Garrett Motion filed for Chapter 11 bankruptcy protection on September 20, 2020. The company cited the COVID-19 pandemic and asbestos-related payments to its former corporate parent Honeywell International Inc. for their decision.
Honeywell imposed on Garrett the obligation to indemnify, in effect, to reimburse it, for certain asbestos liabilities. Honeywell created Garrett Motion as a spin-off company in 2018. Historically, Honeywell and companies it acquired exposed people to asbestos in various industries.
Honeywell and Garrett Motion Dispute Financial Obligations
Garrett Motion Inc. and Honeywell are debating the legality of requiring Garrett to make these payments to Honeywell. According to Reuters, the two companies are disputing more than $1.3 billion in asbestos liabilities due to historical asbestos exposure by Honeywell.
Why Was Asbestos Used by Automotive Companies Such as Garrett Motion/Honeywell?
Garrett Motion Inc. is an auto parts supplier working with Ford Motor Company, among others.
According to reports, automotive companies used asbestos in products as a cost-cutting measure. Companies continued to use the carcinogen after health risks related to exposure became well-known.
Many automotive companies face lawsuits after exposing workers and consumers to asbestos in their products. Mechanics or do-it-yourself car owners may experience asbestos exposure. Asbestos is often found in friction products, such as brakes and clutches, made between the 1930s and 1980s. Exposure to airborne asbestos fibers can cause diseases.
Diseases caused by asbestos exposure include:
What Does Garrett Motion’s Bankruptcy Mean for Victims of Asbestos Exposure?
Garrett Motion’s bankruptcy filing may lead to an asbestos trust fund.
Companies may be able to create trust funds during the bankruptcy process. A Garrett Motion trust fund would change the process of how claimants file a mesothelioma claim against the company.
Typically, claimants can sue an asbestos company in court to seek damages for their injuries. Through court, claimants can either pursue a settlement with the company or can take their case to trial before a jury.
If an asbestos company files for bankruptcy, however, it evades much of its liability to victims. The company may instead form an asbestos trust fund, forcing victims to file claims against the trust fund. The trust fund usually pays victims only a small percentage of the value of their claim, usually pennies on the dollar.
If Garrett Motion creates an asbestos trust fund, victims of asbestos exposure will have to submit their claims to the fund instead of suing Garrett in court. The trust would then pay out successful claims according to a set payment percentage, usually a small percentage of the value of the claim.
While Garrett Motion is in the bankruptcy process, claims cannot be filed against the company. A mesothelioma lawyer can assist a victim in seeking justice from Garrett Motion once the company is out of bankruptcy protection.
While Garrett Motion is in bankruptcy, a lawyer can help victims begin building a case.
What’s Next for Garrett Motion?
Garrett Motion is fielding offers from other parties to buy the company. Garrett Motion continues to operate without interruption during the bankruptcy and sale process.
Companies Interested in Purchasing Garrett Motion
The most recent bid for Garrett Motion comes from KPS Capital Partners (KPS). Garrett Motion and KPS are in a stalking horse agreement. This agreement means any other bid for Garrett Motion has to be greater than the current KPS bid.
The $2.6 billion KPS bid was approved by a New York court on October 23, 2020.
The sale and bidding process will continue until mid-December 2020. An auction is anticipated to end the bidding process around December 18, 2020.
Garrett Motion anticipates completing the sale and emerging from bankruptcy in early 2021.
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