Six years ago, Federal-Mogul Corporation filed for Chapter 11 bankruptcy in the United States and United Kingdom after an onslaught of past claims for damages due to asbestos-related diseases threatened to impact the company's operating potential. But the company's finances and future are looking up. Last month, a U.S. Bankruptcy Court judge affirmed Federal-Mogul's fourth amended joint plan of reorganization, paving the way for the company's emergence from bankruptcy by the end of this year.
According to José Maria Alapont, the Southfield, Mich., parts maker's chairman, president and chief executive officer, emergence from Chapter 11 will be instrumental in the company's future growth plans. These include the development of innovative technologies at competitive cost, while creating value for its customers.
"We are extremely pleased to have reached this significant milestone signaling the emergence of the company from Chapter 11 proceedings," he says. "The Federal-Mogul team has been relentless in its dedication to service excellence and remains focused on our successful operating performance and the implementation of our sustainable global profitable growth strategy."
The company's growth strategy includes focusing on key markets like China, Eastern Europe, India, Russia and South America, as well as evaluating the potential for sustainable long-term growth in emerging markets. In addition, Federal-Mogul is trying to increase efficiencies in existing markets and to make sure — in the words of Marie Remboulis — it is the "most competitive at what we do to better serve our customers."
"As a company, we have always been focused on our strategy for the future," says Remboulis, Federal-Mogul's vice president of corporate communications. "We have always been focused on our customers, focused on leading technology and innovation, focused on quality and focused on service. So this is not about starting over; instead, it's a continuation and re-enforcement of the path we have previously been following."
Weeks of negotiations preceded the legal confirmation and affirmation of Federal-Mogul's reorganization plan, with the final decision in the case being rendered by U.S. District Judge Joseph Rodriguez in New Jersey. This affirmation is vital to the company, which faced opposition to its plan earlier this year, when objectors led by insurance companies tried to block Federal-Mogul's plan and threatened to force the company to renegotiate on $3.5 billion worth of reorganization exit financing.
But now that the plan has been approved, Federal-Mogul's Chapter 11 plan will shift asbestos liabilities off the company's balance sheet. It also will help set up a trust to pay claims for any disease caused by the toxic substance, while allowing the company to take advantage of its lenders' commitments to cheap financing.
"This restructuring process provides us with the opportunity to emerge from bankruptcy as a leading global supplier," Remboulis says. "Now that the legal process is complete, we can focus on our growth strategy and work toward exceeding customer expectations with exceptional quality products."
Once the plan is implemented, ownership of the reorganized Federal-Mogul will be split among commercial creditors, led by billionaire investor Carl Icahn, and people with claims for asbestos damages. Icahn has agreed to buy out the half earmarked for the asbestos claimants in a transaction expected to give him control of the company.
Looking ahead at his company's future, Alapont concludes, "the Federal-Mogul team has been relentless in its dedication to service excellence and remains focused on our successful operating performance and the implementation of our sustainable global profitable growth strategy."
