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The Collapse of the Twinkie Empire

The year was 1969.  I was 12 years old, and the boy who delivered the local newspaper to my parents’ home told me that he was going to quit delivering papers.  His name was Richie.  I asked Richie what I needed to do to take over the job, and he gave me the name and telephone number of his supervisor at the Peoria Journal Star.  After talking to my mom about applying for the job, I called the supervisor and set up a time for me and my mom to meet with him.

I got the job and walked the route with Richie for two weeks before I took over delivering the papers, which were dropped off in bundles every day at Stafford’s Dairy, a small convenience-type store that was about six blocks from my parents’ home.  The paper route was my first experience with earning money on a weekly basis.

With money to spend, I stopped in Stafford’s Dairy every day prior to delivering the papers to buy one or more of my favorite snacks – Slim Jims, Bazooka bubble gum, Hostess chocolate covered Donettes, Dolly Madison apple pies, Hershey’s Milk Chocolate Bars with Almonds, and Pepsi (in 16-ounce glass bottles).

I continued to favor these same items throughout my high school and college years.  As I grew older, I stopped buying the Slim Jims, bubble gum, apple pies, and Pepsi, but I never gave up the Hershey Bars or the Donettes.  In fact, I was craving chocolate covered Hostess Donettes a few months ago, so I stopped by a gas station and bought some.  Delicious.

Anyway, I was disappointed last week when I read that Hostess Brands, the company that made Hostess Donettes and Dolly Madison pies, was shutting down after 82 years in business.

Hostess Brands has been in bad financial shape for years.  Its predecessor, Interstate Bakery, filed for Chapter 11 bankruptcy protection in 2004.  (A Chapter 11 bankruptcy provides a legal mechanism for a company to attempt to reorganize and strip off some of its debts.)  It took almost five years for Interstate to emerge from bankruptcy.

During that time, in addition to closing more than 300 outlet stores and nine of its 54 bakeries, Interstate reduced its work force from 32,000 to 22,000 employees.  Also, in exchange for equity in the company, Interstate’s union workers agreed to concessions.  The final plan that was approved by the bankruptcy judge gave controlling interest in the company to a private equity fund in exchange for a substantial infusion of cash.

In November 2009, in order to take advantage of the goodwill that had been built up over the years by the Hostess brand, the name of the company was changed from Interstate Bakery to Hostess Brands.

Hostess Brands continued to struggle financially until January 2012, when the company again filed for Chapter 11 bankruptcy protection.  During the fiscal year leading up to the new bankruptcy filing, Hostess had total revenues of $2.5 billion and total expenses of $3.6 billion, generating a net loss of $1.1 billion.  In addition to the losses, Hostess had $2 billion in unfunded pensions.

Up until the filing of the new bankruptcy, Hostess obtained loans amounting to hundreds of millions of dollars from two large hedge funds (groups of investors).  The hedge funds finally cut off the flow of money and told Hostess that no more money would be forthcoming unless the company was able to obtain additional concessions from the unions.

Although Hostess was able to get the Teamsters Union to agree to additional concessions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (Bakers Union), which represented 6,600 of the current 18,500 Hostess employees, refused to agree to concessions and went on strike.  Hostess announced that unless the Bakers Union called off the strike and returned to work by November 15, Hostess would lay off its employees, liquidate the company, and sell off its assets – buildings, equipment, recipes, and brand names – to the highest bidders.  The union refused to budge, and on November 21 the bankruptcy judge granted Hostess’ request to allow it to liquidate the company.

On the day that the Bakers Union announced it was not going to give in to the Hostess threat, I heard part of an interview on the radio.  One of the Peoria local union representatives said that Hostess had “raped” the unions and any additional concessions would benefit only Wall Street investors.  The representative then went on to say that the members of his union were hoping that another company would buy the assets of Hostess and hire the union workers to work for the new company.

One of the reasons the Bakers Union took such a militant position against Hostess was because, prior to filing bankruptcy, Hostess tripled the salary of its chief executive officer from $750,000 to $2,550,000 and gave substantial raises to its top executives.  When the information about the raises came out (after the bankruptcy), the CEO announced that he and the company’s top four executives had agreed to reduce their salaries to one dollar for 2012, while the other executives had agreed to return to their previous salary levels.  It was obvious that the only reason they agreed to reduce their salaries was because they got caught with their hands in the cookie jar.

What is surprising to me is the level of delusion that existed among Hostess management and labor.  What were the CEO and the other executives of Hostess thinking when they voted themselves massive salary increases at the same time they knew their company was on the brink of bankruptcy?  Didn’t they realize that whatever trust they had established with the unions would be ruined by their greedy behavior?  And do the leaders of the Bakers Union really believe that a company that invests millions of dollars to purchase the assets of Hostess will hire its members when they were willing to kill off the company they worked for just to make a point?  Is it not obvious to them that whatever company that buys the assets will end up setting up shop in Mexico or some other country?

What happened at Hostess is a microcosm of what is happening in our nation.  We live in a country where many of our leaders – business, educational, and political – no longer have any sense of honor, morality, humility, or personal integrity.  They will do anything in their power to get what they believe is rightfully theirs, regardless of how many people are harmed by their actions.

Patrick Henry, one of our founding fathers, said, “I have but one lamp by which my feet are lighted, and that is the lamp of experience.”  What does the lamp of experience tell us?  Let’s go all the way back to the eighth century B.C. when the prophet Isaiah warned the nation of Judah: “How the faithful city has become an harlot!  It was full of justice; righteousness lodged in it; but now murderers.  Your silver has become dross, your wine mixed with water: Your princes are rebellious, and companions of thieves; every one loves bribes, and follows after rewards.  They do not defend the fatherless, nor does the cause of the widow come before them” (Isaiah 1:21-23).

Isaiah wasn’t finished.  In addition to the rulers, he also laid blame on the entire nation: “Alas, sinful nation, a people laden with iniquity, a brood of evildoers, children who are corrupters!  They have forsaken the LORD, they have provoked to anger the Holy One of Israel, they are turned away backward” (Isaiah 1:4).  Isaiah recognized a universal truth that provides that the rulers of a nation act as representatives of the people. They do evil things because the people, in their own lives, do evil things.

We know from the prophet Elijah that when the people and rulers of Israel turned evil, a remnant still existed: a small group of seven thousand people who had not bowed to Baal (1 Kings 19:18).  The good news for you and me is that a remnant still exists in our country.  That remnant is made up of devout Catholics and Christians.  Our nation cannot survive in its present form without the bold leadership of the remnant.

Are you ready to step up and assume a leadership role in your community, or provide active support to one or more true Christian leaders?  We are running out of time.  The survival of our freedom and liberty is dependent on the courageous actions of leaders who subscribe to long-standing Christian values, traditions, and principles.

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