Federal Mogul files for protection over asbestos liabilities

Federal Mogul, the car and truck parts maker, was yesterday forced to file for protection from bankruptcy, under the huge weight of asbestos liabilities.

The US company's problems stemmed largely from its 1998 purchase of the British group, T&N, which was formerly a building materials maker called Turner & Newell. Although it was known that T&N had historical asbestos-related liabilities, the payouts that Federal Mogul has since made far exceed the figure put on it in 1998.

So far, Federal Mogul has paid out more than $1bn (£680m) in cash to settle claims and it will have to pay out a further $380m in the current financial year. It has 365,000 pending claims against it, though less than 5 per cent of these claimants have so far actually become ill.

The company yesterday filed for Chapter 11 bankruptcy protection in the US and put its UK companies into administration. The businesses will continue to operate, it said, and jobs would be safegaurded, including 4,500 workers in the UK.

Frank Macher, the chief executive, said: "Federal-Mogul intends to work closely with asbestos claimants and other creditors to develop a financial reorganisation plan that will address asbestos claims and establish a viable capital structure for the long-term growth and profitability of the company's operations."

The thousands of cases will now be consolidated under a single federal court and hearings are likely to take years.