A federal bankruptcy judge on Friday cleared the way for Stockton, California to cut health care benefits for retirees while it is in bankruptcy proceedings.
Stockton is seeking Chapter 9 protection from its creditors and said that it would cut retiree health benefits while it reorganizes. Retired employees sued to stop those cuts.
Judge Christopher Klein on Friday issued a temporary order denying the bid to stop the benefit cuts, and he said a formal decision was on its way.
Stockton's attorneys had argued that bankruptcy law gave the city wide latitude on how to spend its revenue while it prepares a plan to restructure its finances.
"For the reasons explained in the forthcoming decision of this court, the Application for Temporary Restraining Order and Preliminary Injunction or in the Alternative for Relief from Stay is DENIED," Klein wrote.
Flood of City Bankruptcies Coming
This is a good start for what needs to happen. The next step needs to be huge clawbacks on promised benefits, preferably top down, so that those with the highest pension benefits bear the brunt of the hit.
As soon as cities realize this is the way out, a flood of bankruptcies will be on the way.
Struggling retailer JCPenney is making some big changes that will affect customers and its clerks. The store is getting rid of its check-out counters.
CEO Ron Johnson said it will remove check-out counters in stores and replace them with a system that won't require clerks. It's all part of an effort to return the department store chain to profitability.
Shoppers will be able to use self check-out machines, similar to those found in grocery stores.
JCPenney is also planning to replace traditional bar codes on price tags with high-tech radio frequency identification, or "RFID" chips to make purchases faster.
Johnson told "Fortune" magazine he hopes to phase out check-out counters by 2014.
End of JCPenny?
My first thought was a question: Will this work?
A move to entirely self-service is a risky bet-the-company type of move.
Given that many large grocery stores have both self-checkout and manned checkout lanes, I suspect in reality that JCPenny will not go big-bang with this concept but instead will use a series if trials to see how customers respond.
How Many Jobs At Risk?
I personally loathe self-checkout but it's not my opinion that counts. If there are enough who think like me, and JCPenny does go big-bang, this move will the death of JCPenny.
However, If I am wrong, then note that JCPenny has 1100 stores so we are talking about the elimination of lots of jobs. Also note that if the move by JCPenny is successful, other stores will follow.
Finally, even if this ends up as a half-way measure, we are talking about the elimination of 10's of thousands of jobs if other stores follow suit.