As a result of the settlement, PPG said it will record an after-tax charge of about $500 million, reflecting primarily the current value of cash contributions over a 21-year period, in addition to 1.4 million shares of PPG stock. Also included in the settlement is the contribution of PPG's shares of Pittsburgh Corning. PPG's insurers have reportedly agreed to pay for the rest of the settlement.
The $500 million charge will occur when the agreement is approved by the bankruptcy court, probably in more than a year. News reports indicated that when PPG Corning filed for bankruptcy in April 2000, 435,000 asbestos-related claims had been filed against the company.
PPG Chairman and CEO Raymond W. LeBoeuf said the agreement would have no effect on PPG's operations, including capital spending, liquidity, technology functions, or customer service.
Under terms of the agreement, a trust would be established for the benefit of claimants and funded with contributions from the settlement.
LeBoeuf said the agreement would be incorporated into a plan of reorganization for Pittsburgh Corning, to be submitted to the federal bankruptcy court in Pittsburgh. PPG wrote down its investment in Pittsburgh Corning with a $35-million after-tax charge in the first quarter of 2000; PPG holds a 50% stake in the business. Corning Inc., which owns the other half, is not involved in the settlement.
"This agreement would enable us to put all our asbestos product claims exposure behind us, most of which is the result of our 50-percent ownership position in Pittsburgh Corning," LeBoeuf said. "Although we continue to believe we're not responsible for Pittsburgh Corning's products, we feel this agreement will benefit our company and our shareholders in view of the number of claims and runaway verdicts against other companies."
In other recent actions unrelated to the asbestos settlement, PPG continued a program of cost reductions in announcing plans to shut down a Grow Automotive plant in Detroit and an automotive pretreatments plant in Troy, MI. The company also said it will sharply reduce automotive OEM coatings production at a plant located near Birmingham, UK.
News reports suggested that the PPG asbestos agreement may represent a dramatic new strategy for companies seeking to address the massive financial burden of mushrooming asbestos litigation. If approved in bankruptcy court, the agreement will channel current and future asbestos claims through a trust established under bankruptcy proceedings. The trust would administer and pay the claims.
A rising flood of asbestos claims have sent a number of companies into bankruptcy, and could cost U.S. corporations more than $200 billion, industry observers estimate.