News Coverage
Study: Companies Facing Asbestos Claims Still Prosper
Published February 20, 2004
WASHINGTON -- Large companies that sought Chapter 11 bankruptcy to shelter themselves from liabilities faced for exposing workers to asbestos remain profitable and should do well in the future, a study released Friday says.
Emory University Professor George Benston says the companies face high legal costs and other costs associated with bankruptcy reorganization. They also must contend with court-imposed restraints on their operations and set aside liquid assets to pay claimants, both of which reduce profitability.
Still, said Benston, "They have been able to continue their operations succesfully, and with few exceptions, they have prospered." Benston's study was sponsored by the Association of Trial Lawyers of America.
Benston said the companies on the whole have increased or stabilized sales, assets, employment and profitability and are projecting increases in all of the above.
"It is fair to say that they are viable and likely to be increasingly successful companies that should generate funds to exit bankruptcy significantly stronger than when they went in," Benston said.
The businesses studied include: Babcock & Wilcox Company - a unit of McDermott International Inc. (MDR); Owens Corning (OWENQ); Armstrong World Industries Inc., a subsidiary of Armstrong Holdings Inc. (ACKHQ); Building Materials Corporation of America, the only operating unit of G-I, which has filed for reorganization under Chapter 11; W.R. Grace & Co. (GRA); USG Corp. (USG); and Federal-Mogul Global Inc. (FDMLQ).
Benston said the businesses on average are doing as well as any others in similar industries, and "none of them have done badly."
For example, while aggregate sales of the seven companies fell from $22.4 billion in 1999 to $21.1 billion in 2001, they rose to $21.6 billion in 2002 and are projected by the companies to rise to $23.4 billion in 2005.
Benston said that given the restrictions placed on companies by their bankruptcy, they are doing remarkably well.
More importantly, he said, on the whole they should be able to continue to function while meeting their asbestos liabilities.
Benston, however, said he didn't have specific knowledge about the size of what future asbestos claims on the companies might be.
Still "the future expectations appear to be quite good," Benston said.
Companies with potential asbestos liabilities have tried to negotiate a federal settlement, but negotiations in Congress have broken down. Similarly, while some of the companies have tried to settle with asbestos claimants, many of their insurers are balking.