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Sears Lays Off 100 At Illinois Headquarters After Tax Break Deal

Sears Illinois Tax Breaks

JASON KEYSER   02/16/12 07:18 PM ET  AP

CHICAGO — Sears laid off 100 workers at its headquarters outside of Chicago on Thursday, two months after the company got a hefty tax credit for dropping a threat to move its headquarters out of state.

Sears Holding Corp. spokesman Chris Brathwaite said the layoffs of "about 100 associates" at the company's headquarters in Hoffman Estates took effect immediately.

The spokesman said the job cuts did not violate the terms of a $150 million tax credit for Sears approved by the Illinois Legislature and Gov. Pat Quinn in December after the company threatened to move its headquarters out of Illinois. Still, the announcement triggered more criticism of the incentives deal and the lawmakers who passed it from those who opposed it from the start.

The Sears spokesman said the headquarters workforce remains above the job levels required in the legislation even with Thursday's layoffs.

"We are well above the minimum headcount requirements for both the existing legislation expiring in the fall and the new legislation which takes effect in 2013," he said in an email to The Associated Press. "It's important to know that under the legislation if we don't meet our obligations we receive no benefits."

The cuts leave about 6,100 people working at the Hoffman Estates site, he said. The deal with the state requires Sears to keep at least 4,250 jobs there.

Quinn's office said the pain of job losses would have been far worse without the deal to keep Sears in Illinois.

"We're not happy with this news today," said Quinn spokeswoman Brooke Anderson. "We're not happy when any corporation cuts jobs. But the bottom line is that the package protected 6,000 jobs and staved off job losses that would have been much, much worse."

Sears, which has roots going back 160 years in Illinois, said last year it was considering leaving, and Ohio worked hard to lure the company its way.

Faced with that and the prospect of also losing CME Group Inc., which operates the Chicago Mercantile Exchange, Quinn signed legislation in December granting both companies hundreds of millions of dollars in tax breaks and incentives. In a parallel step, lawmakers also passed a bill that included tax breaks for individuals, including the working poor.

State Rep. Jack Franks was a vocal critic of the tax credit and said he wasn't surprised by the layoffs.

"The way the agreement was structured, it gave Sears an incentive to fire tax-paying Illinoisans," he said.

Franks, a Marengo Democrat, said the layoffs show "we have weak political leadership that capitulated to blackmail."

University of Illinois economist Fred Giertz said the layoffs were an embarrassment for the governor, though he said the company's recent woes made them necessary.

"I'm sure they don't like it and I'm sure the governor doesn't like it, but it has to be," Giertz said.

Even with the extra incentives help, Brathwaite said the job cuts were needed.

"These decisions are never easy, but they are necessary as part of our efforts to transform the company," he said.

Sears has struggled recently and has announced plans to close between 100 and 120 of its Sears and Kmart stores to raise cash. Few if any of those stores are in Illinois, and Giertz, the economist, said that might be a result of the incentives deal.

The company had a disastrous holiday shopping season, with revenue at stores open at least a year falling 5.2 percent during the eight weeks that ended Christmas Day. The figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.

The company has said its fourth-quarter adjusted earnings will likely be less than half the $933 million reported for the same quarter last year.

In January, Standard & Poor's downgraded its credit ratings on Sears Holding Corp. two notches, putting them deep into "junk" territory. The ratings agency said the decline in Sears Holding's operating performance accelerated last year and it expects the retailer's operations to remain under pressure this year.

The jobs cut Thursday represented a mix of different positions and came from several departments. Those who are eligible will receive severance, Brathwaite said.

"We're focused on improving our business and continuing to be a strong, contributing member of the Illinois business community," he said.

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Associated Press writers David Mercer in Champaign, Ill., and Sophia Tareen in Chicago contributed to this report.

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Filed by Jen Sabella  |