Counterparties: Our sweet creamy center cannot hold
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Hostess, the maker of Twinkies, Ding Dongs and Wonder Bread, is closing up shop, taking 18,500 employees, 33 plants and approximately 750 billion calories worth of annual Twinkie output down with it. (Yes, we did the math.)
Hostess’s second bankruptcy since 2004 has had a few immediate effects. First, a group of very unlucky reporters were assigned to cover the Great Twinkie Panic of 2012: “Twinkie Junkies Raid Stores as Hostess Brands to Close” read one Bloomberg headline, while Mashable contrived to find an opening bid for a single Twinkie for $5,000. Second, the entire western world took to Twitter to make the same jokes about how long Twinkies last. Others made marginally funnier quips about whether Mexico’s Bimbo will buy the Ho Ho brand.
But what unforgiving capitalistic forces are keeping Twinkies from America’s increasingly diabetic hands? “The union has been the death of this company”, one former HR worker told Reuters. Of course, this is not the whole story: CEO pay was also increasing as the company struggled. David Kaplan’s long piece on Hostess from July blames management, distressed debt investors, and a stale — if not perishable — product. Kaplan writes that the Teamsters “had separate drivers for deliveries of such goodies as Yankee Doodles and Nature’s Pride Nutty Oat,” a “job-preserving” move that Hostess approved during the last labor agreement. Generally, the company seems like a manager’s nightmare:
The Balkanized nature of its empire gave Hostess a piecemeal labor situation, including a matrix of 372 collective-bargaining agreements, a dozen separate unions, 5,500 delivery routes, and no fewer than 40 multi-employer pension plans [MEPPs] that are despised by management.
Those pensions, Kaplan notes, include some of America’s most underfunded plans: MEPPs cover some 10 million Americans and are underfunded to the tune of $369 billion, according to Credit Suisse.
It was the striking bakers’ union that Hostess specifically blamed for the shutdown . (The union’s website promptly crashed today). As Dave Jamieson reports, this left the Teamsters out to dry. In September, Hostess Teamsters agreed to pay and pension cuts, and later called for the bakers’ union to hold a secret ballot vote to end the strike. One Teamster described the bakers’ obstinance this way: “They’re losing [5,000] jobs, but they’re costing 18,900 people their jobs.”
But don’t despair, Twinkie lovers. The brand, Dan Primack writes, “still has value and will be acquired”. And there’s online petition calling for the White House to nationalize the Twinkie industry “and prevent our nation from losing her sweet creamy center”. — Ryan McCarthy
On to today’s links: