ABB is taking a charge of $470 million against 2001 earnings to increase its provisions for claims relating to asbestos liabilities that are pending against Combustion Engineering, a subsidiary it acquired in 1990.
‘After our detailed annual review of the asbestos issue, we have decided to increase our provisions with an additional charge of $470 million against 2001 earnings, and we expect a net loss for the ABB Group in 2001,’ said ABB president and CEO JÃ¶rgen Centerman.
ABB will report its 2001 results on February 13th.
With the charge, ABB is increasing its total asbestos provisions from $590 million at the end of 2000 to about $940 million. The relevant estimated insurance recovery was approximately $150 million at the end of 2001, down from around $160 million at the end of 2000.
The number of new claims filed against Combustion Engineering increased from 39,000 in 2000 to 55,000 in 2001. In response to the increase in claims, Combustion Engineering has intensified its efforts to identify which claims are valid and which claims appear not to be.
Valid claims are settled and the invalid claims, which appear to be increasing significantly according to the company, are being disputed. For these reasons, the number of claims settled decreased from 34,000 in 2000 to 27,000 in 2001, and the average amount paid per claim increased from $4,833 in 2000 to $6,069 in 2001.
As of December 31st, 2001, around 94,000 claims were pending against Combustion Engineering compared to approximately 66,000 on December 31st, 2000.
ABB said a total of $136 million was paid to settle claims in 2001 compared to $125 million in 2000, and added that it expected some $43 million would be reimbursed by insurers for 2001 claims.
The asbestos liabilities in the US come from claimed exposure to asbestos in products supplied before the mid-1970s by Combustion Engineering.