Monday, January 16, 2012

Twinkies in the Balance




AP reports on the Twinkies tragedy:

In Hostess' Chapter 11 filing on Wednesday, the company said its rivals have combined and expanded their reach, heightening competition in the snack space. Hostess' competitors range from Bimbo Bakeries, which makes Entenmann's baked goods, and McKee Foods, which make Little Debbie snack cakes. It also faces competition from larger food makers like Sara Lee and Kraft Inc.

Additionally, Hostess employees are unionized while most of its competitors aren't. As a result, Hostess has high pension and medical benefit costs. The company has 19,000 employees and operates in 48 states.

Most headlines on the bankruptcy make it sound like the Twinkies demise is a done deal. Of course, chapter 11 doesn't automatically mean a company is going out of business. Contracts can be renegotiated, costs can be cut. The union can recognize that its fate is tied to the fate of the company.

But watch: if the company is portrayed as a bunch of fat cats trying to screw the working man, union zealots will negotiate all 19,000 workers out of a job. The company will liquidate and all they'll get out of it is a sense of being wronged by the Man.

If I hear Woody Guthrie playing on the Hostess loading docks, I'm hoarding Twinkies.


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