The Parasite That Kills Its Hostess

RCM ^ | 11/18/2012 | Robert Tracinski

[SeekAndFind]

The news about the bankruptcy of Hostess, maker of the Twinkie and other legendary junk foods, touched off some memories of growing up in a mid-sized Midwestern town in the 1970s and '80s. No, not that kind of memory, though come to think of it, the 1980s was the last time I actually ate a Hostess snack. What I'm recalling has a lot less nostalgic charm: the whole phenomenon of a kamikaze labor union that keeps demanding more for workers--who end up getting nothing when their employer goes belly-up.

That's pretty much what the unions did, or tried to do, to three of the big employers in our area, and it taught me some early lessons about the real nature of labor unions and of government intervention.

I grew up in an area known as the Quad Cities, a cluster of four towns in Illinois and Iowa, on opposite banks of the Mississippi River. The big local employers at the time were the Rock Island Arsenal, which made howitzers and machine guns for the US Army, the celebrated Rock Island Line, and two big manufacturers of farm equipment, John Deere and International Harvester.

What might strike you about this list is that half of these companies no longer exist. I watched them go down, and that's why the Hostess story seems so familiar.

[Brooklyn Attitude]

Unions = bankruptcy

[SeekAndFind]

This article from the New Yorker asserts that Unions are being made the scapegoat, it was management and its failure to adapt:

http://www.newyorker.com/online/blogs/newsdesk/2012/11/who-killed-the-twinkie.html

EXCERPT:

Management, of course, blames the company’s demise on the greedy, unreasonable unions. But, while the strike may well have sent Hostess over the edge, the hard truth is that it probably should have gone out of business a long time ago. The company has been steadily losing money, and market share, for years. And its core problem has not been excessively high compensation costs or pension contributions. Its core problem has been that the market for its products changed, but it did not. Twinkies and Ding Dongs obviously aren’t anyone’s idea of the perfect twenty-first-century snack food. More important, the theoretical flagship of Hostess’s product line, Wonder Bread, has gone from being a key part of the archetypical American diet to a tired also-ran.

Hostess’s management certainly bears some of the blame for its failure to successfully adapt, though the company made numerous (and failed) attempts to introduce healthier products. But the simple truth is that this kind of failure is endemic to the system—there are always going to be companies that are unable to change in response to the marketplace. And those companies are supposed to go out of business. Not to be too clichéd about it, but this is what creative destruction is all about.

CLICK ABOVE LINK FOR THE REST...

[SeekAndFind]

This article from the New Yorker asserts that Unions are being made the scapegoat, it was management and its failure to adapt:

http://www.newyorker.com/online/blogs/newsdesk/2012/11/who-killed-the-twinkie.html

EXCERPT:

Management, of course, blames the company’s demise on the greedy, unreasonable unions. But, while the strike may well have sent Hostess over the edge, the hard truth is that it probably should have gone out of business a long time ago. The company has been steadily losing money, and market share, for years. And its core problem has not been excessively high compensation costs or pension contributions. Its core problem has been that the market for its products changed, but it did not. Twinkies and Ding Dongs obviously aren’t anyone’s idea of the perfect twenty-first-century snack food. More important, the theoretical flagship of Hostess’s product line, Wonder Bread, has gone from being a key part of the archetypical American diet to a tired also-ran.

Hostess’s management certainly bears some of the blame for its failure to successfully adapt, though the company made numerous (and failed) attempts to introduce healthier products. But the simple truth is that this kind of failure is endemic to the system—there are always going to be companies that are unable to change in response to the marketplace. And those companies are supposed to go out of business. Not to be too clichéd about it, but this is what creative destruction is all about.

CLICK ABOVE LINK FOR THE REST...

[DownInFlames]

Going to order a case of Twinkies and ding dongs as part of my emergency preparedness kit. When western civilization collapses, I will need something to barter.

[KeyLargo]

The Twinkie: Will it return as a Mexican expat?

Hostess Brands is liquidating its business after 82 years, which means some of the most iconic brands of the century may be up for auction. Will Twinkies become a foreign import?

Especially if a Mexican buyer is involved, production may go the way of the Brach’s and Fannie May candy concerns: south of the border. With US sugar tariffs set artificially high to protect Florida sugar-growing concerns, a non-unionized shop with access to lower-priced sugar in Mexico could be the Twinkie lifeline, economists suggest.

http://www.csmonitor.com/USA/2012/1117/The-Twinkie-Will-it-return-as-a-Mexican-expat

[TexasCajun]

No market for Twinkies?

Who are they kidding?

..do they not know how many pot-smokers there are in the US?

[Buckeye McFrog]

I saw this while living in Michigan in the 1980’s. The employees of a bankrupt grocery chain, the state’s second oldest, voted to PUT THE COMPANY OUT OF BUSINESS (and themselves out of a job) rather than accept wage concessions.

But Richie Trumka was instrumental in Obama winning his re-election, so help is on the way. Look for the taxpayers to end up owning Twinkies (even as Moochelle spends even more of our money in an effort to convince us not to eat them).

BTW, stay away from Walmart stores on Black Friday. The unions are going to launch their full-court press to organize them and it’s gonna be chaos.

[kingu]

To a point, the New Yorker article is correct, however, they failed to take into account that management WAS adapting by lowering costs, attempting to diversify methods of delivery, etc. But the unions prevented lowering of costs to a profitable level, or of adapting the distribution channel to handle products from other bakeries, or stepping away from the Teamsters controlled union delivery all together.

Unions are the core fault in this sad tale of a company struggling to adapt to a market which wasn't as interested in their product any more. Companies can only print money like Hostess did for a short time, and in that time, they need to use that money to invest in new profitable products, not squander it away by overpaying their employees and driving themselves out of the market when it inevitably takes a dip.

[longtermmemmory]

how about some pictures of Trumpka eating.

Trumpka eats like a union thugh while the rank and file starve.

[pennyfarmer]

In all of these cases, of course, there were other contributing factors. These companies suffered from tough competition, bad management decisions, unfavorable trends. Over the long term, Hostess didn't go bankrupt because of the unions. It went bankrupt because it didn't keep up--possibly couldn't keep up--with cultural change. In an era of healthy living and gourmet coffee shops, Twinkies and Ho-Hos are out of place. Their only resort was to try to convince hipsters to eat Twinkies ironically.

The company was on life support with too many dependents. Looks like a mercy killing to me. :)

[Iron Munro]

We know "Bush Did It". But exactly how he managed to do it is the question.

[skinkinthegrass]

!

[longtermmemmory]

the fact that unions required TWO deliveries, one for bread and one for snaks, was insane.

Keep in mind Trumpka used the bakers union to force this.

Nobody mentions Trumpka.

BTW how many reporters are members of a NY union?

[yldstrk]

I despise unions and their tactics, but in the illustration, the other bad guys are also employees— “executives” who helped hang themselves by, in IH’s case giving themselves million dollar bonuses, and in Hostess’ case, the CEO was taking out 100K A MONTH in a bad economy and at the same time the unions and their ilk want more. Look, the shareholders are the ones who got fleeced BOTH by the executives, who likewise squeeze money out of a company in return for their “management” and the thuggish unions. The executives are many times more piggish than the unions, but the bottom line is this: it is a myth that “management” is any different than just another money pit.

The owners got shafted by the people they gave jobs to and probably the best way to run a company is to make the employees shareholders and owners so they will care what happens instead of acting like spoiled little parasites

[chrisser]

These companies suffered from tough competition, bad management decisions, unfavorable trends. Over the long term, Hostess didn't go bankrupt because of the unions. It went bankrupt because it didn't keep up--possibly couldn't keep up--with cultural change. In an era of healthy living and gourmet coffee shops, Twinkies and Ho-Hos are out of place. Their only resort was to try to convince hipsters to eat Twinkies ironically.



A) If management makes bad decisions, then it's the shareholder's responsibility to replace them.

B) How does management make changes, especially in a labor intensive business, when the union forces them to lock into place outmoded labor practices, unsustainable salaries, and prevents automation at every turn? What, exactly, is management supposed to actually do when they can't control their major cost, and even if they can, they have to wait months or years for the next union contract negotiation to make the change, when the marketplace is changing often by the day or week?

C) Hostess made a lot more than just junk food. If the junk wasn't profitable, they would have dropped those business lines in favor of their more profitable ones. But had Hostess eliminated Twinkies, for example, would they have been able to eliminate the workers from those lines, or would they had to continue to employ them even though they were no longer needed, thus keeping all the costs while eliminating the revenue stream, and making an unprofitable line perversely less expensive to keep than eliminate?

[tumblindice]

Ingredients · 6 Twinkies · Popsicle sticks · 4 cups vegetable oil · Flour for dusting · 1 cup milk · 2 tablespoons vinegar · 1 Tablespoon oil · 1 cup flour · 1 teaspoon baking powder · 1/2 teaspoon salt Directions 1. Chill or freeze Twinkies for several hours or overnight. 2. Heat 4 cups vegetable oil in deep fryer to about 375 degrees. 3. Mix together milk, vinegar and oil. 4. In another bowl, blend flour, baking powder and salt. 5. Whisk wet ingredients into dry and continue mixing until smooth. Refrigerate while oil heats. 6. Push stick into Twinkie lengthwise, leaving about 2 inches to use as a handle, dust with flour and dip into the batter. Rotate Twinkie until batter covers entire cake. 7. Place carefully in hot oil. The Twinkie will float, so hold it under with a utensil to ensure even browning. It should turn golden in 3 to 4 minutes. Depending on the size of your deep fryer, you might be able to fry only one at a time, two at the most. 8. Remove Twinkie to paper towel and let drain. Remove stick and allow Twinkie to sit for about 5 minutes before serving. Makes 6.

[Oshkalaboomboom]

I was in a unionized company for 17 years before it essentially went belly up. We made great product, had one of the world’s greatest R&D organizations and had a pretty good relationship with management. They overestimated the demand for their product, overexpanded to meet that demand and gave unrealistic profit expectations to investors. When the bottom started falling out many employees actually bought more stock because they couldn’t believe a company so good could be run so badly. They thought it was a blip. Our stock lost over 90% of its value. Massive layoffs left once busy factories looking like downtown Detroit. Just about everyone was devestated except the top management team, who walked away rich, fat and happy. Sure, they walked away with millions instead of hundreds of millions but hundreds of thousands of families were devestated. I can’t even begin to think about the losses other than financial. Dissolving marriages, bankruptcies, even suicides. The failure was entirely because of mismanagement. The company was Lucent Technologies, look it up. The company I started with before Lucent was spun off, AT&T, isn’t run much better. I have no idea how it is still even in business.

[GOPJ]

What became clear, in times of trouble, is that the unions didn't really add anything to the actual process of production. They didn't recruit workers, train them, build the factories in which they worked or the machines they operated. They didn't provide working capital or marketing skills or strategic advice. Their whole function was simply to find an enterprise that was already a going concern and to squeeze money out of it. This is no surprise, because unions are built on a Marxist economic theory.

Says it all....

[Brooklyn Attitude]

“Hostess’s management certainly bears some of the blame for its failure to successfully adapt, though the company made numerous (and failed) attempts to introduce healthier products. But the simple truth is that this kind of failure is endemic to the system—there are always going to be companies that are unable to change in response to the marketplace. And those companies are supposed to go out of business. Not to be too clichéd about it, but this is what creative destruction is all about.”

Its true that some companies cannot be saved no matter what management does. It appears that hostess tried to change but was unsuccessful. Ironically their products were unfairly demonized by the media as “junk food” by the media and by govt. No wonder their market share dropped to below sustainability. When that happens you try to reduce costs and worker salary and benefits (generous during good times) becomes THE MAJOR operating expense. Magazines like the New Yorker have the same problem as Hostess. They are obsolete, market share is dropping like a rock and they soon will go out of business. The media deserve to go out of business as their product is poison. At least Twinkees taste good.