Common Cents for November 23, 2012

One of the bigger business headlines this week has been the liquidation of Hostess Brands, Inc., the company which heretofore made Twinkies, Ding Dongs, Wonder Bread, a host of other snack cakes and breads. As you can imagine, there was some measure of discomfort about the iconic Twinkie brand, a symbol of all that is both right and wrong in the United States, vanishing. What is the world coming to these days? Can the US not even produce snack cakes and bread anymore?

The dern Chinese, huh?

In truth, the company had been on the ropes for years. It first declared Chapter 11 bankruptcy all the way back in 2004, when it was known as Interstate Bakeries. That process dragged on through 2009, when Hostess Brands officially came into being. However, the problems weren’t over, as the company again declared Chapter 11 in January 2012. So, none of this should have come as a surprise to anyone paying attention. What was surprising was how it all went down at the end, with the baker’s union basically calling the company’s bluff when everyone else knew the company wasn’t bluffing.

What was shocking was how cavalier some of the members of the bakery union were. Consider this snippet from an article by Chris Isidore from CNNMoney on November 16:

Mike Hummell, a receiving clerk and a member of the Bakers’ union working in Lenexa, Kan., said he was making about $48,000 in 2005 before the company’s first trip through bankruptcy. Concessions during that reorganization cut his pay to $34,000 last year, earning $16.12 an hour. He said the latest contract demands would have cut his pay to about $25,000, with significantly higher out-of-pocket expenses for insurance.

“The point is the jobs they’re offering us aren’t worth saving,” he said Friday. “It instantly casts me into poverty. I wouldn’t be able to make my house payment. My take-home would be less than unemployment benefits. Being on unemployment while we search for a new job, that’s a better choice than working these hours for poverty wages.” …Read on…

This report does not constitute an offer to sell or a solicitation of an offer to buy or sell and securities. The public information contained in this report was obtained from sources and vendors deemed to be reliable, but it is not represented to be complete and its accuracy is not guaranteed. This report is designed to provide an insightful and entertaining commentary on the investment markets and economy. The opinions expressed reflect the judgment of the author as of the date of publication and are subject to change without notice; they do not represent the official opinions of the author’s employer unless clearly expressed within the document. The opinions expressed within this report are those of John Norris as of the date listed on the first page of the document. They are subject to change without notice, and do not  necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, & employees.