PPG Industries Inc.'s plan to resolve 116,000 asbestos lawsuits for less than $1 billion may be jeopardized by a 2004 appeals-court ruling.
PPG, the world's second-largest car-paint maker after DuPont Co., wants to shift responsibility for the lawsuits to a trust linked to a bankrupt unit. U.S. Bankruptcy Judge Judith K. Fitzgerald in Pittsburgh has put off a decision for more than two years, partly because a U.S. appeals court rejected a similar tactic by Combustion Engineering Inc. She said last month she will rule by Dec. 31.
"There is always uncertainty when a case is in limbo," said Francis E. McGovern, a law professor at Duke University in Durham, N.C., who has been a mediator in asbestos-related bankruptcies. Asbestos has been linked to cancer and respiratory diseases.
Pittsburgh-based PPG may face higher costs to end the litigation if the court says the company can't confine its liability to the trust. PPG might have to deal with cases one at a time, said Thomas Reed, a Widener University Law School professor in Wilmington, Del. The company might be exposed to new asbestos suits, PPG said in a February filing.
Asbestos is a mineral used until the 1970s to add fire resistance to insulation, roofing and other building materials. PPG's liabilities stem mostly from insulation made by its Pittsburgh Corning Corp. venture.
A ruling against PPG may hurt the shares of other companies facing asbestos lawsuits, said Gene Pisasale, a senior analyst at Mercantile Bankshares in Baltimore.
"If PPG loses, and it's sent back to the drawing board, I think it puts it back on the front burner for a number of companies," Pisasale, who helps manage $25 billion, including 45,000 PPG shares, said in an interview.
Other companies facing asbestos claims include bankrupt chemicals maker W.R. Grace & Co. of Columbia, Md., and Federal-Mogul Corp., a bankrupt auto-parts maker in Southfield, Mich. Congress failed to approve legislation this year that would have created a $140 billion fund and ended asbestos suits that have bankrupted almost 80 companies.
PPG shares have climbed 32 percent since the end of 2002, the year the company and insurers agreed to fund the trust. The shares fell 34 cents to $65.74 in New York Stock Exchange composite trading Monday. They have gained 14 percent this year, valuing the company at $10.9 billion.
PPG wants to put $998 million in cash and stock into the trust proposed by Pittsburgh Corning as the exclusive fund to compensate victims. The insulation maker, a joint venture between PPG and Corning Inc., filed for bankruptcy protection in 2000.
James Restivo, a PPG lawyer, said he's confident Fitzgerald will rule in the company's favor. "This case is not Combustion Engineering," said Restivo, a partner with law firm Reed Smith in Pittsburgh.
PPG has the financial strength to weather a loss, said Tom Uutala, who helps manage $60 billion at Cleveland-based Victory Capital Management, including 2.73 million PPG shares. PPG earned $596 million, or $3.49 a share, on record sales of $10.2 billion last year.
"Even if gets rejected, I don't think it affects the stock," Uutala said.
Fitzgerald said at a Nov. 17 hearing that she is writing her opinion. "I think I have come to a resolution that I am now comfortable with," Fitzgerald said, according to the transcript. PPG Chief Executive Officer Charles Bunch told investors last month a ruling by Fitzgerald would allow his company to settle its asbestos suits next year.
