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Penske Auto Centers Leaves Kmart

CHICAGO - Penske Auto Centers has become the first big-name business to abandon Kmart since it filed for Chapter 11 reorganization by announcing it will permanently close 563 of its auto-repair shops located at Kmart stores across the country, The Detroit Free Press reports.

Penske officials said their decision came after Kmart failed to pay $5 million owed in conjunction with the retailer's decision to close 283 stores and after months of negotiations with the Troy retailer failed. They said the auto shops were losing $3 million a month and that Kmart's top leaders told them that they did not consider the Penske chain to be essential to Kmart's survival, according to the newspaper.

Penske, which is 36 percent owned by Kmart, abruptly closed its shops in Kmart on Saturday. On Monday Kmart and Penske Auto Centers attorneys were told by U.S. Bankruptcy Court Judge Susan Pierson Sonderby to negotiate a solution for liquidating the auto centers in 44 states. But talks broke down after three hours and were scheduled to resume this afternoon, according to the newspaper.

Kmart officials say they want a more orderly closing procedure. Attorneys for the Troy retailer received a temporary restraining order Saturday morning from Sonderby that was to keep Penske Auto Centers in business. But the auto centers closed before the order was issued.

"We are diametrically opposed to the way they want to handle this," Christina Tchen, attorney for Kmart, said in court Monday.
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