Kmart disputes court filing claiming it plans shut down up to 700 more stores

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Posted 4:33PM on Monday, April 8, 2002

CHICAGO - Executives of one of Kmart Corp.'s business partners say the financially troubled retailer may close as many as 700 more stores nationwide on top of the nearly 300 closings announced last month, according to court papers made public Monday. The disclosure came in a document filed in U.S. Bankruptcy Court by Penske Corp., which over the weekend closed some 550 auto service centers it has operated at Kmart stores through a subsidiary. "Representatives of Penske Corp. were informed by representatives of Kmart Corp. of Kmart's plan to close as many as 700 additional stores," according to the filing. However, a Kmart spokesman said the company "is not inclined to close any more stores until after a business plan is developed later this year." Even then, Kmart executives have said the number of further closings would be "minimal," Kmart spokesman Michael Freitag said. Kmart, which filed for bankruptcy Jan. 22, is currently closing 283 of its 2,114 stores nationwide as part of its reorganization. The store closings were announced March 8. The Penske court document was included in a March 29 document drafted as a prelude to shutting down the Penske Auto Centers. Kmart owns 36 percent of the centers and has two directors on the board. Penske Corp. owns the remainder through a subsidiary, which has four of the six directors. Kmart on Saturday got a temporary restraining order, barring Penske from shutting down the auto service centers. It claimed that it had learned of the shutdown plan only late Friday afternoon. But attorneys for both Kmart and Penske said Monday that the order came too late to stop the centers from shutting down and that there was no longer any way to reopen them. "The eggs are scrambled," Kmart attorney Christina M. Tchen told U.S. Bankruptcy Court Judge Susan Pierson Sonderby. Kmart now wants the remaining work of closing the auto centers down to be completed in an orderly way that would minimize customer confusion and do no more damage to Kmart's image. Kmart attorneys and other officials said they feared the disorderly closing of the auto centers would wrongly give customers the impression that "the whole place is shutting down." Kmart maintains that the unilateral action on the part of Penske in shutting down the centers violated a contract between the two. "We completely disagree," Penske attorney David Lynch said. He said Penske had no obligation to keep pumping cash into the auto centers which have been awash in red ink. "The horse died, your honor," Lynch told the judge. "The horse died because there was no money."