Federal-Mogul Corporation

A true corporate conglomerate, few industries are untouched by Southfield, Michigan’s Federal-Mogul Corporation. A manufacturer of parts and components for the automotive, industrial and energy sectors that operates in more than 30 countries around the world, the company was founded in 1899 when J. Howard Muzzy and Edward Lyon incorporated the Muzzy-Lyon Company. After establishing a subsidiary, Mogul Metal Company, the founders developed a process to fabricate die-cast bearings for engines. Buick placed the company’s first major order in 1910 when it requested 10,000 connecting-rod bearings.

Mogul Metal became Federal-Mogul Corporation in 1924 after merging with Federal Bearing and Bushing. World War II created a significant boost for Federal-Mogul: Between 1941 and 1945, company sales doubled. Throughout the ensuing decades, Federal-Mogul expanded. During the recession of the 1970s, the company began to diversify away from its dependence on the automotive industry through strategic acquisitions.

With a buying spree in the 1990s, Federal-Mogul tripled in size by the turn of the century, but was forced into Chapter 11 by 2001, emerging in 2007. Legendary financier Carl Icahn currently owns 76 percent of Federal-Mogul, which posted $161 million in profits on sales of $6.2 billion in 2010, an almost 17 percent sales increase over 2009.

Federal-Mogul Corporation and Asbestos

Federal-Mogul made two major acquisitions in 1998: Fel-Pro and T&N PLC. Fel-Pro was a United States manufacturer of gaskets and other seals. T&N, which Federal-Mogul purchased at a bargain-basement price, was Europe’s largest manufacturer of raw asbestos products and a maker of brake pads, bearings and other parts. The price for T&N PLC was being held down by impending asbestos litigation, and the decision to acquire the company would prove critical for Federal-Mogul.

Federal-Mogul Corporation’s core manufacturing businesses, typically involving bearings and other machined or die cast parts, did not generally involve asbestos. However, the company exposed itself to asbestos liability through its acquisition of a number of other companies that manufactured fireproof insulation sprays and raw asbestos fiber (T&N PLC), industrial gaskets (Gasket Holdings Inc, formerly Flexitallic Gasket Co.) and automotive friction products such as brake pads (T&N PLC, as well as Apex and Wagner).

Individuals who worked with such companies in the direct manufacture of their products could have experienced asbestos exposure. Other individuals involved in the repair or installation of asbestos-containing products may have also been exposed to airborne asbestos particles. Jobs that may have presented asbestos exposure risks include:

• Autoworkers
• Insulators
• Pipe Fitters
• Shipyard Workers
• Welders
• Railroad Employees
• Aerospace Workers
• Auto Mechanics

Federal-Mogul and Asbestos Litigation

Federal-Mogul’s strategy for acquisitions more than tripled the size of the company in less than two decades. Staggering under its new weight, the company tried to streamline by shedding workforce and closing manufacturing facilities. However, no strategy could save the company from the T&N PLC-related asbestos lawsuits. In 2001, the company was forced into Chapter 11 bankruptcy protection, from which it would not emerge until 2007, one of the longest and most complex reorganizations in U.S. bankruptcy history.

By the time Federal-Mogul filed for Chapter 11 bankruptcy protection in 2001, it had more than 156 subsidiaries and affiliates. Of these, a number were involved in extensive asbestos litigation suits, totaling nearly 350,000 individual claims. At the time Federal-Mogul acquired T&N PLC, it had set aside approximately $2.1 billion as a reserve to pay asbestos-related claims, but the amount proved insufficient. Many of these claims stemmed from individuals contracting mesothelioma cancer. While Federal-Mogul has cited T&N PLC asbestos lawsuits as the driving force that sent the company into bankruptcy, it is the former Flexitallic company that is the defendant named most often in asbestos claims against Federal-Mogul.

One of the larger lawsuits in which Federal-Mogul was named a defendant had to do with so-called “friction claims.” The friction cases involved a large class of individuals who worked with asbestos-containing brake pads and other products that caused asbestos particles to become airborne through friction. These individuals filed suit against several auto makers and parts manufacturers, including Federal-Mogul. As part of its emergence from bankruptcy, the company established the Federal-Mogul Asbestos Personal Injury Trust, which now handles all asbestos claims filed against the company.

Individuals who worked in a Federal-Mogul manufacturing facility, or plants subsequently acquired by Federal-Mogul, that produced asbestos-containing products should advise their physicians and seek regular medical exams to check for any signs of disease related to asbestos exposure. Individuals who believe they handled, installed or repaired any asbestos-containing products that Federal-Mogul and its subsidiaries manufactured should also monitor their health on a regular basis for asbestos-related diseases such as mesothelioma, asbestosis and lung cancer.