dead twinkieNow that the Hostess closure has begun to affect all of us, Jordan Weissman of The Atlantic will discuss what’s really important here, namely: whose fault it is. And duh, of course it was not the Bain-style “private equity” managers for loading the shitty snack cake company up with debt and then legitimately raping it with management fees; no, it is only their fault for making “poor decisions,” mostly the decisions to only slash union workers pay “a lot” instead of “maquiladora-style.”

As David Kaplan chronicled at length for Fortune earlier this year, the roots of this debacle go back to when Hostess entered its first bankruptcy in 2004… A private equity company, Ripplewood Holdings, paid about $130 million dollars to take Hostess private, and the company’s two major unions, the Teamsters and the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, sacrificed about $110 million in annual wages and benefits. But its labor contracts were still deeply flawed. Worse yet, the company left bankruptcy saddled with more debt than it went in with — “an unusual circumstance that the company justified on expectations of ‘growing’ into its capital structure,” as Kaplan put it.

What was “deeply flawed” about these contracts, given that the workers had sacrificed hundreds of millions of dollars to the corporate gods? We don’t know, shh! it’s a secret. What about the fact that Hostess tripled its CEO pay and increased other top executive compensation by 80%? Were these inflated wages part of the “deeply flawed” labor contracts? No, of course not, these inflated wages were for job creators, so they were fair and square probably, but we don’t know because he doesn’t mention them.

Hostess didn’t do much growing. It continued to lose hundreds of millions of dollars making and selling starchy snacks that much of the public had lost its taste for, while failing to launch any great new products. The interest on its loans swelled the company’s debt. By January 2012, it was back in Chapter 11, trying to wrestle a new contract with more concessions from its unions.

Hostess insisted that unless workers accepted further cuts, the company would have to shut its doors for good…The bakers’ union.. launched a strike last week that Hostess CEO Greg Rayburn says forced the company to take the final, dramatic step of liquidating everything and firing workers….Rayburn said Hostess was already operating on thin margins and that the strike was a final blow.

Well, if that’s what the CEO says, it must be true. No need to get a quote from the labor union, just write down what the CEO says and move on. (Note: this type of practice is what leads our fiancé to say that American journalism is just slightly more qualitative than community theater. Just slightly though.) But anyway, if only the unions hadn’t mistakenly believed they had some sort of “upper hand,” Jordan Weissman continues, all this could have been avoided if they had just been willing to return to their shitty jobs at sub-par wages. Wouldn’t the company have been doomed to collapse anyway, given that it was loaded with debt, made products that no one seemed to want, and wasn’t developing anything new? And isn’t the CEO ultimately responsible, since CEOs are supposed to be ultimately responsible for successes AND failures?

Who knows, not important. But the REAL TRAGEDY here is the “private equity guys” will probably lose their investment (even though as we know already, this doesn’t necessarily mean they will lose any of their own money).

The private equity guys will likely lose most of their investment, since their stake in the company will be worthless. It’s also not clear that the hedge funds and other lenders that supplied Hostess with its mountain of loans will fare much better…. In short: the smart money guys larded Hostess with too much debt and never figured out a real plan for fixing its business. They’re coming out with a loss as a result.

As far as the unions go: You can blame them for not making enough concessions. You can blame the bakers for administering the final death blow. But you can’t blame them for management’s strategic incompetence, or the decision to try to run a flailing company on debt, hope, and empty calories.

There’s more than enough blame in this story for everyone involved to have a taste.

“In short,” he says, the “smart money guys” loaded Hostess up with debt, failed either to competently market pre-existing products or develop new ones, made poor decisions that stymied growth, gave themselves a hefty raise (though Weissman doesn’t mention that), demanded (and got) wage cuts from employees the first time they went into bankruptcy,  stole from employees’ self-funded pensions (though he doesn’t mention that either), and were already in bankruptcy AGAIN when the strikes started.

But this is still partially the WORKERS’ fault because they still had contracts that were so “deeply flawed” as to afford them a near-living wage (we assume, he doesn’t tell use) and they didn’t agree to give up even more of their wages in return for the God-given gift of working for this mismanaged company.

[The Atlantic]

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  • freakishlywrong

    Note to the vaunted private equity guys; you probably shouldn't invest in Twinkies. Think about it.

  • snowpointsecret

    They should have just outsourced to China, that's what Mitt did!

  • Trannysurprise

    The real victim as always and forever shall be Sarah Palin.

    • LibertyLover

      Won't someone think of her children?

    • sundaytrucker

      the collapse of hostess would explain the weight loss

  • Hostess still carries 3/4 of a billion dollars in secured debt in the various buyouts its been through.

    But hey! Let's blame the unions!

    • An_Outhouse

      Maybe Occupy the Debt will buy them up. Twinkies for the People!

  • freakishlywrong

    Little Debbie, watch your back, bitch.

  • BZ1

    No union-busting going on, no siree, Bob.

    • One can only hope that the Twinkie debacle is what finally focuses public attention on this form of union busting.

      • GunToting[Redacted]


        Oh, MERCY.

  • SorosBot

    He keeps using that phrase, "smart money guys", but that doesn't make any sense, this is just the latest incident to prove that the money guys are complete and utter morons.

    • hagajim

      They're smart money guys in that they got theirs before the company went TU.

    • No no no. The *money* is smart, the guys, not so much.

    • ProgressiveInga

      I'm trying to do the math, People!

      Private Equity Firms + CEO = Hedge Fund Lenders + Risk
      Jerb Creators = Smart Money Guys
      Union Thugs = Stupid Money Guys
      Smart Money Guys > Stupid Money Guys
      CEO – Capital = No Twinkies

      I'm lost…..

      • sullivanst

        You forgot to multiply something by Journalistic Integrity, which, in this case, as most cases, is negative. That'll make it all work out.

    • Tundra Grifter

      I believe the line comes from Dan Jenkins – "Why is it all the smart mice are always trying to take the cheese away from the dumb mice?"

    • Disassembly

      I always skip the smart money guys and go straight to the fucking smart money guys like Jeffrey Skilling.

    • LibertyLover

      …Complete and utter thieves….


    • An_Outhouse

      In one article I read, they mention the Teamsters sent their accountants in, realized how bad things were, and agreed to new terms. Apparently the Teamsters have the 'smart money' guys.

    • miss_grundy

      And one of them ran for President!

  • “an unusual circumstance that the company justified on expectations of ‘growing’ into its capital structure,” as Kaplan put it.

    I'm going to try that one on American Express. I fully expected my income to "grow into" the $100,000 dollar chicken coop I bought from Neiman-Marcus, so I probably should just get it for free because it didn't.

    • sullivanst

      Can I possibly be the only one with a strong suspicion that if one were to actually look into what happens when private equity guys swoop on a company in bankruptcy, one would actually discover that there's nothing remotely unusual in any way about the post-takeover entity being larded up with new debt on the excuse of projected revenue growth?

      • HistoriCat

        You mean where the "smart money" guys make the company take on debt, give themselves bonuses and "management fees" and then act like it's a complete shock when the company goes belly up?

  • Come here a minute

    And still no mention of the true victim, the poor Ho-Ho eater.

    • Callyson

      That's not a nice way to talk about Newt Gingrich.

    • OzoneTom

      Someone got two hos?

      That explains where mine went.

    • JerkCade

      Hos gotta eat, too.

    • mull_man

      What do you call a stuttering prostitute? A Ho Ho.

      Old joke – couldn't resist.

  • snowpointsecret

    I wonder… If Hostess sold their cakes with actual hostesses, would the have made more money, or would they just be shut down by the government of Mobile?

    • LibertyLover

      Twinkies do kinda resemble…. er… a marital "aid"

  • Not_So_Much

    Anybody remember a WonderBread or Twinkie commercial within the last 15 years or so? I don't.

    • nounverb911

      Wonderbread: Helps build strong bodies twelve ways?

      • Not_So_Much

        Yeah, and I remember 'Twinkie the Kid' from my misbegotten youth. But I have no recollection of them doing even the bare minimum to promote the brand in the last dozen years or so.

  • hagajim

    Company that sells larded up products blown up by bloated debt – news at 11. Actually this seems to be a strategy some of the equity firms are using to blow up company pension obligations as well. I figure the equity guys have owned the company for 8 years – I'm sure they made a shitload of cash for "consulting" and of course in interest payments.

  • Goonemeritus

    The reason management got big raises was to retain them to the bitter end, these last minute raises are proof in my mind that company was going out of business regardless of what labor did. When a company is about to go tits up with foam it is typical for them to pay senior management to ride the pony all the way into town.

    • miss_grundy

      It's the golden parachute that the "smart money guys" offer senior management. Help us kill the company and walk away with millions. That way, they can still get into their luxury cars in the executive parking garage and watch the workers, who just lost their jobs, walk like zombies toward the employee parking lot.

  • nounverb911

    But what will they deep-fry at next years Texas State fair?

    • freakishlywrong


    • BadKitty904

      Moon Pies!

      • kittensdontlie

        Cow Pies!!

    • Ted Cruz?

    • Messicans trying to cross the border?

    • sullivanst

      Butter, y'all. Or the Scottish classic, Mars bars.

    • Cat turds!

  • Aridzona

    Tried the "maquiladora style" burrito at Chipotle and it was yummy.

    • Kid_Charlemagne

      Naw. Not enough donkey sauce.

    • horsedreamer_1

      That's cannibalism.

  • The private equity guys will likely lose most of their investment, since their stake in the company will be worthless. It’s also not clear that the hedge funds and other lenders that supplied Hostess with its mountain of loans will fare much better

    By the way, isn't this why it's called "risk"?

    • snowpointsecret

      Attacking Yakutsk from Irkutsk.

    • Lot_49

      Only if you can't get the taxpayers to make up your losses.

    • PugglesRule

      Risk for thee (employees) but not for me (private equity guys).

  • asterixaverni

    Corporate mis-management and greed had nothing to do with the destruction of a company and over 18,000 jobs. Oh no. It was the 300+ union employees that took out the company. Greedy fucks – who wouldn't accept a 32% pay cut on their mind-blowing $12/hour job? They just don't appreaciate how generous the corporation was being. Greedy Fuckers. They got what they deserved – outta work! Bunch of lazy moochers anyway.

    • PugglesRule

      And just think – maybe now they'll be eligible for food stamps. Just what the lazy moochers wanted, I'm sure.

  • It's a strange twist of fate being that Twinkies were supposed to survive Y2K, Zombies and nukular Wahr, but only to die in a self inflicted financial apocalypse.

    • freakishlywrong

      Indeed. Out-survived by the cockroaches. Or, as they're more commonly known; "the smart money guys".

      • josephmax

        Actually, it's more like a self-inflicted zombie attack, where the infected loses all human qualities except ravenous hunger, but in this case, the zombie devours itself.

        Kinda works as a metaphor, when you think about it…

  • Botlrokit

    As long as diabetes is a market, someone is going to corner it.

  • BadKitty904

    I've yet to see anyone in the "liberal media" mention the management problems detailed above.

    As for Hostess "snack food products" –

  • MiniMencken

    If the workers were to rise up and murder all of their bosses, would they all be exonerated because, "Twinkie defense?"

  • Oblios_Cap

    The real victims of the tragedy surrounding the death of Twinkies will be the Hover Round manufacturers.

    And the county fair vendors. No more deep-fried Twinkies for you.

  • fartknocker

    Thank goodness America still has Cheetos and Doritos, with all their nutritional value.

    • Lot_49

      "…starchy snacks that much of the public had lost its taste for" is the worst sort of Twinkie libel.

      But it is definitely true that, for me at least, the fine food stylists at the Frito-Lay Corporation have mastered the art of packing one-half ounce of irresistibility in a colorfully printed foil bag that sells for a dollar.

  • Workers take a pay cut while management takes a pay raise. I cannot see that working well. Ever.

    • Oblios_Cap

      It's the airlines' business plan.

  • EatsBabyDingos

    That's Jack Abramoff's six twin brothers helping carrying the deceased.

  • gullywompr

    Real question is: who's the asshole on the financial beat at AP who first reported the story as a simple regurgitation of what the CEO said?

  • AlterNewt

    So this is what equity investment has become. Like a blight that burrows inside a company and eats out it's substance until it withers and dies.

    Or in this case, it's creamy, gooey filling, but otherwise…

  • Tundra Grifter

    “an unusual circumstance that the company justified on expectations of ‘growing’ into its capital structure,” as Kaplan put it.

    Isn't this like a recent college graduate without a job purchasing a home and taking on a mortgage?

    • MissTaken

      And then taking a second-mortgage on the 'home equity' to buy a Hummer and flat screen tv.

      • SorosBot

        Hey, if you're not fully "leveraging" your house with maximum debt, you're not getting the full value out of it!

        • Lot_49

          Because everyone knows you can't lose money on residential real estate!

  • So we have a new market for Twinkies: lining bomb shelters.

    • PugglesRule

      The bomb shelters could become padded cells. Plenty of possible occupants, IMO.

  • ph7

    I'm trusting Lindsey Graham will find a creative way to review the Twinkie.

    • BadKitty904


      • ph7

        I meant to type "revive", which is probably ew-ier.

    • Esteev

      I think he's more into Bears.

  • cousinitt

    The Atlantic reported on the Twinkipocalpse? This is a job for no less than Megan McArdle. Well, or a damp sponge mop.

    • bobbert

      But you repeat yourself.

  • OneDollarJuana

    After the nuclear holocaust only the rats and roaches will survive. Because Twinkies!

  • Abernathy

    loaded with debt, out of ideas, and all into synthetic sugary snacks–Hostess is people, my friend!

    • loaded with debt, out of ideas, and all into synthetic sugary snacks–Hostess is people Teabaggers, my friend!

      Fixed yer post.

  • Callyson

    As far as the unions go: You can blame them for not making enough concessions. You can blame the bakers for administering the final death blow.

    What was the definition of insanity again? Something about doing the same thing you did before and expecting a different result?


  • Lascauxcaveman

    So it's a classic cautionary tale of how the greedy farmer ends up killing the goose that lays the golden, uh… cream-filled, cake-like, snack food thingees.

  • Come on, if it was really management's fault, would they be walking away from a failed company richer?

    This is the same sort of anti-Capitalist propaganda that points at the oil companies for making obscene profits by jacking up the price. It's the market, people!

  • BadKitty904

    But how does this tie into Benghazi?

    • Blueb4sinrise

      lemme try…………ummmmmmmmmm

      ERGO, Benghazi!!!!!!!!!!!!!

      also 'ilk'.

  • Aridzona

    Twinkies are shaped like small coffins for a reason.

    • LibertyLover

      Always wanted to be buried in creme.

      • HistoriCat

        Are we back to porno DA guy again?

    • kittensdontlie

      Bakery, Confectionary, Tobacco Workers and Grain Millers International Union

      Their addictiveness was from the tobacco.

  • LibertyLover

    Why are all of those men dressed like Jack Abramoff?

    • Twinkies are Orthodox. Their real name is Twinkelstein

      • LibertyLover

        Gonna need proof of circumcision then.

  • CapeClod

    How in our health concious world of today did a company that made the most un-nutrious suite of foods imaginable somehow go out of business?

  • glasspusher

    That's a big Twinkie…

  • LibertyLover

    Somewhere, in a smallish mansion in La Jolla, CA, Mitt Romney was heard to whisper: "Don't let Hostess go bankrupt."

    • glasspusher

      …and then went to the car elevator…

  • delaney_blom

    A private equity company, Ripplewood Holdings, paid about $130 million dollars to take Hostess private

    Ripplewood's a bunch of amatuers; the real smart money guys are over at Whiskeydick Enterprises.

  • this doesn’t necessarily mean

    Dreaded 404 None Page

    seems to be getting lost in the Wonkette bowels. Try the direct route here.

    • The 404: the End of the Internet

  • Lot_49

    Ha ha, "larded with debt…" So funny, The Atlantic. Thank goodness you've gone conservatard now that you belong to Mort '"Sugar Man" Zuckerman. No, wait:

    On September 27, 1999, ownership of the magazine was transferred from Zuckerman to David G. Bradley, owner of the Beltway news-focused National Journal Group….Bradley, who has described himself as "a neocon guy"…

    There it is. What do neocons love more than war to defend Israel at the expense of who cares who else? They love rich guys like Murdock and this asshole to finance the scribblings.

    • BadKitty904

      Well, it's not like "The Atlantic" is relevant or anything…

  • SmutBoffin

    I dreamed I saw Joe Hill last night,
    Alive as you or me
    Says I, "But Joe, you're ten years dead,"
    "I never died," says he
    "I never died," says he
    "In Salt Lake, Joe," says I to him,
    Him standing by my bed,
    "They framed you on a murder charge,"
    Says Joe, "But I ain't dead,"
    Says Joe, "But I ain't dead."
    "The copper bosses killed you, Joe,
    They shot you, Joe," says I.
    "Takes more than guns to kill a man,"
    Says Joe, "I didn't die,"
    Says Joe, "I didn't die."
    And standing there as big as life
    And smiling with his eyes
    Joe says, "What they forgot to kill
    Went on to organize,
    Went on to organize."
    "Joe Hill ain't dead," he says to me,
    "Joe Hill ain't never died.
    Where working men are out on strike
    Joe Hill is at their side,
    Joe Hill is at their side."
    "From San Diego up to Maine,
    In every mine and mill,
    Where workers strike and organize,"
    Says he, "You'll find Joe Hill,"
    Says he, "You'll find Joe Hill."
    I dreamed I saw Joe Hill last night,
    Alive as you or me
    Says I, "But Joe, you're ten years dead,"
    "I never died," says he
    "I never died," says he

  • BartStarrland

    Agreed – that article was not sponge-cake worthy.

  • Nostrildamus

    Looks like Marlon Brando has lost some weight.

  • savethispatient

    I said this on the previous article, but it bears repeating: the union's pension fund is Hostess' biggest unsecured creditor, and is owed about $944.2m. Raid the pension fund in number 1 in the big book of vulture capitalism, right?

  • Fox n Fiends

    Trust the Free Market + Hate Science = USA! USA!

  • Pat_Pending

    Dan White is rising from the grave…

  • An_Outhouse

    Twinkies, Ho-Ho's, Sno-Balls! Was Mark Suben, the DA in Cortland County, NY, in charge of marketing at Hostess?

    • horsedreamer_1

      The Suben thing reminds me of spring 2000 ONION story about presidential candidate Bill Bradley acknowledging buying a Spin Doctors record in 1992.

  • flipdraw

    I'm going out on a limb here as I have always had a soft spot for Drakes Coffee Cake, which is also a sad casualty, too.

  • Wile E. Quixote

    Would anything bad happen if we killed everyone who worked for a hedge fund?

  • HouseOfTheBlueLights

    And you know, I bet those greedy union workers didn't even buy twinkies to help the company stave off banruptcy.

  • ttommyunger

    I blame Obama!

  • LibertyLover

    "Let them eat Twinkies!" They yelled from the Barricade!

  • shelwood46

    One thing this past election cycle has taught me is that every single US business, no matter how much debt it carries, how badly managed, how overloaded with executive pay, how irrelevant its product, should be a success as long as that business does not have to pay any taxes and can exploit their workers as fully as possible. This is why it kind of baffled me that Romney touted his business skills, since according to his own party's rhetoric, it doesn't actually take any skill to have a successful business.

  • carlgt1

    how absurd these Bain-style vulture capitalists are – they load down the company with so much debt that it can only be paid off if the entire world population of 6 billion gets a pack of Twinkies!

  • christianmuslin

    Had they dyed most of those Sno Balls red, with only a few packages blue, they would have sold tons of them! For Freedom.

  • christianmuslin

    Alternately, they could attach a small condom and sell them for stocking stuffers.
    See, they should have contracted with Wonkette's world wide marketing department. We could have had them in need of a second shift in no time.

  • KillerBoob

    Exactly what's happening at certain airlines. And as always, the workers get blamed for daring to want to pay their mortgages (the same ones they could afford 15 years ago). HOW is it that workers can give up 1/2 their pay, yet are blamed for ruining companies with their "greed"? (Sorry, I misplaced my snark somewhere…)

  • If only this story of union greed had come out three weeks ago, it would surely have swung the election to Mitt Romney!

  • ttommyunger

    Judging from the looks of the dearly departed, the Governor of New Jersey has "paid his respects".

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