Dow Corning seeks protection

FROM DAVID USBORNE

in New York

Threatened by a rising tide of lawsuits stemming from its production of breast implants, which it has now discontinued, the Dow Corning Company yesterday filed for protection under Chapter 11 of the US bankruptcy code.

The company, a joint venture between Dow Chemical and Corning, agreed last year to contribute $2bn towards a global settlement for women who claim the implant has made them unwell. However, it revealed that it faced at least another 200 claims against it beyond the general settlement.

"We decided to take this action while we are in a position of financial strength, with the cash to continue operating our business without disruption," said Richard Hazleton, the company's chairman, .

The bankruptcy filing will have the effect of freezing any outstanding lawsuits against the company while it is given time to reorganise.

Mr Hazleton said: "Attorneys with lawsuits outside of the global settlement have not reduced their exorbitant demands, threatening our long-term buinsess and, therefore, our ability to fund the global settlement."

Terms of the global settlement were set last year by a federal court in Alabama. But it has become clear that thousands of women claiming health problems they say are linked to the silicone-gel implants have opted not to join the settlement.

Dow Corning's move is likely to reduce the chances of the global settlement succeeding. Dow has contributed $2bn to the $4.2bn fund and says it will not give more. Manufacturers and lawyers for the plaintiffs are holding talks in Washington to see if a way can be found to increase the settelement fund.

Dow Corning denies that research has shown any conclusive link between the implants and any health hazard. It has stopped making the devices, however. Their use only for cosmetic reasons was banned by the US government last year.

"Research has not shown a link between breast implants and diseases alleged by the lawsuits," the company reiterated yesterday.

The US Congress, meanwhile, is making headway towards reforming product liability laws, in particular to place caps on the compensation amounts manufacturers should be expected to pay in cases where their products are found to be defective and to have caused damage. The reforms, approved on Friday by the Senate, come too late for Dow Corning.

It is likely that a trust will be established to service Dow Corning creditors, as happened with asbestos bankruptcies in the US. The trust fund would be made up of corporate assets and insurance recoveries.

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