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GM's Estate May Face Billions of Dollars in Asbestos Claims, Creditors Say
Creditors of General Motors Corp.’s bankruptcy estate won permission to seek data from new General Motors and other parties to estimate what could be billions of dollars in asbestos claims.
U.S. Bankruptcy Judge Robert Gerber in New York today granted permission to unsecured creditors to request documents, after they agreed to keep sensitive information confidential.
“This isn’t like the formula for Coke or nuclear launch codes,” Gerber said, after taking hours of testimony about the risks that the information could be misused if disclosed.
Motors Liquidation Co., the remains of General Motors still in bankruptcy, plans to create a trust, allowing it to exit bankruptcy with some funds set aside to pay future tort claims. While the estate recorded an estimate of $648 million for asbestos liability, a committee of creditors said in a court filing the estate may face claims for five to 10 times as much.
Pinning down the liabilities of GM’s bankrupt remains is key to exiting bankruptcy. In May, Gerber extended the bankrupt estate’s exclusive control over its liquidation until this fall, citing the need to resolve asbestos and environmental liabilities.
Brake linings used in Old GM’s automobiles incorporated small amounts of encapsulated asbestos, creditors said in court documents. Under Gerber’s order, the creditors can demand documents from trusts that are processing asbestos claims on behalf of other bankrupt companies.
Macroeconomic Information
Gerber said today that the creditors’ request is legitimate because it seeks “macroeconomic information.” He directed lawyers for asbestos claimholders and creditors reach an agreement on a method for keeping information confidential.
A committee of holders of asbestos claims had objected to the release of the data. The committee said it would complicate the estimation process, by requiring information about more than 7,000 individuals, including medical records and parts of Social Security numbers.
Creditors said they need more information such as the age, work history and diagnosis of claimants in order to estimate the scope of liability claims for mesothelioma, a deadly cancer.
‘Target’ Defendant
GM’s asbestos liability increased because “all of the traditional asbestos defendants that had not previously filed for bankruptcy did so in the years 2000 through 2003,” turning GM into a “target” defendant, lawyers for creditors wrote.
Those traditional defendants “returned to the scene” from 2004 to 2009, in the form of trusts formed out of the companies’ bankruptcies. Those trusts have funding of $30 billion to $60 billion for asbestos claims, creditors said.
Creditors said they need the claims information to determine whether future claims will be more like levels GM saw in the 1990s, when average annual asbestos-related indemnity costs were less than $2 million, and the company saw fewer than 40 mesothelioma claims per year. From 2000 to 2008, costs rose to an annual average of $30 million, with 850 claims submitted per year.
Thomas Mayer, a lawyer for creditors, wasn’t available for comment today.
Elihu Inselbuch and Rita C. Tobin, lawyers representing the asbestos claimants, didn’t answer a phone call to their New York office after regular business hours.
A trust for Johns Manville Corp., once the nation’s largest maker of asbestos, which exited bankruptcy in 1986, objected to the GM creditors’ request for information. So had Armstrong World Industries Inc.’s asbestos trust. Armstrong created a $1.8 billion trust to pay victims of asbestos exposure when it exited court protection in 2006.
Under GM’s transfer of its assets to new General Motors, the debtor received 10 percent of stock in the new company and 15 percent of the warrants. Unsecured creditors say they expect the stock and warrants will be distributed to them.
The case is In re Motors Liquidation Co., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Tiffany Kary in New York at +1-718-875-1459 or tkary@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at +1-212-617-1092 or drovella@bloomberg.net.
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