Here’s news that Hostess Brands is filing for bankruptcy. Last fiscal year, it posted revenue of $2.5 billion and a net loss of $341 million. The losses, we’re told went to servicing corporate debt and obligations to pension and health-care plans. Which is to say that Hostess did not lose money making Twinkies. The debt, I’m almost certain, was incurred in the course of various restructurings, not as capital expenditures on plant.

I’d sure like to know more, because Hostess seems, if not representative of America industry overall, then afflicted with its principal illnesses. First, the benefits nightmare. I’ll be the last to say that workers don’t deserve generous pension and health-care benefits after retirement. But why do we expect individual corporations to provide them? Because it smells better than socialism, for one thing, and, less benignly, it introduces a whiff of free-marketry into the undertaking, since benefits are negotiated between corporations and unions. Why do we have unions? For the same reason that the government doesn’t provide retirement benefits directly: unions are proof that we are not socialists.  Hostess Brands has declared bankruptcy because, like the former Soviet Union, it can no longer afford to pay for the Cold War.

Then there’s that debt. The private equity firm of Ripplewood Partners is mentioned, but only as “seizing control” in 2009. Then what happened? IMy guess is that the debt was “restructured” — that is, postponed but increased. The story of the underlying debt is what I’d like to hear. Once upon a time, Interstate Bakeries, as it then was, was just a bakery. Then somebody had the bright idea of diversifying, either by buying other businesses for the bakery or by selling it to a larger outfit. One imagines a spell, lasting from the Eighties into the Nineties, when the company’s strength — popular snack-food brand names — struck executives as unspeakable banal.

Nobody needs to eat Ding Dongs, so calling Hostess a “utility” is something of a stretch. For better or worse, though, millions of Americans reach for Hostess products ($2.5 billion’s worth) when they crave whatever it is that junk food provides. They ought to be denied only if the manufacture of cupcakes becomes prohibitively expensive, or if the baking process is shown to be dangerous. The  Hostess shelves at the convenience store ought to remain well-stocked otherwise. If Twinkies disappear for any other reason, it will signifify that American leaders don’t know how to allocate costs and responsibilities, and that American businessmen are too easily distracted.

 

 

Drop me a line at rjk@dailyblague.com
This entry was posted on Wednesday, January 11th, 2012 at 11:36 am.