Automakers see asbestos lawsuits rise
Firms pay millions to avoid ‘runaway verdicts’ by juries
By Ed Garsten / The Detroit News, March 21, 2004
General Motors Corp. and Ford Motor Co. are facing an escalating number of asbestos-related lawsuits.
The companies in some cases are paying millions of dollars to settle cases out of court to avoid what GM termed runaway verdicts in a filing this month with the U.S. Securities and Exchange Commission.
GM did not specify the number of cases it faces, saying only there has been an increasing number filed. As of Feb. 3, Ford faced 41,500 claims, compared with about 25,000 in February 2003, the automaker stated in the filing.
Our annual payout and related defense costs in asbestos cases are increasing and may become substantial in the future, Ford warned investors in a recent filing.
Ford says most of the cases were filed by mechanics or other people who worked on brakes. Since the early 20th century, asbestos has been used in brakes, clutches and other components.
GM also faces lawsuits by railroad workers who may have been exposed to locomotive brakes which also contain asbestos. GM s Electro-Motive division, based in LaGrange, Ill., produces locomotives. GM is trying to sell the division.
Even with the uptick in asbestos suits, GM says the claims will not result in a material adverse effect on its financial condition.
Southfield-based auto parts supplier Federal-Mogul Corp. was forced to declare bankruptcy two years ago after taking over a British company hit with thousands of asbestos lawsuits.
DaimlerChrysler AG s Chrysler unit and several other parts makers face asbestos-related lawsuits.
Cancer and other diseases have been linked to long-term exposure to asbestos.
But GM said in its SEC filing that the vast majority of claimants do not have an asbestos-related illness and may never develop one.
The Michigan Supreme Court is considering shunting questionable cases to an inactive file where they would sit until claimants could prove actual injuries, according to Rick Sanders, senior counsel for commercial litigation at the Detroit law firm Miller, Canfield, Paddock and Stone.
Sanders estimates that since the asbestos suits filed since the early 1980s have cost companies about $70 billion.
Congress is considering legislation that would create a victims compensation fund with more than $100 million aimed at taking the cases out of court, putting them in the hands of an administrator that would parse out payments to claimants.
Impact of asbestos
*Asbestos, commonly used for insulation and fireproofing until the 1970s, can scar the lung tissue and has been linked to mesothelioma, a fatal cancer of the lung lining.
* Asbestos liability has pushed at least 60 companies into bankruptcy since 1982.
* Auto companies are increasingly the target of asbestos lawsuits, often from brake mechanics exposed to the substance.