Friday, November 16, 2012

The End of the World As We Know It....

There are some who say that the re-election of SCOAMF began the end of America.

Nah.  It's a milestone, but there's always secession.

There is a far more significant End of the World event which occurred yesterday:

North Texas-based Hostess Brands, Inc. has decided to go out of business and liquidate its assets after failing to win back striking workers.

Read that again.

Yup.  It's the end.

Some of the brands' products include Twinkies, Ding Dongs, Ho-Hos, Fruit Pies and Wonder Bread.

Best stock up now; you just can't have a good old-fashioned secession/revolution without Twinkies in the backpack.

UPDATE:  The VC firm which closed it down is run by Democrats (pals of Richard Gephardt, no less.)


Tim Morrissey said..., there was no value whatsoever in the brand names you listed? Nothing at all to salvage? Just plain out of business - not a bankruptcy, not a licensing deal for some pretty well-established brand names?

Sounds to me more like the company seceeded from SANITY.

Tim Morrissey said...

Your post prompted me to read more about the great Twinkie ordeal. Seems the story behind the story is that it was a union-bust gamble that didn't work.

So now, the company WILL go through bk and sell off the assets. Should have read what you wrote more closely.

But - isn't this EXACTLY what Bain Capital would have done, without the "management fees"? It really seems the template for most Bain operations. Cut the labor cost to generate cash flow to pay for the re-fi, go through a couple rounds of that, then bust it up and sell the assets.

The Twinkie folks did this without the Bain management fees and without several rounds of re-fi.

I see this as advanced capitalism, not some Obama-induced poison pill.

Dad29 said...

Nah. They're going to sell the assets, so the brands will (most likely) re-appear at some point in time.

And I never said this was caused by Obamism, by the way.

As to the financial reality: if the cost of making the goods exceeds the available profits, BK is the route.

Is that too difficult to understand?

Whether union or not, shops which cannot obtain whatever price they want for a product MUST reduce the cost of doing business, or they go out of business. Period.

If Bain succeeded in making sick companies healthy--and saving X% of the jobs therein--that's a credit to them.

You'd prefer closing them entirely, Tim?

Dad29 said...

By the way: the only 'shops' which can get whatever price they demand are Governments--which seem to have 'all the guns.'

That's a delusion, of course.

Dad29 said...

One last thing, Tim:

[In 2009] the company was already in bankruptcy, and a Bain-like private equity firm brought it out of bankruptcy due to a $130 million investment, which the investors, get this, hoped to one day see a profit on.

The union workers disagreed, and told the investors that they should not only never expect a profit, but that they would continue escalating demands so that additional bankruptcies and additional bailouts of millions of dollars would follow.

So, the investors said: See ya. No use throwing good money after bad.

But remember, it's the people who spent $130 million to bring the company out of bankruptcy who are the villains here.

Nice of you to quote Trumka without acknowledging it, Tim. Too bad Trumka didn't bother with the whole truth, eh?

Anonymous said...

If they wanted to see a profit, they should have deferred compensation. But alas, the greed!

Dad29 said...

I take it you've seen their 10-K's?

I haven't.

Please share!

Anonymous said...

Ok as a former employee of IBC. I can shed some light on this. I was making great money, for the LaCrosse area. In the mid 2000s we went in to bankruptcy. The company asked for a small concession, like 35 bucks a weeks, or close to that. We all agreed. Then the company came back to us, asked for 150 bucks a week concessions, to get out of bankruptcy. I asked our union rep, to ask for higher commission rate, to offset the cut, and get us to sell more. He said the company is not going to do that. Seems stupid.

The company said the concession would be given back in the form of profit sharing, at the end of the year. I knew that was a lie. The LaCrosse branch all voted no to the concession vote. The company said a no vote would eliminate our job and they would close. I knew that was a lie. They have been in business for decades, someone would buy us.
Shocking the union said we passed the concession vote. Hmmm skeptical since it was a mail in vote. Who counted the vote.

So now that we took the pay cut, wal-mart switched theyre private label business to mostly Sara lee. So i lose twice. I left the company, went to Kraft foods.
The first year under the concessions the company said they where changing the name of the company from Interstate brands company to hostess brands company. Bye bye profits.

Then when hostess emerged from bankruptcy they pretty much gave bread away. Bread and buns were dirt cheap. Bottom line is union pensions, run down bakeries, very poor management. Top management still getting bonuses, not being able to adapt to the changing market all drove Hostess back into bankruptcy.

This time the company went to the bakery employees and asked them for concessions. They told Hostess to pound sand. Hence the spot they are in now.

Big Dog

Dad29 said...

Seems like they were depending on WallyWorld for a lot of volume; in that case, if they didn't update the bakeries, they were going to get bled to death.

So when WallyWorld dumped 'em, their volume went south (maybe 50%), and the pay and rules structure plus the old bakeries killed them off.

Anonymous said...

Big Dog,

Nobody believed your horseshit story on Boots and
Sabers yesterday. Fuck off, delivery bitch.

Anonymous said...

At least Big Dog was gainfully employed, until the Company CEO's and hedge fund managers messed it all up. Unlike Anony 5:47 p.m. who lives in his mom's basement.

Tim Morrissey said...

Don't know who Trumka is and didn't lift anything from him/her/it. As you should know, Dad, when I lift - like you - I attribute. Pounded into my head years ago by broadcast lawyers.

And, to respond to your other question, yes. I would have preferred that they would have shuttered the joint and killed the jobs. It's hard for a lot of people to believe, but I'm a capitalist. We're not a homogenous group. I believe that if a firm is as badly mismanaged as Hostess was, it should die. Darwinism. If the concept was good but the execution was bad, another entrepreneur will pick up the ball and run with it, and recreate the jobs.

Dad29 said...

Trumka is the Muckety-Muck of the AFL-CIO. Egads, Tim...

I'm certain that you did not "lift" those words--but they happen to be an almost-exact replication of his textual emission following the closing.

Tim Morrissey said...

Thanks for the intel re: Trumka. I don't know him/her because I've never been a "labor" person. I'm part of that huge, scary spectrum of "THE LEFT" - but I guess I'm pretty far right on that spectrum. Some of the stuff I'm reading in the blogosphere now says the VC outfit that funded Hostess in the last round was a lefty VC company (there IS such a thing?)with "ties" to Dick Durbin.

I don't spend a lot of time sifting through this sort of stuff.

I firmly believe that weak/ineffective/stoopid management is behind most failures of this sort. If they can't deal with their labor problems - and god knows, give labor an inch, and it thinks it's a ruler - they can't successfully manage the enterprise.

Anonymous said...

The principal of the current firm--the one who lost $130MM--is a heavy (D) contributor.

So are a couple of the other VCs who are in there as 'lenders.'

The point is that there are VC's who are (D) (see Shel Lubar) and VC's who are (R).

IOW, it ain't only Horrible Piggish Republicans....