US court rejects ABB asbestos settlement again
Swiss-based engineering giant ABB has suffered another setback in its attempts to finalise a billion-dollar asbestos settlement in the United States.
A federal appeals court turned down the company’s request for a rehearing on part of its settlement proposal, after having rejected the whole plan late last year.
Shares fell 3.25 per cent on Thursday after the decision was announced, closing at SFr6.55 ($5.50).
ABB said on Thursday that the Third Circuit Court in Philadelphia had denied a request by its Combustion Engineering subsidiary for the rehearing.
The company added that it regretted the decision, but admitted it was not unexpected.
In December, ABB asked the court to review a $1.2 billion settlement plan worked out for Combustion Engineering to include its US Lummus and Basic divisions.
The plan was aimed at resolving more than 135,000 asbestos lawsuits filed by former employees.
Surprise rejection
But the court threw out the proposal, saying that it would have provided too much protection against future lawsuits at the two other units.
The surprise rejection of the original plan in December was a major setback for ABB. The company, which has been undergoing financial difficulties after a failed expansion strategy, had hoped the deal would end years of legal wrangling.
After the latest decision, ABB said the claims against Lummus and Basic were insignificant and that the company was working on finding a solution for these two subsidiaries.
“The uncertainty that hung over ABB before remains now,” said Zurich Cantonal Bank analyst Mark Diethelm. “It’s all about how well ABB as a whole is going to be protected from this issue.”
No confidence
The court’s decision not to reconsider parts of the December ruling has also dealt another blow to investor confidence. There are doubts about ABB’s ability to resolve the asbestos liabilities quickly and without significant extra cost, as management has repeatedly pledged.
“They are not yet heading for a final solution,” said Rudi Buxtorf, a funds manager at Coutts Bank Switzerland.
“Uncertainties still remain,” he admitted, adding that it was difficult to analyse the stock and that investment in ABB shares was “high-risk” in terms of lack of visibility.
Combustion Engineering, which benefits from Chapter 11 creditor protection, made industrial boilers lined with asbestos, a lethal substance that can cause cancer and other diseases.
Lummus and Basic have received far fewer claims than Combustion Engineering. But all three units made products containing asbestos and also shared production sites.
swissinfo with agencies
More than 100,000 people have made asbestos-related claims against ABB subsidiary Combustion Engineering.
ABB has proposed a $1.2 billion settlement.
Most of the plaintiffs have agreed to settle, but a small minority has refused so far, along with some insurers.
Philidelphia’s federal court of appeals refused in December to extend the accord to ABB’s US units, Lummus and Basic.
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