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Twinkies, to those who are not from America, are a childhood treat, a bakery institution that smacks of the 1950’s, when we and America were young. Alternatively it’s a rather odd tasting sponge cake with a white cream like substance injected into the middle of it.

Sales have been dropping steadily.  It was a treat that was becoming out of step with the times.  At 300 calories and $1.50 for two they weren’t exactly helping themselves.  Its marketing was stuck in 1971, and the list of ingredients, chemicals, preservatives and additives on the packet led to jokes that they would never perish.  The ingredients became progressively cheaper and the sponge a bit drier.

So, Twinkies are a memory of one’s childhood, or threatens to become one fairly shortly. And America is up in arms over it.  The management at Hostess are blaming the Unions for the fact that the entire enterprise is going down the lavatory.  There are going to be 18,000 American jobs lost when it closes.

 Quite how the Unions are responsible for the piss poor financial management and decision taking team who have dragged the long suffering brand through three sales and two (ye Gods TWO) bankruptcies in recent years is beyond me.

Here’s a bunch of the senior management at Hostess.  It shows the raises that were approved last year.  People like Brian Driscoll have since bailed out as at March this year.  However can see why such extraordinary actions in doubling and tripling Executive pay at a time of trouble have rattled the creditors.  The workers get $7.00 an hour.  What were these klutz’s thinking?

Brian Driscoll, CEO, around $750,000 to $2,550,000.
Gary Wandschneider, EVP, $500,000 to $900,000.
John Stewart, EVP, $400,000 to $700,000.
David Loeser, EVP, $375,000 to $656,256.
Kent Magill, EVP, $375,000 to $656,256.
Richard Seban, EVP, $375,000 to $656,256.
John Akeson, SVP, $300,000 to $480,000.
Steven Birgfeld, SVP, $240,000 to $360,000.
Martha Ross, SVP, $240,000 to $360,000.
Rob Kissick, SVP, $182,000 to $273,008.

And remember, this was when the company was already on its second bankruptcy.

But if you’ve driven a company to Bankrupcy you devalue the stock.  You can then buy the company from under the shareholders for pennies.  The company then becomes worth more dead than alive.  The product patents for Hostess are where the money really is.  They are worth millions and you get them for a song.

Hostess is following Romney’s Bain Capital model, a company using bankruptcy as a bargaining chip to screw down the wages with the Unions.  Now that it’s not working out for them they decide to liquidate the company.  Today in HuffPost  they reveal that the same management team will pay themselves to guide the company through the closure process.  Have they no shame?

The reason this is causing ructions is because Twinkies is a poster boy for the new capitalism that has seized America.  The management will sack the workers ditching the pension liabilities in the process, and sell off the plant and land for development. Then they will simply flog off the brand name and contacts, and distribution stuff to a “new” consortia.  My bet is a Mexican based one.  Followed smartly by building the new factories in Mexico, because that will still be close to the markets in America but free of regulations, staffed by cheap Mexican labour with none of the civilised benefits American workers expect as of right, and they will be back in business.  Bets the management team are kept on at top dollar for the sake of “continuity”?

Copyright David Macadam 2012

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