Smart Reasons to Save, Use and Invest Money

Death of Hostess Company And Possible Results

First of, let me say that I think it’s foolish of the Baker’s Union to let the Hostess Company fail.  In my opinion reduced income is better than no income!

The Hostess company have filed for bankruptcy before back in 2004.  The cause of the previous bankruptcy was debt!  The debt was comprised of pension obligations, labor and a product that is falling out of favor with consumers (I use to love twinkies, but I haven’t bought one in years).

The Hostess company did emerge from bankruptcy in 2009 (with the help of money from 2 hedge funds), but apparently it wasn’t enough.

One of the unions (the Teamsters) already agreed to cuts.  Perhaps the Teamsters realized that the company was already in trouble financially and the extended strike would put it out of business (which it appears it now is).

It’s a shame the baker’s union didn’t talk to the Teamsters union about why they took the offer.  Perhaps this company would still be running today.  I think unions should understand finances before making demands.

What will happen to our Twinkies (Ho Hos and Wonderbread too)?

Basically, it will either be absorbed by other competing companies in the same industry, or an up-shoot will be created overseas and produce the same product that will be shipped here and sold.  The labor is so cheap overseas that it still might be worth it to build a plant over there, even with the shipping cost included.  Of course, there is always Mexico too, perhaps someone will setup a plant down there.  Anyway that you look at it, the Baker’s union workers are the ones that will lose.  This is a sad day for them, especially with a potential recession looming next year, and the flight of companies to countries with a much cheaper labor force.  I wonder when someone in the government will start to work on the currency issue and how it doesn’t make sense that working in the US workers get paid around $20 per hr vs less than $1.5 per hr is certain countries.

I know there aren’t any easy solutions, but until such financial inequalities are addressed, I can see more and more US companies closing. If a product cost $2.00 to produce in the US to make and put that product on a department shelf, and if a similar product only cost $1.00 from an overseas company to make and put on the shelf right beside the US one… Well, based on the success of Walmart, it’s kind of obvious which product will be bought by consumers.  After all, who want to pay more for essentially the same or extremely similar product?

On a lighter, more temporary note, I’m sure these Hostess products will increase store sales in the very short term as people try to get their one last chance to eat a Twinkie or whatever their favorite Hostess Product was…

Sad day, not only for the Hostess products, but also the 18,500 jobs lost!


4 Responses to Death of Hostess Company And Possible Results