Retail

Penske Auto Centers plans to close all 563 of its stores

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Penske Auto Centers LLC, the largest independent tire dealership in the United States, is discontinuing operations nationwide.

The company, which purchased some 875 automotive service outlets from Kmart Corp. in November 1995, had operated at 563 Kmart locations in 44 states.

Penske Corp. owns 64% of the tire and auto service chain; Kmart owns the remaining 36%.

Penske Auto Centers (PAC) Chairman Richard Peters provided background on some of the events surrounding the company's decision to discontinue operations in a press release.

"Over the past five months, PAC management has

conducted numerous meetings with senior Kmart officials to discuss strategies to provide support to PAC during Kmart's restructuring and subsequent Chapter 11 bankruptcy filing," he said. "During that period, Penske Corp. provided over $40 million to support the viability of PAC."

Peters and PAC Director Roger S. Penske met with Kmart COO Julian Day and Chief Restructuring Officer Ronald Hutchinson on March 27, 2002.

Commenting on the meeting, Peters said, "Julian Day informed us that Kmart had determined through their research that the auto centers provided no value to its core business. Kmart was therefore unwilling to provide any support to PAC and agreed that the best course of action was to close PAC.

"On April 1, Kmart then defaulted on a $5 million payment that was contractually due to PAC as a result of the Kmart store closures announced in March," continued Peters.

In its own statement, Kmart reported that the United States Bankruptcy Court for the Northern District of Illinois had issued a temporary restraining order against Penske Auto Centers Inc., and Penske Auto Centers LLC ("Penske"), "requiring them to continue operating auto service centers at more than 550 Kmart stores across the United States."

The order, signed on Saturday by Chief Judge Susan Pierson Sonderby, "enjoins Penske from taking any action to close or liquidate the Penske Auto Centers owned and operated by Penske Auto Centers LLC, including any action to

refrain from opening or continuing to operate the auto centers for business as usual," according to Kmart.

Kmart reports its version of the incidents surrounding the announced closures as follows:

"Penske informed Kmart on April 5, 2002, that it intended to immediately shut down the operations of the auto centers as of the start of business on Saturday, April 6, 2002."

Kmart said it had been in discussions with Penske "for several weeks regarding a mutually acceptable plan for the future of the auto centers that would protect the interests of the centers' customers.

"Kmart regrets the precipitous action

taken earlier today by Penske and is pleased that the court has issued a temporary restraining order to keep the centers open."

PAC said it will appear before the court in Chicago, Ill., on April 8 to protect its

interests. "Our immediate focus is on the well being of our employees and their families as well as our customers. I regret that these actions had to be taken," Peters added.

"Our team is focused on assuring an orderly transition for all of our constituents including customers and employees," said Jim Wheat, Penske Auto Centers' CEO and president. "Importantly, wherever possible, we will try to provide our employees with opportunities for positions within the Penske family of companies."

www.mtdealer.com contacted Goodyear Tire & Rubber Co. about the situation. Goodyear supplies Goodyear and Dunlop brand tires to PAC, plus Penske brand tires.

"We are aware of the announcement of the closing of Penske Auto Centers and are in on-going discussions with Penske Corp. regarding the details of any issues related to the decision," Goodyear said in a prepared statement.

"Goodyear and the Penske Corp. have enjoyed a long and mutually beneficial relationship. Penske Corp. has been a valued customer for a long period of time, and we look forward to a continuation of that relationship."

A toll-free number, (800) 889-5458, has been established for customers who have questions regarding the past or future service of their vehicles.

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