Document 2JY9YKdpdx9DymqyRE3mBY96L

" CE/HI (F) 33417 CE0115321 BELEAGUERED BY A MANVILLE FILES FO Attention: Manville Corporation Shareholders, On Thursday, August 26, Manvills Corporation and to establish an effective system to handle these claims in Chapter its principal American and Canadian affiliates filed voluntarily for reorganization under Chapter 11 In O. What we all these lawsuits really about? A. It's a long story. Here's the bottom line. Not untM 1994 was it Now Yortc* In the following interview, John A. McKinney, Man- viile's Chief Executive, answers questions about the background of this startling development: known that excessive exposure to aabastos fiber released from asbestos-containing insulation products can somatimas causa cartain lung diseases. Since the mid-'70s, lawsuits have been brought against Johne-Manville. our subsidiary, on behalf of nearly 20,000 people allMing injury from excessive asbestos exposure. We Q. Mr. McKinney, thto announcement wee a surprise. Whata have disposed of about 3,500 of these cases by settlement or trial. i wrong with Manvttle'a operations? __ A. Nothing is wrong with our busirmssaa. FtOng Chaptar 11 doss In a significant number of cases tried, juries have found that we were not at fault and acted responsibly in light of then-existing not moan that tho Company is going out of bustnass or that its medical knowledge. Nevertheless, new lawsuits have been com ssaots wit Da Uquidatad. Thousands of asbastoshaalth lawsuits ing in at a rate of 500 a month -- every month! In the absence of ata tha prottam! Wa'ra the American and world leader in a number Congressional action, the board of directors concluded there is no of markets, mostly related to construction. During the current conceivable resolution to this burden, other than Chapter 11. Just recession our sales have held up well and we've operated at better to put It in perspective, Newsweek has stated that asbestos health than break even (If you exclude litigation expenses). We've slim* litigation surpasses in size aN the automobile accident suits pen mad down too. tuning eliminated mors than 1,500 salaried Jobs in ding across the nation before no-fault insurance laws were tho last six months. Ws'l continue to generate substantial caah adopted. flow. Our Chapter 11 lawyers ten me Manville has stronger businesses and caah flow than any other big company that's ever filed. Q. 20,000 plaintiffs? 6,000 new ones a year? Where are these suits coming from? A. WoN, many of them come from workers in shipysrds and in 0. Your bualnoaaoe are In good shape, but you filed under dustries which used our aabestoa fiber and products. Decades can Chapter 11? Why? pass between excessive exposure to esbestos and onset of the A. We're overwhelmed by 16,500 lawsuits related to the health ef disease. For instance, there was asbestos insulation on the steam fects of asbestos, with many more projected. The federal govern pipes and boilers in most ships built or refitted during World War II. ment has refused to admit Its responsibility to its shipyard workers. The largest group suing us now oonsists of shipyard workers Congrau has tatad to aet to proMsoompansaitlon lor claimants. claiming recently manifested injury from asbestos exposure dur Ctupter 11 la the only orderly way tor the Company to handle tho ing wartime service, 40 years ago. litigation and treat everybody lately. You may have read recently that another pubUdy held asbestos manufacturer has taken the same step. Q. What about your Inouranea? Shouldn't the Insurance com panies take care of the problem? A. Over the years, Johne-ManviNe Corporation's former insurance O. Could you have avoided Chapter 11? broker bought insurance coverage tor it totalling hundreds o A. No. To avoid Chapter 11, we would have had to strangle the Company slowly, by deferring maintenance and postponing capital expenditures. We would also have had to cannibalize our good businesses just to keep going. If recent trends had continued we would have had to mortgage our plants and properties and new credit would be most difficult and expensive to obtain. This is no way to go forward. Chapter 11 avoids these problems and preserves our operations. Q. WIN Manville go out of business? A. No. Our businesses wM keep operating, very smoothly, we millions of doNars. Right now, however, only one company is pay ing, and It pays only a small part of each daim. O. Why la that? A. The whole subject disgusts me. Now. when we need the coverage, with one exception, the insurance companies are reneging. We sued them aN in California in early i960 to force pay ment, You won't believe It, but even now, 30 months later, we still aren't sure which Judge wIN preside over the case. As a result the case has gone nowhere. As much as anything else, the bad faith of insurance companies has made It necessary for us to take this action. I have instructed that our damage claims in the California O/WM any of your 25,000 employees toes their Jobe? case be increased by live biUion doNars to partially compensate i A. I don't think Chapter 11 wIN cause a single employee to lose a creditors and shareholders for their tosses. Job, pay or benefits. In (act, we believe Chapter t is the best way Q. How much do the asbestos lawsuits cost you? to psrmft tha Company to operate normally, providing jobs and A. Including our outside legal toes, the cost is currently over usetof protects, despite aN the litigation. Moat important, I want to $40,000 per case. This is sharply higher than our averages in pnor keep our employees' morale up. They've done a bang-up job to years. Internal legal staff costs are also substantial. keep ManvWe lean and competitive. O. Can you pay your suppliers? Q. If aR 16,500 lawsuits now pending coat $40,000 apiece to settle, that would total $660 million. Without payments from A. We don't expect any significant problem in making full, timely your insurance companies, your problem is obvious. payment tor new shipments after our filing. A. Right. And that doesn't take into account the cases yet to be fil ?' yy "Hz* Ch*P**r 11 have on your customers? ed. Talking about legal costs, one of the truly outrageous aspects A. None. Wa wm eondnua to manufacture and ship hlah-ausHty of this situation is the amount of money being poured down the prortjeti and provide the same services, as always. drain in litigation expenses and contingent fees paid to plaintiff's * O. Whet w* happen to the lawsuits? lawyers. Cur boat guess is that tha injured worker receives lass A^The Chapter 11 tiling automadeaty stops sM lawsuits ponding against us. New lawsuits are also automatically wnpptd. We hope than a third of tha total eost of thaaa suits. The court system, with separate individual trials, is too inefficient and haphazard for a massive problem like this. We need an effective, practical national bestos lawsuits REORGANIZATION nployees, Customers, Suppliers and Creditors tem which delivers maximum payments to Injured workers, . inimizes the coats of delivering thoee payments and withholds ' lyments to those with no disability. : . What do you mean by haphazard? ; . There is no better word to describe our experience to date in ' e litigation. Wo had one suit from a plaintiff with doubtful ' Pestoeis who had retired on a fun disability pension with a : oken ankle. He received an additional award for asbestos t sesse of one and a quarter million dollars. We have seen others tally disabled or in fact daad who received no award from the . 7. In one recent trial in Texas, five separate juries hearing five . fferent cases wore empaneled and heard the same evidence ' tore the same judge in the same courtroom at the same time. - reir findings ranged from no liability to punitive awards. Maybe . ipftazard is too weak a description. This type of toxic tort Ittiga! m is an intolerable gambling exercise for both plaintiff and 1 Cendant. > . Why dM you file now? ; We're a public company. We are required to comply with cer in accounting requirements. Under these rules, we're supposed estimate the costs of current and probable litigation whenever wsible and create a reserve for the liability in an amount equal to a estimate. When the asbestos caaea began to proliferate, we sildnt estimate their probable number or coat, and our auditors wlified their opinion about our financial statements. Whan we and that (he numb* at now cases was not dooming and our lota booo'of ponding coooo was largo enough to assist In mok1projections, wo hired opidomioiogtats and otherprofessionals to >voiop on esflmats ot probable tuturo dfsesse cases. Early this ; with, they finished their work. On the basis ot their work so tor, ' t forecast that we oouldgat ot least 32,000 more lowoutto on tap ` the 20,000 steady assarted Some people outside Manville , ave estimated many more claims than thaL 1. A total of 52,000 lawsuits at a cost of $40,000 apiece could -wan a total cost of two billion dollars and that doesn't Include n inflation factor. Could Manville afford It? w Not on our own. Our businesses are strong and viable but they -right not be able to pay a bill that big. Even If we could pay, thout the protection of Chapter 11, it would cripple us. The cost handling paperwork tor this number of eases is staggering. We we to incur that coat In all events and sometimes we are essured by the courts to pay settlements without court deter* nation that disability exists. We also might have to sell good jsinessee to raise cash. In Chaptar 11, we can keep those jsineesee going and use their earnings to pay our liabilities. And rring is of course a problem. We have limited control over the timg of lawsuits and little ability to match timing of litigation lyments against available cash. Disregarding the litigation, we s a low-debt company with a book net worth of $1.1 billion. <hen a reserve is booked, net worth must also be reduced. The soking of a large reserve now tor current and future asbestos* salth liabilities would wipe out most of our net worth. Without lowing s good-sized net worth on our beiance sheet, affordable -edk would have dried up, and we simply could not have oersted. So, when our board ot directors learned this month of w probable need for s large reserve, it considered the options nd concluded we had to file tor relief under Chapter 11. 1. How do you feel about this? _y Awful. I've never had to do anything I hatedmore. Our loyal sup* Jsrs. lenders and shareholders all may suffer losses tor their >dit and investment exposure before our Chapter 11 filing. -'Wes could be very, very large for our present shareholders. Then, too, the many people who do have disabling injuries from excessive exposure to asbestos will be hurt. Their claims will be delayed and reduced. Still, it seems to us that the only orderly way to treat everyone fairly is through a court-supervised Chapter 11 proceeding. Q. Disabled workers are fully protected by workers' compen sation. How la It most people think they can sue you? A. You're partly right Workers' compensation covers an employer's liability to its employees for injury in the workplace. The law has been interpreted to make 'employer* and 'employes' very restrictive terms. This means that a 1940's employee of a shipyard can get workers' compensation from the shipyard, but he can also sue us tor having supplied the allegedly defective product I don't agree with that, but the fact is we are be ing sued in virtually every state because of it Q. Isn't there some ether national program for people Injured while on the job? A. There are programs in other industries, but not tor asbestos workers. There should be a statutory compensation program for asbestos Injuries. We've triad to got 0 program passod, but Congross has boon prooccupiod. This is another reason we've been forced into Chapter 11. No other country uses the court litigation system to provide compensation tor occupational disease. Q. How long will you be In Chapter 11? A. That depends. I've ordered our laywers to go lull blast One of the biggest problems will be court approval of the estimated amount due in the future to produet-liability claimants. Ones we get that approval, I think that getting out of Chaptar 11 ought to be just a matter of finishing up the legal proceedings. In the mean time, I understand that a company in Chapter 11 is allowed to con duct its affairs in the ordinary course of businees without court ap proval. One other thing needs attention. Our lawyers tell me that Con gress needs to act by October 4 to straighten out an important technical point of bankruptcy court jurisdiction. Important aspects of our Chapter 11 ease could be stalled until we get new legisla tion. / hope Congress writ resolve this important technical problem quichty and also move toward a rsaolUttonof occupational dsease tdgatlon so that tho thousands of citizens end voters caught up In this problom wU bo spared tha expensive, tnam&am and haphazard ttigation system we have boon sat&od with. I also hope the government writ stop up to its responsibilities lor having played a role In creating tho disease problom. O. Is there anything else to know? A. Yea. You should know that I and the people who work tor the Company have turned every stone at least once seeking an out-ofcourt solution to this problem. Chspter 11 hurts, yes. However, our board believes Chapter 11 is the beet way to protect our businesses. We expect to emerge from Chapter 11 stronger than ever. We are determined to make the best of this tor everyone involved. August 27. 1982 Manville For further information write to the Corporate Relations Department, Manville Corporation, P.O. Box 5108, Denver, Colorado 80217 33418