I do not pretend to understand the problem Greece is having with the European Union. Who decides Greece’s future? The bankers? So bankers are the most powerful force on earth, not governments? Is this wrong or what? The Greek people, after their government spent money they didn’t have for years, are suffering terribly. It’s been going on for five years now. Can’t they go bankrupt? Companies go bankrupt all the time. Everything is forgiven. And then they start over.
All this came to mind the other day when, in the IGA in East Hampton, I came upon a display of Hostess Twinkies. Hostess spent more than they took in for years. They went bankrupt. And there were no Twinkies anywhere (a few exceptions I will get to) for almost a year. Life just wasn’t the same without Twinkies. But then they got their debts forgiven, and then in 2013 they came back, better than ever. They even have a slogan right on the 10 Twinkies for $3.99 box. It says, “The Sweetest Comeback in the History of Ever.” Why can’t the banks let Greece pull a Twinkie?
I have looked into this. Here’s what happened with the Twinkies. In 2011, Hostess Twinkies and all the other products, Ding Dongs, Donettes, Devil Dogs, were in terrible trouble. They owed huge amounts of money to bankers and creditors and the money they made was not enough to pay the debts. The straw that broke the camel’s back came in November 2012 when the baker’s union broke off talks for a new contract with management. The head of the union said now they would strike.
“Our members decided they were not going to take any more abuse from a company they have given so much to for so many years,” the union head said. “They decided that they were not going to agree to another round of outrageous wage and benefit cuts and give up their pension only to see yet another management team fail and Wall Street vulture capitalists and ‘restructuring specialists’ walk away with untold millions of dollars.”
Sound like what the European Union is doing to Greece?
In December of that year, Hostess went before a judge and said they were going out of business. And they did. The 18,500 workers at Hostess at that time were just plumb out
Because of the worldwide reach of Hostess, it was still possible, on occasion, to find small numbers of Twinkies for sale from time to time. They were made in Canada and Mexico and some, I think, even came from Egypt. The companies there that produced Twinkies on license from the Hostess Company in Kansas City were still in business. But these cakes were just not the same. And they were few and far between. I, for one, suffered terribly from the lack of a proper Twinkie.
The bankruptcy judge allowed all the Twinkie trucks to be sold off. The 14 factories were shut and those they owned sold. The money aquired, a few cents on the dollar, was divided up among the creditors.
And then a New York City investment firm with a lot of money approached the judge. People wanted their Twinkies. The firm, Apollo Global Management (run by Leon Black), partnering up with Dean Metropoulos who had restructured other food companies, agreed that Hostess had once been worth a billion dollars, and they’d be willing to buy it for $400 million, nearly 40 cents on the dollar. The judge and the creditors took it. And back came the Twinkies, in July of 2013, everywhere.
Without trucks or a factory, how could they do this? They opened five factories to replace those that had closed. They also changed the recipe around. The Twinkie now had fewer calories and fat—but more preservatives. In taste tests, people could not tell the difference. The new Twinkie is slightly less bad for you, and will last in its boxes on the shelves for about 45 days. This is a much longer shelf life than the old Twinkie enjoyed.
This longer shelf life also meant they could deliver them more cheaply. Before the bankruptcy, company drivers in company trucks drove Twinkies around to grocery stores around the country to sell them direct. Now, they could make fewer trips out, leave more each trip because the Twinkies would last longer and then come back for a re-stock later. In addition, they could now sell to big convenience store chains, a rising retail category. With the old Twinkies and their shorter shelf life, the Twinkies didn’t last long enough to be in convenience store regional warehouses. Now they could. Furthermore, delivery is now being handled by independent truckers rather than union drivers using company trucks. And all of it, from baking to packaging to delivery, is now non-union. Hostess can make money this way.
So Twinkies ARE back! And in fact, last week it was reported that Apollo and Metropoulos are offering to sell Hostess, perhaps to one of the giant baking companies such as Nabisco, Kraft or General Foods, for two billion dollars. They will make four dollars on each dollar they invested if they succeed. But they have saved the day. And Twinkies survive, with about 1,000 employees instead of 15,000, all working for less money, but working. And life moves on.
Can Greece do this? Well, let’s see. It would be tough. They’d have to lower the number of Greeks in Greece. 14 out of 15 Greeks would be forced to emigrate to elsewhere. They’d sell off all the cars and trucks and the Acropolis and maybe the island of Santorini to raise a few Euros on the dollar for the big bad European Union. And they’d offer lower paying jobs to the few Greeks left. But it would be Greece. We’d still have our Greece. And maybe it would be an even better Greece if it was shut down for a year, as was done with Twinkies. They could tempt us with a few Greek enclaves in Canada or Mexico or maybe Egypt during the shutdown. We’d really appreciate it. But we’d know that was not the real thing.
Nevertheless, the answer is that what works for Twinkies won’t work for Greece. I was wrong to think that a Twinkie solution might work for Greece. It won’t.
Now here’s another bankruptcy happening. Radio Shack is going out of business. Except that Sprint, the prospering telephone company has come along, made a deal to partner with the company that is buying Radio Shack out of bankruptcy, and will keep open about half of all the Radio Shack stores with big featured Sprint showcases in the front, and some small Radio Shacky things being sold in the back. Same store, almost same name.
Could, for example, AT&T buy out Greece and do this? It would be worth it for the Acropolis naming rights alone. No?
Well, I still think Greece should not be beholden to the European Union. Other countries that spend themselves into debt don’t pay. Argentina, for one, just didn’t pay what it owed. The banks forgave. And they moved on.
Well, maybe some investment bankers could come in, restructure Greece, re-sell it to the European Union all fixed up for a hundred billion, and, after pocketing half as their profit for taking the risk, give the rest to the Greek people who have had to suffer through the pain of the restructuring.
That would be a fair outcome.
And it would get them a lot of Twinkies.