Honeywell Spinoff Sues Former Parent Over Asbestos Liabilities
December 02 2019 - 2:22PM
Dow Jones News
By Thomas Gryta
Garrett Motion Inc. is suing its former parent, Honeywell
International Inc., alleging that it was forced into a burdensome
agreement related to asbestos liabilities.
Garrett is Honeywell's former transportation-systems division,
making turbochargers and compressors for cars and trucks, and
became a separate public company in October 2018.
The complaint, filed Monday in New York state court, alleges
that Honeywell unilaterally imposed an "oppressive and
unconscionable" 30-year indemnification agreement before the
spinoff.
Garrett, which is based in Switzerland, said it failed to reach
a negotiated agreement with Honeywell's leadership over the matter
and now is trying to nullify the agreement in court.
"Honeywell's spinoff of Garrett into a standalone company fully
complied with applicable law," Honeywell said in a statement,
calling the claims without merit. Honeywell spun off 100% of
Garrett when the two separated and has no controlling interest or
seats on its board.
Honeywell continues to face lawsuits related to use of asbestos
in its North American Refractories Co., which it sold in 1986, and
from Bendix, an automotive brake division Honeywell sold in 2014. A
recent filing shows Honeywell has $2.4 billion in asbestos
liabilities with $6.4 billion in unresolved claims against it.
Honeywell said the asbestos liabilities covered by the agreement
with Garrett originated in the former transportation business that
is now Garrett. It contends the agreement is enforceable and "was
structured and sized to enable Garrett to generate sufficient cash
flow" to make the payments and operate as a stand-alone
company.
Garrett said it was forced into the agreement and is required to
cover punitive damages awarded against Honeywell, even though it
doesn't have control over the legal proceedings. The payments have
an annual limit under the agreement.
Garrett had revenue of $2.4 billion in the first nine months of
2019, compared with $27.2 billion at Honeywell. A recent regulatory
filing shows Honeywell received $114 million in payments from
Garrett in the first nine months of 2019.
Honeywell, which is based in Charlotte, N.C., has made hundreds
of millions of dollars' of asbestos-liability payments in recent
years. Before spinning off Garrett and another company, Honeywell
said it expected to receive up to $315 million a year from the
spun-off companies to help cover future expenses.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
December 02, 2019 14:07 ET (19:07 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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