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Opinion

Opinion

Opinion: Boomers fuel Twinkie melodrama

November 24, 2012

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— “All Gods were immortal.”

     — Stanislaw Lec

And also brands, the gods of the marketplace. Earthquakes may strike, dynasties may fall and locusts may devour the crops, but Oldsmobile and Pan Am are forever. Never mind.

But about the death of Twinkies: Write obituaries in the subjunctive mood. Like Lazarus, but for a reason more mundane than miraculous, this confection may be resurrected. In any case, the crisis of Hostess Brands Inc., the maker of Twinkies, involves two potent lessons. First, market forces will have their way. Second, never underestimate baby boomer nostalgia, which is acute narcissism. The Twinkies melodrama has the boomers thinking — as usual, about themselves: If an 82-year-old brand can die, so can we. Is that even legal?

The late Daniel Boorstin, historian and Librarian of Congress, said Americans belong to “consumption communities.” Are you a Ford or Chevy person? Sears Roebuck or Montgomery Ward? Camels or Chesterfields? Wooed by advertising, people plight their troths to brands in marriages that often are more durable than boomers’ actual marriages.

Hostess, which had 18,500 employees making and distributing more than 30 brands made in 36 plants, had been in and out of bankruptcy several times since 2004. Its terminal crisis began on Nov. 9 when thousands of members of the bakers union went out on strike to protest wage, health care and pension cuts imposed by a court. The bakers objected to a 17 percent increase in their contribution for their health care benefits.  

Amazingly, Washington did not offer Hostess a bailout. This discriminatory policy may be a constitutional violation — denial of equal protection of the laws. Since the onset of the financial crisis, the government has decided that some SIFIs are TBTF — some systemically important financial institutions are too big to fail. Why, any fair-minded person will ask, was Hostess not TBTF?

Granted, it was not big in the technical, crabbed, hairsplitting, narrow-minded way that “big” is normally understood, as a boring matter of mere size. It was, however, big in what matters most — in boomers’ minds. They fondly remember opening their Roy Rogers or Hopalong Cassidy or Davy Crockett lunchboxes at school and finding Twinkies nestled next to peanut butter and jelly sandwiches made of Wonder Bread (another endangered Hostess species). Stendhal said that the only way ice cream could be better is if it were a sin. Boomers, a generation of food scolds, became adults who considered Twinkies and other sugary things sinful. They should be shedding scalding tears of remorse.

Anyway, why GM and not Hostess? The Troubled Asset Relief Program, aka TARP, was passed to rescue financial institutions. But Washington reasoned: “What’s legality among cronies?” So soon TARP was succoring GM, which was not a financial institution. It was not even a car company. It was a health care provider unsuccessfully trying to sell cars fast enough to generate enough revenue to pay health benefits for its employees and approximately twice as many retirees.

Hostess had in its far-flung operations 372 collective bargaining agreements with various unions that had sought and received — shed no tears for complicit management — some interesting benefits. The Teamsters liked the rule that bread and pastries might be going to the same place but must go in different trucks.

The bakers rejected management’s final offer by a voice vote. The Teamsters, who favored a compromise, wanted there to be a secret ballot. This is insouciant insolence by the Teamsters, who are situational ethicists. In Washington, operating from impressive headquarters located on prime real estate at the foot of Capitol Hill, the union’s leadership has lobbied Congress for the Employee Free Choice Act. That is the Orwellian title of legislation that would effectively abolish employees’ right to secret ballots in unionization elections, replacing them with “card check,” whereby individuals confronted by union organizers sign a card indicating support for the union.

The market said that Hostess as configured made no sense. If, however, Twinkies and perhaps other Hostess brands retain value, the market will say so, and someone will produce them. Probably in a right-to-work state, which is how “entrepreneurial federalism” (another Boorstin phrase) should work: Business moves to states that make it welcome.

Whatever else a hospital ought to do, supposedly said Florence Nightingale, it ought not to spread disease. And whatever else unions should do, they should not put employers out of business.

— George Will is a columnist for Washington Post Writers Group.

Comments

just_another_bozo_on_this_bus 2 years, 1 month ago

Interesting that George never even mentions the effects of vulture capitalists on the collapse of Hostess, and their intent to use the vegematic method of "economic development" to profit from their dismantling of the company.

And, really, what does this have to do with "boomers?"

jonas_opines 2 years, 1 month ago

Are you creating alt accounts for specific articles now?

Tomato 2 years, 1 month ago

For those who don't know, so-called "vulture capitalists" are venture capitalists who swoop into distressed company and buy up a good portion of the worthless debt - part of the deal is that the debt that they buy is senior debt, or preferred debt, so that they get priority in bankruptcy.

The original owners (also a venture capitalist group, in Hostess' case) are left with any subordinated debt, which is now extra-worthless. BUT, they (or whatever bank lent to Hostess) is able to recoup some minor amount of cash while writing off the balance.

The "vulture-capitalists" are then willing to work with the company in bankruptcy for as long as the company is making debt payments, then they'll push for liquidation if they don't think any more payments are coming. They get priority in liquidation because their debt is senior to other debt. They purchased this debt so cheaply that they can make a profit.

But here's the deal: the debt has to be worthless in order for the vulture capitalists to come in and buy it. Often, but for the fact that they came and bought this senior debt (which is often being called at that moment by banks who are demanding their money and have every right to demand it), the company would simply fold earlier.

The vultures win either way - if the company recovers, they get paid on debt that they bought for pennies on the dollar. If the company liquidates, they get paid some portion of the debt, for which they only paid pennies of the dollar.

But the workers also won something: they got a second chance. Instead of closing a year or three ago, the company stayed open under the watchful eyes of the vultures and it had a chance to negotiate new contracts in bankruptcy. Indeed, liquidation is no guarantee, a judge has to approve that, and the judge did everything possible to get the union to sit down with management.

So really, you can't really blame the vulture capitalists for the collapse of Hostess, because Hostess was already in trouble when they swooped in.

jhawkinsf 2 years, 1 month ago

Tomato - As someone who admittedly doesn't know much about this subject, your explanation is very enlightening. However, there are many in this forum who have a decidedly different attitude when it comes to this subject. I'd be very interested in hearing from those people, in the same enlightening manner, so that this admittedly unenlightened person can hear both sides of the issue.

Thank you Tomato and I thank in advance those who present the other side of the story.

chootspa 2 years, 1 month ago

The unions already agreed to severe cuts the first time around. What the bakers didn't agree to was being cut down to wages below the poverty level over the next five years and having their pensions obliterated. At the wages the company submitted to court, at least one of the union workers talking to the cameras said that frankly, he's better off with the unemployment payments freeing him up during the day to spend his time applying for that different job.

jhawkinsf 2 years, 1 month ago

Are you suggesting that this result is a win/win? The company sells off it's assets while the workers are free to look for their next job.

chootspa 2 years, 1 month ago

Ultimately, they'd have been better off with better management years and years ago. They put their eggs in one carborific basket and didn't try to diversify their product lines to change with the times. Not the fault of the bakers at all. But given the choice between looking for a job while collecting unemployment benefits or trying to look for a job at dwindling poverty wages, I think the bakers probably did what they felt was in their best interests. It's not exactly win-win, because nobody but the hedge funds are getting their money back from this deal.

jhawkinsf 2 years, 1 month ago

If Tomato's analysis is correct, then the venture capitalists win in the end, but the company essentially gets a second chance at becoming viable. Unfortunately, that didn't happen. But in the interim, the workers got several more years of work. So in that sense, they also won.

chootspa 2 years, 1 month ago

That used to be the case, but perverse tax and bankruptcy law discourages that sort of long term vision. The sales pitch says that their purpose is to lend funds and rehabilitate the company, but there's not enough financial incentive for doing so compared to the ease of making money by saddling them up with high priority debt and fees and then selling the place off in pieces. If PE investments made money only when they managed to rehabilitate a company, I suspect we'd see both more selectivity with the debt hose and wiser spending of the money received. There are a lot of political reasons that will probably never happen, including the ironic investing practices of many pension funds.

Hostess had their "second chance" in 2004. They renegotiated with the unions, and they all took huge pay cuts. The money they saved from labor costs wasn't reinvested in the company, and the company continued to bleed. There was no real second chance. There never was.

jhawkinsf 2 years, 1 month ago

OK, but then the individual you mentioned earlier should have begun his job search 8 years ago, rather than wasting his time at this company. Even if a line baker or truck driver didn't see this collapse coming, their union should have. Shouldn't they have advised their member to jump ship before the inevitable? Shouldn't they have taken steps to protect their pension fund? Or did he and the union just get all they could out of this dying company, in which case I don't see a whole lot of difference between them and vultures that floated this company since then.

chootspa 2 years, 1 month ago

The union's job is to get the best deal for the workers they represent, and getting the best deal means keeping the company in business whenever possible. It makes no sense to think that unions would want to intentionally shut down companies and un-employ their members. They urged the workers to take the concessions last time around because they thought it would keep the company afloat. They're not hedge fund experts, and if the company tells them that this loan will get them on their feet and back to profitability, how are they supposed to know that it's all a shell game and that the company has no intention of reinvesting in the company with this money? They're a privately held company, so the only reason we know it would never have succeeded is because we have hindsight. From what I understand, the company management had lost all credibility in this matter this time around, which is one of the reasons why the union wasn't urging them to accept the recent offer. The company lied when they threatened liquidation before. They'd stolen worker pensions. They'd given themselves raises, etc.

If you can't see the difference between a $30,000 a year guy who doesn't want to be a $20,000 a year guy and a $30 million a year guy who wants an extra couple million without more work, I really don't know what to tell you on that.

jafs 2 years, 1 month ago

jhf like to maintain a "balanced" view, which means he often equates things that aren't really equatable, like the ones you mention.

I'm not at all sure why.

yourworstnightmare 2 years, 1 month ago

Other than sour contempt for everyone and everything, it is difficult to see the point of Will's fevered sarcasm. Bad sarcasm at that. I love sarcasm, but this was trash.

tomatogrower 2 years, 1 month ago

The baby boomers are why Hostess is going under. We used to eat Twinkies and Wonder Bread, but then we developed a healthier and better sense of taste.

JackMcKee 2 years, 1 month ago

For once I agree with George Will. The Boomers are the worst group of people to ever set foot in America. They're like locusts.

just_another_bozo_on_this_bus 2 years, 1 month ago

It was vacuous sentiment from Will. it's equally vacuous coming from you, (but consistent with your general posting history.)

purplesage 2 years, 1 month ago

It is Mrs. Obama, who removed protein from school lunch to make room for more veggies who doesn't approve of Twinkies. So, no TARP for the Twinkie. It isn't the reminders of my own mortality; it is the nostalgia of the golden cakes filled with cream for 12 cents a package that stirred up my childhood sweet tooth that saddens me a bit.

Having worked in the world of union industry, the goofy, shoot profits in the foot rules are well addressed by Mr. Will. Those folks had jobs when many do not. The concessions are always hard to make. And health care is a big piece of what is driving companies down. And, uh, I forget, but someone promised to lower my health care rates about 4 years ago.

I loved the description of GM.

Katara 2 years, 1 month ago

What protein did Mrs. Obama (who has no power to enact legislation or regulatory measures) remove to make room for more veggies? And how exactly does a Twinkie (which has no protein or veggies) fit into that statement you made?

The Twinkie you had as a child is not the same Twinkie that exists now. Changes were made to the formula so it would have long lasting shelf life. It was not a good change and Twinkies are pretty gross now compared to what they were like when you were a child.

I fail to see the whole "At least they had jobs" mantra when the jobs weren't going to be worth much, certainly not to continue supporting a family. Of course, this mantra comes from people who think minimum wage laborers are just dirt beneath their feet.

The workers had already agreed to concessions in Hostesses' previous bankruptcy measures. The company had stopped contributing to their pension and in fact had gone ahead and "borrowed" (read as raided) quite a lot from the pension savings.

And, uh, ACA doesn't go into affect until 2014.

Richard Heckler 2 years, 1 month ago

"The debt can wait. While it’s true that the government pays interest on the debt and should therefore not let it rise continuously and unsustainably, Congress could delay debt reduction by a few years until the economy is more stable."

Exactly... use the money now to make money. Such as in new industry,fill in all vacant positions within government, fix the highways and bridges which should be common sense and bring on more public school teachers.

It has been estimated that Medicare Single Payer Insurance will create 2.4 million jobs while at the same time saving approximately $400 billion annually. Seems like a no brainer.

Let the employees by Hostess. Freeze all Hostess assets. Force return of all bonus money immediately no matter what level of extortion is required. Take the owners to court and audit their mismanagement of company revenue.

Then never allow any venture capitalist offer that does not guarantee all jobs stay in America,that does not consider employee buy out for a minimal fee and does include language that simply does not allow for bankruptcy. Make venture capitalism quite a high risk on the backs of the gamblers.

Bring on more and tighter regulations. USA White collar executives are killing USA jobs and the USA economy. It ain't the unions my friends.

notaubermime 2 years, 1 month ago

Wow. As far as I can tell, the best summation of the article is "Nooooooo, my twinkies!" followed by blaming everyone and everything for the demise of twinkies. I have this image of George stuffing twinkie after twinkie in his mouth, sobbing in a sugar-enhanced delirium, while writing this article.

Not. A. Pretty. Image. Sometimes you have just got to let go of the past.

jonas_opines 2 years, 1 month ago

Don't forget the occasional tearful muttering of: "Obama is still President!" repeated every once in a while.

beatrice 2 years, 1 month ago

I remember watching Willy Wonka. When the kids were brats, guess who the Oompa-Loompas blamed? That is right fellow boomers, they blamed the parents. This means, Mr. Will, if you don't like boomers, your generation is to blame for raising us spoiled brats. So there.

Honestly, if nostalgia is nothing but "acute narcissism," then isn't the entire GOP platform's desire of "taking back our country" nothing but fantasy nostalgia for an America that never was?

Oh, and anyone still eating Twinkieswho is upset, get over it. I'm sure there is some other garbage that will make your butt just as fat and still taste like the processed chemicals you so crave. Seriously, get over it already.

FloridaSunshine 2 years, 1 month ago

tange...what in the world happened to your avatar? I always enjoyed seeing what you could/would come up with...this is a real disappointment. :~)

jonas_opines 2 years, 1 month ago

"This means, Mr. Will, if you don't like boomers, your generation is to blame for raising us spoiled brats. So there."

Actually, not really. On a lark when I read this earlier I looked up Will's birthday, and he was born in 1941. So he can claim a good 6 years or so superiority on the Boomers. Enough to be their older brother, that can't help but get annoyed at the younger for whatever reason, I suppose.

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