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twinkies,sugar and Mexico
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khall_12_34
Posted 11/20/2012 11:30 (#2707523 - in reply to #2706243)
Subject: Re: twinkies,sugar and Mexico


Formerly NE North Dakota, now NW MN
My point was not that Hostess should have sold more twinkies to stay afloat and that's why they are out of business. That may be true, might not be, but it's not really what I'm hitting on.

The writing was on the wall that labor negotiations would not go as smoothly this time around. The lockout at the corn sweetener plant in Iowa or Illinois or where-ever it was served as a warning shot, and rather than sitting back and saying "hey you guys are bleedin' me dry" like it appears Hostess did, Crystal was pro-active and had a contingency plan in place.

There's been a lot of monday-morning quarter-backing (more like Wednesday evening at this point) about whether bringing in Strom Engineering was the right thing to do, is this lockout costing too much ect. ect. Well, Hostess gave that Union the choice of 1.) come back to work, 2.) kamikaze the whole thing. The union unflinchingly decided to just tank the whole works. They are willing to act against their own long-term self interest to "stick it to the man". In my mind, that radically alters the calculus on the "would they have striked during harvest" question. I don't know that they absolutely would have, but I can't say with any certainty they wouldn't have.

Given all that, It makes questions of "whats this lockout costing us", "are our managers doing the right thing", "are they just union busting" look pretty silly. Maybe our production costs are higher than they were in the years prior to the lockout, but that's not really a ceterus paribus comparison. The question our choice our management faced was "Do we risk a lot, hope it works and try to save a some cash", or "do we chalk up and pay someone to take this production risk off our hands". It's not different than paying a premium for a put option.

I still think the Hostess thing makes Crystal's management look pretty smart.
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