USG exec thinks asbestos bill would help

By Sandra Guy, Chicago Sun-Times

William Foote, CEO of wallboard maker USG Corp., told shareholders Wednesday he sees a glimmer of hope in federal legislation to be introduced soon that will address the asbestos crisis that drove the company into bankruptcy.

But he warned that shareholders may be left with nothing.

"It is possible your investment in USG will be wiped out," Foote said during the Chicago-based company's 100th annual meeting.

USG filed for Chapter 11 bankruptcy protection June 25, 2001, to manage the growing claims of people who allege they were exposed to asbestos in products made by USG's U.S. Gypsum unit. USG mixed asbestos into wall products and joint compounds between 1930 and 1977.

Foote said he expects USG to emerge from bankruptcy free of asbestos liability. It could take another three years or longer.

USG's fate remains precarious because no one knows whether the company's asbestos liabilities will outweigh its market value.

People making the claims range from those suffering from mesothelioma, a rare form of cancer, to people who fear their exposure to asbestos leaves them vulnerable to cancer and respiratory illnesses.

The legislation, expected to be introduced soon by Senate Judiciary Chairman Orrin Hatch (R-Utah), reportedly will take asbestos claims out of the court system, impose medical criteria for people pursuing claims, and enable companies to emerge from bankruptcy with no asbestos liability.

One sticking point is the size of the trust fund to be set up to settle claims. Manufacturers, insurers and other businesspeople believe $90 billion is adequate, while labor groups want twice that. Hatch has asked the parties to agree on terms or he will appoint a panel to do it.

Since January 2000, claims by people not severely impaired have pushed about 30 companies that sold or used asbestos products into bankruptcy. Another 40 companies have filed asbestos-related bankruptcies since the mid-1970s.

USG intends to fight claims against it by people who rarely used its products and those who have no asbestos-related diseases. Foote said the company will pay only an amount proportionate to its involvement in the exposure. USG never made, mined or sold raw asbestos.

No date has been set for when the personal injury claims will be tallied. USG announced in earlier regulatory filings that it expects to pay as much as $1.28 billion in claims through 2003.

Outside of asbestos claims, USG also owes suppliers $162 million and owes banks and bondholders $1 billion, according to USG's calculations. Despite its obligations, USG wants its shareholders to retain as much value as possible from the bankruptcy process.

USG faces challenges in its wallboard business, such as a slowdown in commercial building and rising gasoline and waste-paper prices, but its underlying operations are sound, Foote said. USG generated $337 million in cash in 2002, compared with the $189 million it generated after filing for bankruptcy in mid-2001.

Executives are benefitting, too. Foote received a $1 million incentive bonus plus a $1.3 million retention bonus last year, boosting his total compensation to $3.3 million.

The company has paid $32 million to its top 225 executives and managers for staying with USG while it has been in bankruptcy. USG's creditors' committee approved the retention package because it is in the creditors' best interests that the company be well run, said USG spokesman Robert Williams.

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