Honeywell's Bendix Unit Is Sold To Federal-Mogul.

Honeywell reached a landmark deal to rid itself of its remaining asbestos liabilities by selling its Bendix brakes parts business to Federal-Mogul, the insolvent car parts company. No sum was disclosed, but under the terms of the deal, Federal-Mogul would gain the assets in exchange for taking on asbestos-related liabilities.

The company is able to use its Chapter 11 bankruptcy status to more easily deal with asbestos claims and cap liability. Federal-Mogul filed for bankruptcy protection in October 2001 mostly due to mounting asbestos claims of its own. The Bendix transaction follows a recent settlement by Honeywell and plaintiffs suing its former Narco refractory brick unit for $2.9 billion.

Conglomerates such as ABB, Honeywell, oil services group Halliburton and packaging group Sealed Air of the U.S. have all reached settlements. ABB reached a $1.1 billion settlement, Halliburton agreed to settle for $4.1 billion in cash and equity, Honeywell for $2.9 billion, and Sealed Air for $853 million in cash and stock. "It's just appalling. It's just a perversion of the whole system," said one asbestos plaintiffs' attorney, who said claimants would fight the move.

Companies under pressure from asbestos exposure typically file for bankruptcy in which they settle claims in the court-monitored reorganization. In the process, companies form a trust with assets or equity to pay current and future claims, in exchange for emerging from bankruptcy with no further liability. Johns Manville pioneered the structure in the 1980s. The Bendix deal adds asbestos liabilities to a bankrupt reorganization already dealing with large exposure, while giving Federal-Mogul a growing auto parts business.

Bendix also expands it presence in friction products in Europe and gives vital exposure in Asia. "It is a precedent-setting way that we are using our Chapter 11 status to grow our business," Federal-Mogul said. Federal-Mogul said it would take all the asbestos liability, but would be able to pay out future claims with Honeywell's $2 billion insurance provision. The deal is still contingent on a bankruptcy court's approval and its ruling that Honeywell is shielded from current and future claims for that unit.

Honeywell views Bendix as a non-core business and has wanted to sell the $1 billion-turnover unit for years. In November 2000, it scuttled a deal with Questor Partners Fund II, a private investment group following the collapse of the General Electric merger. Honeywell will retain the rights to the Bendix brand in its aerospace business.