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PPG Tries to Dodge Financial Bullet

PPG Industries, one of the world’s largest industrial companies is trying to shift their financial responsibilities for asbestos claims by setting up a trust with a bankrupt company.

The company currently faces 116,000 unresolved asbestos lawsuits and is trying to set up the fund to limit losses from dealing with cases on an individual basis. The case which has been in limbo since 2004 with delays following closely watched legal proceedings involving similar circumstances.

Combustion Engineering Inc. tried to set up a similar system but it was rejected by a U.S. appeals court. That certainly has played a role in the long wait for both sides as they anxiously wait for a U.S. Bankruptcy Judge to rule on a case with major business implications.

PPG is the second largest car-paint maker and that sector continues to be their biggest corporate asset. However the Pittsburgh based company’s legal woes stem from it’s Pittsburgh Corning Corp. which manufactured asbestos-laden insulation.

Asbestos exposure has been proven to cause a number of lung related conditions including the deadly cancer mesothelioma. It was used in insulation as a fire resistant material but was phased out by the late 1970s.

While other companies have struggled with asbestos claims (W.R. Grace, Owens Corning, Federal Mogual) PPG has a strong financial base and if they are unable to consolidate claims they have the resources to manage individual cases.

A company that successfully setup a trust fund was the Australian based James Hardie Industries. Their fund was approved just last month and will begin processing claims in early 2007.

PPG’s proposal would put $998 million of stock and cash into the fund and if paid at present value with equal compensation would net each claimant just over $8,000. That amount is significantly less than average case payouts and would barely cover funerals much less any medical expenses.
A ruling is expected between late 2006 and early 2007.