Automotive Suppliers Mull Impact of Kmart Bankruptcy Filing

The impact of U.S.-based retail chain Kmart’s Chapter 11 filing is still being analyzed, but some suppliers are already making statements on what they expect.
Lancaster Colony Corporation announced today that its accounts receivable with Kmart Corporation total approximately $14 million U.S. John B. Gerlach, Jr., chairman and chief executive officer of Lancaster Colony, said, “While the company is still assessing the effects of this exposure, it is anticipated that a related provision for loss on this receivable will be charged against the results of the company’s fiscal second quarter ended December 31, 2001.” He pointed out that, although the company manufactures a number of products in the automotive aftermarket, essentially all direct sales to Kmart are consumer glassware and candles. He said, “As Kmart is one of the more significant customers of our Glassware and Candles segment, we look forward to working with Kmart’s management as they develop a stronger and more viable financial condition.” On a consolidated basis, the company’s direct sales to Kmart in the past fiscal year totaled approximately four percent of consolidated net sales.
Pennzoil-Quaker State Company has announced today that it will incur a pretax charge of up to $20 million U.S.in the fourth quarter, in addition to the restructuring expenses previously announced in June. The new charges are asset impairments resulting from the bankruptcy filing of Kmart as well as charges related to Argentianian currency devaluation. “Obviously, the additional charges announced today are in light of very recent developments and are the appropriate, conservative actions to implement. We are hopeful that Kmart is successful in its reorganization and expect to maintain a relationship with them,” said James J. Postl, president and chief executive officer of Pennzoil-Quaker State Company.