Kmart Corp. and Penske Corp., Penske Auto Centers (PAC), and Penske Auto Centers, LLC (collectively “Penske”) have agreed to shut down the auto service centers at 550 Kmart stores across the United States. Under the terms of agreement, which is subject to the issuance of a signed order by the United States Bankruptcy Court for the Northern District of Illinois, Penske and Kmart will cooperate to assure an orderly wind-down of the business following Penske’s unilateral decision to close the business on April 6, 2002. Also under the agreement, Penske has set aside funds for certain close-down expenses, including facility restoration, removal of hazardous waste and materials associated with the wind-down, and money to support PAC’s future customer’s warranty needs. Penske has approved to fund PAC’s payment of approximately $10 million for salaries, severance, and future medical expenses of PAC employees. Penske has also agreed to pay $6 million to Kmart under the terms of a master lease guarantee. Penske Auto Centers, LLC has also agreed to waive a claim of $5 million that was allegedly owed as a result of Kmart’s previously announced store closing plan.

Originally posted on Fleet Financials