ABB clinches surprise asbestos deal
Swiss-based engineering giant ABB has announced a breakthrough in its battle to end American asbestos-related claims that still threaten its future.
The company said on Monday that it had reached a comprehensive agreement with all parties on a financial settlement that would account for all outstanding claims.
ABB said that, under the new arrangement, it would pay an additional $232 million (SFr272 million) to a special trust fund for asbestos-related liabilities, over and above the $1.2 billion it has already offered.
The surprise development comes just two months after a US court refused to grant ABB a rehearing on part of the original settlement proposal, which was rejected in its entirety last year.
However, ABB president and CEO Fred Kindle told an analysts’ conference in Zurich that the past few months had seen “intensive discussions” between all parties involved, and the latest deal had the backing of everyone.
“This agreement is a vital step towards a final resolution of our asbestos issue,” said Kindle.
Nice surprise
Mark Diethelm, an analyst at the Zurich Cantonal Bank, told swissinfo that it was an unexpectedly early settlement.
“Now there are just the courts that have to decide, but it looks like they will have to say yes, because everyone involved has agreed to the terms.
“The additional costs are low compared to what the market expected, so that is also a positive development for ABB.”
Diethelm added that the inclusion of ABB United States division Lummus Global in the deal was also positive.
Last year, US courts rejected attempts by ABB to include claims on Lummus in a global settlement that would also have wrapped up claims on the company’s former Combustion Engineering division.
Restating results
Kindle said the new agreement would be funded either by the sale of ABB Lummus Global assets within two years of the deal being finalised or by a “direct contribution” from ABB.
He added that the group’s 2004 financial results, which were announced last month, would be revised to incorporate the “full impact” of the new development, but did not elaborate.
ABB made a net profit of $201 million last year on revenue of $20.72 billion – moving back into the black for the first time in three years.
Kindle added that ABB still planned to meet its target of reducing debt to $4 billion this year.
ABB came close to the brink a few years ago following a failed expansion strategy and a series of financial and management-related problems.
Back to the future
The asbestos issue is one of the last major obstacles to completion of the financial turnaround, following a major strategic U-turn that led to the sale of several core businesses, refocusing on two new global divisions and the loss of tens of thousands of jobs.
Combustion Engineering, which benefits from bankruptcy-related creditor protection, made industrial boilers lined with asbestos, a fibrous mineral substance that can cause cancer and other diseases.
ABB bought the company during an expansion drive launched in the late 1980s despite warnings by many observers that it was exposing itself to potentially unlimited health-related claims.
Lummus and Basic have received far fewer claims than CE, but all three made products containing asbestos and shared production sites.
ABB general counsel John Scriven told the conference that ABB Basic – the third ABB division in the US with asbestos-related claims against it still pending – was not included in the deal.
However, he pointed out that ABB had a reserve of $8 million for potential claims against Basic, and said the size of exposure was “minor” by comparison.
swissinfo, Chris Lewis in Zurich
ABB, formed by a Swiss-Swedish merger in 1988, is a world leader in power and automation technologies (robots).
The group, which has undergone radical restructuring in recent years, now employs about 102,000 people worldwide.
The asbestos issue, which stems from ABB’s purchase of US firms, is the last major obstacle to its financial turnaround.
ABB has announced a surprise deal that puts a ceiling on its exposure to asbestos-related health claims in the US.
CEO Fred Kindle said on Monday that all major parties had agreed to the deal, following a US court’s rejection of an initial proposal last year.
ABB would pay a further $232 million, on top of the $1.2 billion already agreed.
In compliance with the JTI standards
More: SWI swissinfo.ch certified by the Journalism Trust Initiative
You can find an overview of ongoing debates with our journalists here. Please join us!
If you want to start a conversation about a topic raised in this article or want to report factual errors, email us at english@swissinfo.ch.