Federal-Mogul agrees to take Honeywell's friction products in exchange for asbestos liabilities

SOUTHFIELD, Mich. (Jan. 31)—With the approval of the bankruptcy court overseeing its Chapter 11 case, Federal-Mogul Corp. plans to acquire much of Honeywell International Inc.'s Bendix friction materials business. In exchange, Federal-Mogul must assume all current and future asbestos liability for the business, which posts about $700 million in sales annually. Under the agreement, Honeywell would continue to operate some of its U.S.-based Bendix plants to manufacture friction materials on a contract basis for Federal-Mogul for up to two years following completion of the pact. The two expect to finalize the agreement when Federal-Mogul emerges from Chapter 11 late this year. Honeywell currently has asbestos liability insurance that would cover up to $2 billion in claims. Automotive analysts speculate that Federal-Mogul will ask the bankruptcy court to cap all Bendix liability at that amount, effectively giving Federal-Mogul the Bendix business for nothing. In exchange, Honeywell would be spared the potential cost of ballooning asbestos litigation, the analysts said.