Thanksgiving, Twinkies & Mortgages

As we again sit down to a bountiful Thanksgiving dinner with friends and family there ought to be a moment to think about Hostess Brands Inc. and the more than 18,000 people whose jobs are at risk.

The company says its workers want too much and the union says the company is offering too little. This is not just an academic debate, Hostess Brands literally says that it’s closed. Most likely, some or all of the company will be sold off to new owners who will try to reinvigorate such great brands as Twinkies, Ding Dongs and Wonder Bread.

Gustatory Delights?

Nobody would argue that the company’s snack products were epicurean triumphs or the foods that health-conscience citizens would be most likely to stock. But they were good, a fantasy of sugar and baking that from time-to-time was a very enjoyable guilty pleasure. A lot of people must hold this view given that the company had annual revenues of more than $2 billion.

But Hostess was also a company with more than $1 billion in debt and huge conflicts between hedge fund owners and union workers. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union said workers gave up $110 million in benefits but that the money was not re-invested in the company. Earlier this year,  said the Union, “the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. One such executive received a pay increase from $500,000 to $900,000 and another received one taking his salary from $375,000 to $656,256.”

Mortgages & Wages

No one would care if top executives got a big increase as long as the company made money and the workers – as the old expression goes – got a fair day’s pay for a fair day’s work. But this is a company which despite massive executive pay hikes is now on its second bankruptcy and in the best case had a long way to go before it reached any sort of financial nirvana.

Now we have the prospect that large numbers of people are going to miss paychecks and the odds are pretty good that if brands and facilities are re-sold many workers will never be rehired or earn the incomes they once had. These are people who are not any different than you or I. They have kids, they have mortgages, some will now face foreclosures and short sales, and if mortgage rates stay low or even drop further it won’t make any difference in terms of real estate because people without incomes can’t refinance or buy property — including, perhaps, the home you want to sell.

One hopes the bakeries can be re-started and that good people will once more have the opportunity support their households, pay taxes and buy stuff from local merchants. And if it happens that grocery shelves again showcase a few traditional snack and bread products under different ownership you can at least count on me to buy a few Ding Dongs every so often.

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