February 7, 2023

Common Sense: The Headache in Housewares for J.C. Penney

Yet that didn’t stop him from signing a deal with Martha Stewart — his “new best friend,” according to an e-mail — even though she already had an exclusive deal with Macy’s. “Macy’s deal is key. We need to find a way to break the renewal right in spring 2013,” he wrote in one message. “The ball is in her court now to talk to Macy’s about a break in a tight, exclusive agreement they have with her,” he said in another.

The e-mails emerged this week in a New York courtroom, where Macy’s has accused J. C. Penney of inducing Martha Stewart to breach her contract and is trying to block its rival from carrying out its plan to open Martha Stewart boutiques inside J. C. Penney stores.

J. C. Penney has been floundering — it recently reported a staggering $4.28 billion loss in sales for the year since Mr. Johnson became chief executive and announced the layoff of 2,200 workers this week. Its shares have dropped more than 60 percent. So the star-crossed Martha Stewart deal may not be its biggest problem.

But it’s a purely self-inflicted one. With calls mounting for Mr. Johnson’s ouster, the deal is also a window into his judgment, experience and management skills.

“I’m very concerned that this could be a fatal blow to J. C. Penney,” said Walter Loeb, a veteran retail analyst, referring to the lawsuit. That Mr. Johnson “would talk about ‘breaking’ a deal between Martha Stewart and Macy’s is simply incredible. Ron Johnson has never been a chief executive, and I can only assume this reflects his naïveté and lack of experience.”

Much of the coverage of the trial has focused on the appearance in court of Ms. Stewart, nine years since her conviction and sentencing on federal felony charges of false statements regarding her sale of shares in ImClone Systems (she also settled civil insider trading charges without admitting or denying them).

At one point this week she told the presiding judge, Justice Jeffrey K. Oing of New York State Supreme Court, “I keep looking at this entire episode of this lawsuit wondering why it isn’t — it’s a contract dispute, an understanding of what is written on the page, and it just boggles my mind that we’re here sitting in front of you.”

Justice Oing seemed to agree, and on Thursday ordered the parties to pursue mediation to resolve the matter. Legal experts I spoke to also expressed incredulity that the costly and time-consuming dispute has ended up in court, since the contract itself seems straightforward, with numerous clauses giving Macy’s exclusive rights to Martha Stewart products in various categories, including “soft home,” like sheets and towels, as well as housewares, home décor and cookware, and specifically limits her rights to distribute her products through any other “department store.”

J. C. Penney is undeniably a department store and one of Macy’s major competitors. So the only issue is whether a Martha Stewart boutique within a J. C. Penney store would qualify as a separate Martha Stewart store, since the contract states that the restrictions “shall not apply” to products “marketed or promoted” through the MSLO Web site “or MSLO store.” (MSLO is the often-used acronym for Martha Stewart Living Omnimedia.)

Even that shouldn’t be hard to determine. Charles Fried, a noted professor of contracts at Harvard Law School, told me that the law is well settled that contracts should be interpreted according to the plain meaning of their words and should reflect the intent of the parties, and that technical or specialized terms should be interpreted according to trade usage. While he said he didn’t want to comment on the Macy’s contract itself, he said, “Whether a boutique inside J. C. Penney qualifies as a Martha Stewart store shouldn’t be difficult to determine based on prevailing standards in the retail industry.”

In that regard, Mr. Johnson testified that J. C. Penney, and not Martha Stewart Living Omnmedia, would set prices of the merchandise, decide when it would be promoted, employ the people who sold the goods, own the goods, source the goods, book the sales, bear the risk and own the shop. No space would be leased to Martha Stewart’s company. J. C. Penney contended nonetheless that any space displaying the Martha Stewart mark and containing Martha Stewart merchandise qualified as a store.

Article source: http://www.nytimes.com/2013/03/09/business/the-headache-in-housewares-for-j-c-penney.html?partner=rss&emc=rss

Economix Blog: Casey B. Mulligan: Hiring, ‘Quits’ and Layoffs

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Casey B. Mulligan is an economics professor at the University of Chicago.

The recession and lack of recovery have often been characterized as a lack of hiring, rather than an extraordinary number of employer-employee “separations” (a separation is a layoff or what the Bureau of Labor Statistics calls a “quit”). But the aggregate data on hiring, quits and layoffs can be misleading.

Today’s Economist

Perspectives from expert contributors.

The chart below from the Bureau of Labor Statistics shows total hires, separations and total employment from December 2000 to December 2009. The shaded area to the right indicates the start of the most recent recession. Both separations and hires fell about 20 percent (the hires dropped sooner).

Bureau of Labor Statistics

However, this characterization is quite different for young people than for the rest of the work force. Even during business cycle expansions, young people have high rates of job turnover. The number of young people hired during a typical month is disproportionately high, as is the number of young people quitting or getting laid off (I use the term “layoff” to refer to both layoffs and discharges).

For this reason, young people could dominate the job turnover statistics, even while they do not dominate the employment statistics.

A paper by Michael Elsby, Bart Hobijn and Aysegul Sahin, using a method developed by my University of Chicago colleague Robert Shimer, estimated job separations for different age groups according to the number of people flowing into unemployment. They found a very different pattern for people 16-24 than they did for people 25-54.

Estimated job separations among employees ages 25-54 were 33 percent greater in 2009 than they were in 2007. I tried to update their estimates through 2010 and found that job separations still remained greater than they were in 2007.

In contrast, the low employment rates for young people since 2007 are almost entirely explained by low hiring rates.

The Bureau of Labor Statistics also reports that the composition of job separations has changed a lot since 2007. Before the recession began, quits were by far the most common type of separation; now the number of quits about equals the number of layoffs.

Perhaps the decline in quits is a signal of what’s ailing the economy, although I view it largely as a consequence of the unemployment insurance system. A person who quits his or her job is not eligible for unemployment insurance. As a result, calling a job separation a “quit” rather than a “layoff” results in the loss of unemployment benefits.

I estimate that, before the recession began, a person beginning unemployment would receive about 12 weeks of unemployment benefits, on average, if he or she were eligible for benefits. By 2010, that average was up to about 34 weeks. At $300 a week, that means that the government subsidy for calling a separation a “layoff” rather than a resignation was up to about $10,000 from $3,600.

There is also the employer payroll tax consequence of layoffs to consider, but overall employers and employees now often have a lot to gain by calling their separation a layoff rather than a quit.

These are a couple of reasons the aggregate data on hiring, quits and layoffs can be misleading. Even so, the very different patterns for people 16-24 and 25-54 may suggest that the recession and lack of recovery have more than one cause.

Article source: http://feeds.nytimes.com/click.phdo?i=8b89bed5689380d7d68af8453c8ae341

G.M. to Spend $2 Billion in Hiring and to Upgrade U.S. Plants

The company said its plans to upgrade 17 plants in eight states would create or save more than 4,000 jobs.

G.M.’s chief executive, Daniel F. Akerson, made the announcement at a transmission plant in this northern Ohio city, where the company will spend $204 million and retain 250 jobs.

“We are doing this because we are confident about demand for our vehicles and the economy,” Mr. Akerson said.

G.M. did not specify where and when it would make all the investments, preferring to announce positive news periodically to underscore its recovery from its 2009 bankruptcy.

“There’s always going to be naysayers and there’s always going to be people who buy a G.M. product no matter what,” said Rebecca Lindland, an analyst with the research firm IHS Automotive. “It’s about influencing those people who are in the middle.”

About 1,350 of the jobs cited will be filled by current G.M. employees who are on layoff. Once those workers are recalled, the remaining positions will go to new hires at a lower wage rate.

The company’s contract with the United Auto Workers union allows it to hire new workers at wages of $14 an hour — half what it pays existing hourly employees.

The two-tier wage scale is expected to be a major topic at the bargaining table this summer, when G.M., Ford and Chrysler all negotiate new contracts with the U.A.W. The current four-year agreements expire in mid-September.

The U.A.W. vice president in charge of the G.M. division, Joe Ashton, said he expected all the laid-off workers to be recalled before the contract expired.

Mr. Ashton declined to say what changes the union might seek in the two-tier system during the negotiations.

“They will be discussed at the table,” he said.

The union’s president, Bob King, has said the U.A.W. hopes to get back some of the concessions it made during the last round of negotiations, in 2007, when Detroit’s Big Three were in dire financial condition.

Since then, both G.M. and Chrysler were bailed out by the American taxpayers and drastically restructured in bankruptcy court. Ford recovered on its own without federal assistance and has reported healthy profits over the last two years.

G.M.’s announcement of new jobs and investments came after the company’s announcement last week that it earned $3.2 billion in the first quarter of this year.

The company has been steadily revamping its product lineup since emerging from bankruptcy in the summer of 2009, adding more fuel-efficient small cars and crossover vehicles.

The transformation is starting to produce better sales and greater market share against rivals. G.M. reported domestic market share of 19.6 percent in the first four months of this year, compared to 18.7 percent for the same period a year ago.

“For the first time in a generation, in the last year we took market share,” said Mr. Akerson.

G.M. has 49,000 hourly workers in the United States — less than half the number it had five years ago.

Since emerging from Chapter 11 bankruptcy protection in July 2009, G.M. had committed to investing $3.4 billion in its plants and to creating or preserving an estimated 9,000 jobs.

Tuesday’s announcement of an additional $2 billion in investment is another step in the rebuilding process. In addition to the improvements in Toledo, the company said last week that it would spend $131 million at an assembly plant in Kentucky.

The United States government still owns a 26 percent stake in the automaker as part of the $50 billion taxpayer bailout. The Treasury Department could begin selling some of its remaining shares as soon as May 22, the first day it will be permitted to sell them under terms of G.M.’s initial public stock offering.

G.M. has ample cash reserves of more than $36 billion to upgrade and expand manufacturing facilities such as the Toledo plant.

“They’re spending money so they can make money,” said Ms. Lindland. “And the more profitable they are, the better chance they have of decreasing the ownership of the government.”

Nick Bunkley contributed reporting from Detroit.

Article source: http://feeds.nytimes.com/click.phdo?i=778ca28b10b3afc58ffa29506edb5236