ABB facing confidence crisis over asbestos claims

ABB's shares have fallen by some 40 per cent over the past year Keystone Archive

The international technology group, ABB, is facing a crisis of confidence, after investors stampeded for the exits over concerns about the extent of its exposure to asbestos injury lawsuits in the United States.

ABB told swissinfo on Wednesday that it had put aside $590 million (SFr1 billion) for claims related to asbestos exposure in the US.

The sum is based on analysis of previous settlements but spokesman, Thomas Schmidt, admitted that the company’s liabilities could be well in excess of that amount.

“I have to stress that due to the very nature of the legal environment in the US, the unforeseeable number of claims and several other issues that are involved, no one can foresee the future,” he said. ABB is insured for a part of the claims.

The company, based in Zurich, is facing 66,000 personal injury claims stemming from its ownership of Combustion Engineering, a United States boilermaker it bought in 1990 and has since sold.

Share prices in ABB dropped by 16 per cent on Monday as Deutsche Bank downgraded its 2001-2003 earnings forecast and drew attention to the asbestos liabilities.

“During our ownership of the company there was no asbestos-related production and no exposure to asbestos,” Schmidt told swissinfo.

“ABB from this point of view is not the original creator of the problem. However, we are taking seriously the liabilities and with that our corporate responsibility,” he added.

ABB says the provision has been put aside over the past 11 years and has been fully accounted for.

Schmidt told swissinfo that a number of asbestos-related illnesses and conditions have been reported. “I think one has to reckon – though I don’t know of any individual case – that cancer would be a typical illness arising from asbestos,” he said.

Analysts say the markets also dumped ABB shares on Monday on news that US specialty chemicals manufacturer, WR Grace, had filed for Chapter 11 bankruptcy protection because of a rising number of asbestos injury claims.

WR Grace is the fifth US corporation to file for bankruptcy protection over asbestos-related claims since the beginning of 2000.

Schmidt told swissinfo that the markets were very nervous at present and ABB had been trying to attract investors with its new strategy for growth announced in January.

ABB then announced it was transforming its worldwide enterprise to focus on customer groups, aiming to boost growth by helping its customers become more successful in a business environment of accelerating globalisation, deregulation, consolidation and eBusiness.

The company’s shares have fallen by some 40 per cent over the past year.

swissinfo