You remember when Hostess declared bankruptcy last November? There were outcries that the iconic snack pastry would be gone forever. Speculators began to stockpile the tasty treats
As Zero Hedge documented, eBay featured the following items:
Even now, there’s a rotting Twinkie for sale on eBay. Supposedly, Twinkies will remain edible for decades, even outliving their cellophane wrappers (or so goes the mythology).
The belief was that unyielding union workers could make the Twinkie vanish. But that’s not how real capitalism works. However, we understand the confusion. In this bailout economy, whenever an enterprise is on the rocks, the workers cry out to their political friends that the employer must be saved or the jobs and products will be lost for good.
The government and media preached that not only would General Motors and Chrysler perish if the taxpayer didn’t step in, but all of the suppliers would be gone as well. Millions would lose their good, high-paying jobs. The Center for Automotive Research, a Michigan think tank, estimates that the bailout saved 1.5 million U.S. jobs by keeping GM and Chrysler, and the companies that depended on them, in business.
Uncle Sam shoveled $80 billion to the automakers, some of which has been paid back through a GM IPO. The taxpayers still own a slug of Government Motors and will be made whole only if or when the shares reach $51 (currently trading at $28). Chrysler still owes $1.3 billion.
And remember, this rescue happened in 2009. Time flies when you’re bailing out.
The automakers are now making a profit, but the U.S. Treasury’s latest figures estimate the Detroit bailout will ultimately cost taxpayers $25.1 billion. This number has been revised upward more than once, so don’t carve it in stone. Let’s just say at least $25.1 billion.
So $25 billion divided by 1.5 million jobs comes to nearly $16,700 per job.
Meanwhile, Hostess Brands couldn’t reach an agreement in November with the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union and began liquidation. According to the company’s website, “The wind down was necessitated by an inflated cost structure that put the company at a profound competitive disadvantage. The biggest component of the company’s costs was its collective bargaining agreements that covered 15,000 of 18,500 employees.”
The Obama administration must be more partial to cars than pastries. Administration officials were nowhere to be found as the company circled the drain. The shutdown of Hostess meant the closure of 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes, and 570 bakery outlet stores, as well as the loss of 18,500 jobs.
The company was founded in 1930 and built some iconic brands such as Hostess, Wonder Bread, Nature’s Pride, Dolly Madison, Butternut Breads, and Drake’s brands.
General Motors was founded in 1908 and owns iconic brands such as Chevrolet, Buick, Cadillac, and GMC.
Chrysler was founded in 1925 and owns brands such as Chrysler, Jeep, Dodge, Ram, Fiat, Mopar, and SRT.
Here we are less than three months after Hostess filed for liquidation and the bids are flooding in for the assets of the company. Its hoping to sell the brands, factories, and other assets for $1 billion.
Flowers Foods Inc. bid $390 million for the bread brands. United States Bakery Inc. agreed to pay $28.85 million for the Sweetheart, Eddy’s, Standish Farms and Grandma Emilie’s bread brands, four bakeries, 14 depots and some equipment. “We believe the assets and brands will allow us to provide fresh-baked Franz Bakery products to a wider and diverse geographical base,” Bob Albers, United States Bakery’s chief executive, said in a statement.
Two bids came in Monday for cakes and bread that brought the total offered to more than $440 million. These aren’t final bids, but are what’s known as “stalking horse” bids.
Stalking horse bidders are selected by the company to make the initial bid in a bankruptcy auction. This allows the distressed company to avoid low bids on its assets. Once the initial bid is put in place, competing bids can commence.
Hostess then selected C. Dean Metropoulos & Co. and their financial partner Apollo Global Management to provide the initial bid for its cake brands that include Twinkies, Ding Dongs and Ho Hos. As I write, Forbes is reporting that Metropoulos and Apollo will bid $400 million for the treats. This would set a tasty floor for the bidding, and if they were outbid, they would earn a breakup fee.
The point to all this is that the beloved Twinkie will be back on the shelves before you know it. Plus, many of the jobs required to make them will be reinstated. Yes, there may be fewer of them and they may be lower paying, but hungry consumers will be served.
Taxpayer cost per job saved: nothing!
Writing for Policymic.com a couple months ago, Lenny DeFranco wrote, “Let’s recognize that a company like Hostess is supposed to go out of business. Liquidation is a proper burial when you sell products no one wants and are unable to change.”
DeFranco said the whole idea that union wage demands and management incompetence took down the company was nonsense. “I think Twinkies lost their appeal when the possibility of having to survive a nuclear hellscape passed, or when people realized that subsisting on them in such a scenario would lead to a more agonizing death than leukemia,” he sniffed.
Well, Mr. DeFranco, the market is speaking, and the score looks to be Twinkie 840 million, DeFranco 0.
The same liquidation proceeding would have sorted out the brands, jobs, and assets of the automakers four years ago if Washington would have kept its nose out of it. No doubt some company would have bought Jeep, Cadillac, and the rest with production never missing a beat. Instead, taxpayers are $25 billion poorer, not to mention the odious CAFE standards Washington forced into the deal.
It turns out the Twinkie has an official shelf life of 25 days — not exactly immortal, but a long time for a baked good. But a fresh new supply is likely just months away.
Long live the Twinkie, thanks to bankruptcy
The lesson for economics, investors, and everyone is that bankruptcy can be a new beginning, a rebirth, the most bullish sign there is. It is not an end, but a light that shows the way to a wonderful future. Bankrupt but unsubsidized business can be a great place to place your bets on future growth. Now, if only all the bailed-out zombie institutions that are weighing on U.S. growth could be so lucky.
Original article posted on Laissez-Faire Today
Douglas French is a Senior Editor for Agora Financial. He received his master's degree under the direction of Murray N. Rothbard at the University of Nevada, Las Vegas, after many years in the business of banking. He is the author of two books, Early Speculative Bubbles & Increases in the Money Supply, the first major empirical study of the relationship between early bubbles and the money supply, and Walk Away, a monograph assessing the philosophy and morality of strategic default. He is founder and editor of LibertyWatch magazine.
Pingback: Check Out
Pingback: Continue Reading
Pingback: click the following web page
Pingback: just click the following web page
Pingback: just click the next web site
Pingback: Discover More
Pingback: linked web page
Pingback: Full Guide
Pingback: mouse click the following article
Pingback: Highly recommended Online site
Pingback: Read More At this website
Pingback: just click the up coming article
Pingback: Read the Full Piece of writing
Pingback: Recommended Web site
Pingback: Recommended Web-site
Pingback: mouse click the next page
Pingback: please click the following internet page
Pingback: Read More Listed here
Pingback: mouse click the following website page
Pingback: mouse click the next site
Pingback: Read Significantly more
Pingback: Recommended Looking at
Pingback: simply click the following web site
Pingback: related web page
Pingback: relevant web-site
Pingback: simply click the up coming internet page
Pingback: simply click the up coming post
Pingback: simply click the next internet page
Pingback: stay with me
Pingback: mouse click the next internet page
Pingback: This Web-site
Pingback: This Internet page
Pingback: visit the following web page
Pingback: visit the next website
Pingback: Recommended Internet page
Pingback: click through the next webpage
Pingback: related web site
Pingback: mouse click the up coming web site
Pingback: Going Here
Pingback: please click the following internet site
Pingback: please click the next webpage
Pingback: just click the following article
Pingback: just click the next webpage
Pingback: Recommended Internet site
Pingback: Recommended Web page
Pingback: Read the Full Report
Pingback: More Signup bonuses
Pingback: Recommended Site
Pingback: simply click the next website
Pingback: simply click the next internet site
Pingback: relevant webpage
Pingback: Suggested Studying
Pingback: This Resource site
Pingback: visit the following internet page
Pingback: This Web site
Pingback: visit the next web page
Pingback: Click at
Pingback: click the up coming internet site
Pingback: Full Posting
Pingback: Highly recommended Reading
Pingback: additional reading
Pingback: linked webpage
Pingback: More methods
Pingback: click the up coming webpage
Pingback: click through the following website
Pingback: mouse click the up coming post
Pingback: Full File
Pingback: Read the Full Article
Pingback: Go At this site
Pingback: related web-site
Pingback: click the next document
Pingback: click through the next internet site
Pingback: More Support
Pingback: Read Even more
Pingback: relevant internet site
Pingback: simply click the following website page
Pingback: Recommended Reading
Pingback: Going On this site
Pingback: simply click the up coming site
Pingback: just click the following web site
Pingback: similar web site
Pingback: just click the up coming site
Pingback: simply click the next web page
Pingback: visit the following post
Pingback: More Info
Pingback: click for source
Pingback: Suggested Reading
Pingback: This Site
Pingback: click through the next article
Pingback: mouse click for source
Pingback: Recommended Browsing
Pingback: Suggested Webpage
Pingback: Recommended Online site
Pingback: visit the up coming document
Pingback: mouse click the following web site
Pingback: simply click the next document
Pingback: supplemental resources
Pingback: Read Full Report
Pingback: Click On this site
Pingback: Check This Out
Pingback: click through the next page
Pingback: Click on
Pingback: click through the next web site
Pingback: click through the following post
Pingback: Full Post
Pingback: Highly recommended Internet page
Pingback: Extra resources
Pingback: Home Page
Pingback: Learn Even more Here
Pingback: More suggestions
Pingback: relevant website
Pingback: visit the up coming post
Pingback: get a free ipad
Pingback: best vpn provider
Pingback: My Homepage
Traveling the world can be expensive. Between airfare, dining costs and hotel accommodations, travel expenses can add up quickly. And the last thing you want on your vacation is to be stretched too thin. Chris Campbell explains how you can eliminate one of the biggest travel expenses entirely, with one simple trick. Read on...
The S&P finally closed above 2,000 yesterday - a new all-time high. And that has some investors comparing it to the heady days of the late 1990s, when the S&P soared through 1,000 and didn't bother to look back. But as Greg Guenthner explains, that run up wasn't without its pitfalls, and this one won't be either. Read on...
A "fair-weather fan" is someone who only roots for his team when the team is winning. And while that's usually a derogatory term, Matt Insley explains why, at least when it comes to investing, being a "fair-weather fan" can be the best strategy to making huge gains in any kind of market. Read on...
The S&P got back over the 2,000 hump and actually managed to close there by day's end. Dave Gonigam examines the buzz on Wall Street that accompanied the move higher - and takes a closer look at Warren Buffett's role in the Burger King takeover of Canadian doughnut maker Tim Hortons. Read on...
Public companies operate mostly for their own sake, representing the vested interests of their management teams. So much so that shareholders are often little more than an afterthought. As an investor, it's important for your to seek out those companies that have your interests at the forefront. Chris Mayer explains how to find them...
The fall of the US dollar-based monetary system will happen much like Hemingway's description of how one goes bankrupt: "gradually, then suddenly." And, as Dave Gonigam explains, when the inevitable finally happens, there's one group of investors who will be happy they listened to folks like Jim Rickards. Read on...