From Detroit Free Press
After spending nearly six years in bankruptcy protection to settle hundreds of thousands of asbestos lawsuits, Federal-Mogul Corp. is due in a Delaware court Monday for the last major hearing in its bankruptcy case.
The Southfield, MI-based auto-parts maker will ask U.S. Bankruptcy Judge Judith Fitzgerald to approve its reorganization plan, putting the company on the path to exit bankruptcy.
In addition to settling its asbestos lawsuits, the company has set out on a course to trim its operations, as it moves forward on shutting 25 plants and cutting its workforce by 10 percent, or more than 4,000 workers.
Federal-Mogul, which makes a range of parts including windshield wipers, spark plugs and powertrain and brake components, filed for Chapter 11 bankruptcy protection in October 2001. At the time, it faced more than 330,000 lawsuits, many coming from mechanics, workers and property owners who claimed exposure to asbestos, a carcinogen.
The asbestos had been used in products including gaskets, brake pads and insulation made by companies that Federal-Mogul acquired in the past four decades.
Federal-Mogul, which employs 45,000 people worldwide and had $6.3 billion in sales last year, plans to allocate 50.1 percent of the stock in its reorganized company to pay asbestos claims. The rest will go to other creditors.
Like other auto suppliers that are on their way out of bankruptcy, Federal-Mogul could emerge under the control of private equity. Billionaire financier Carl Icahn is expected to buy 43 percent of the company for $775 million by purchasing most of the stock paid out to asbestos claimants.
He has the option to buy all of the trust’s shares, which would give him control of a little more than half of the company.
As part of its corporate restructuring, Federal-Mogul had identified at least nine plants that will close, including one with 425 workers in St. Johns, in Clinton County, MI, that shut down last year and another in St. Louis slated to close at the end of this year.
"It’s a stressful situation. The job market overall is not that lucrative. Some of these guys have to get out in the workforce. … The job market in St. Louis is not that great," said Roland Lewis, business agent for Teamsters Local 688 in St. Louis.
The company’s restructuring plan, which includes moving manufacturing work to lower-cost countries, is part of Federal-Mogul’s plan to grow around the world and compete.
"Our plan is progressing successfully as the company continues to make the adjustments necessary to ensure global competitiveness and support the implementation of its global profitable growth strategy," the company said Friday in a statement.
Federal-Mogul was the fifth-largest company to file for Chapter 11 in 2001, according to www.bankruptcydata.com. At the time, it was believed to be the largest auto supplier to file. Since then, Delphi Corp. has taken that position. Dozens of other auto suppliers have entered bankruptcy in an industry pressured by high raw material costs and pricing pressures from automakers that have cut production.
"It’s a more competitive environment than ever," said Laurie Felax, president of consulting firm Harbour-Felax Group in Royal Oak. "Those that invest in technology and innovation and have strong operations … and are financially stable are the ones that are going to continue to survive and thrive in the market."
Copyright (c) 2007, Detroit Free Press
