Ho Ho, you say.
The "Twinkies bankruptcy" caused much hilarity over the weekend, with office wags, late-night comedians and social-media clowns having fun with the demise of the junk-food giant Hostess Brands. A posting on eBay – one of almost 350 this morning – offers free delivery of a box of Twinkies for $10 million.
But while products such as Twinkies, Ho Ho's, and Ding Dongs make for good laughs, there's really nothing funny about the demise of Hostess. The company's story is not only serious and sad – some 18,500 people stand to lose their jobs – but it also is emblematic of way too much of America's once-strong manufacturing sector.
The company has adopted the line that the bakers' union is responsible for Hostess's downfall, but that rhetoric seems as empty as the calories provided by its signature products. The fact is, the company that provided us with so many sweet memories had turned financially sour long ago, and it was asking its employees to bear the burden of its management's mistakes.
Earlier this year, after the company had declared bankruptcy for the second time in a decade, its board tripled the compensation of the company CEO to $2.55 million. Even today, the company was due in New York bankruptcy court to defend itself against charges that its plan to give senior management huge bonuses is unfair and improper, given that it comes at the same time the company proposes to reduce vacation and sick time paid to departing union members, according to Reuters.
Last week's strike decision by the bakers' union may have been the last straw for Hostess, but it certainly wasn't the cause of its demise. Like many of America's big manufacturing companies, it didn't keep up with the times (one headline said, "People love Twinkies, but don't eat them"). And when things got tough, they brought in private equity backers, who loaded the company with debt but weren't willing to spend on modern equipment. Earlier this year, Hostess had more than $860 million of debt, according to the New York Times.
In 2011, the company reported annual sales of more than $2.5 billion, but it lost more than $300 million.
That's not the employees' fault.
But the employees were asked to bear the brunt of the company's problems. Hostess proposed slashing its pension contributions by 75 percent, cutting health benefits by 17 percent and reducing pay by 8 percent.
Some unions, including the Teamsters, reluctantly agreed. But the bakers, even in the face of the company's threats to liquidate, said no.
"Our members decided they were not going to take any more abuse from a company they have given so much to for so many years," union President Frant Hurt said Friday in a statement. "They decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and 'restructuring specialists' walk away with untold millions of dollars."
No doubt, somebody will walk away with plenty. The company says there's a lot of interest in its brands, and buyers are lining up to be the new maker of those snacks that nobody eats.
So you'll probably still be able to get your Ho Ho's. But 18,500 people won't be getting their paychecks.