Court rejects asbestos liability cap for ABB

Dec 06, 2004

According to the Wall Street Journal, ABB Ltd.'s efforts to improve its debt-laden balance sheet could be delayed by the collapse of attempts to limit its liability to U.S. asbestos litigation. Late last Thursday (Dec. 2, 2004), a U.S. federal appeals court rejected a pact that would have capped liability at $1.2 billion (€892.2 million).The electrical engineering and process automation giant had hoped that the settlement was behind it, and that it could go forward with the sale of Combustion Engineering and Lummus Global, the two divisions with the most asbestos liability.

Fred Kindle, ABB's chief executive-designate, said that while the court decision was a disappointment, it won't hamper the company's overall operations or its ability to reduce debt. Since the view on the street is that this setback will force ABB to dedicate even more cash to the settlements, Mr. Kindle’s statement, at least as regards new product development and other cash-intensive activities in ABB’s process automation group, is questionable.
ABB, which has sales of about $18 billion a year, only this year achieved a major turnaround after three years of consecutive net losses due to spiraling asbestos claims and weak demand.

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