W.Thomas Stephens has been at the helm of the Manville Corporation for two years now, and he is determined to put the company's asbestos quagmire behind him - without forgetting its lessons. It will not be easy.
In 1986, Mr. Stephens inherited a company that will remain for decades intertwined with one of the most emotionally charged and legally complex bankruptcy/product-liability cases in United States history.
As the company gets set to emerge from six years of bankruptcy-court jurisdiction, several experts say the case and its unique settlement have set important precedents for future massive product-liability cases.
Manville's Stephens says the central issue beyond the company's commitment to pay compensation to people harmed by asbestos will be to rebuild trust in the 130-year-old company.
``We're not going to whine or complain or be defensive,'' Stephens says. ``We're going to say that what happened, happened in the past. This generation of Manville employees can set an example of what is best in American industry in terms of ethical conduct.''
Stephens says the company has been remolded and is now dedicated to making a profit in order to help the thousands of people harmed by asbestos products that the company produced for decades. That new mission, he believes, has already caused a morale boost at a company that he says has ``learned the hard lessons of the past six years.''
Manville's unique case represents the first time a Fortune-500-size company will be owned almost totally by a health trust organization set up by a bankruptcy court. The trust will collect a slice of company profits to pay compensation.
Initially, the trust will receive $815 million in cash and notes from Manville and its insurance companies. Manville will also pay the trust with common stock, $75 million a year for 24 years beginning in 1991, and up to 20 percent of the company's net earnings, if needed, to cover claims. The payments to the trust are expected to exceed $2.5 billion over 26 years.
But some critics say the company still has a long road to travel before regaining public confidence. Some people harmed by asbestos have waited in frustration for more than six years, while lawyers and creditors worked out a compromise.
``We had thousands of victims with cases pending'' against the company, says Heather Maurer, director of Asbestos Victims of America, an informational and advocacy group with more than 13,000 members based in Capitola, Calif. ``Most of them are gone now. Some died in poverty without any compensation.... Going into bankruptcy was a business decision for the company. It was the least expensive thing - it's what they had to do to avoid a business disaster.''
In August 1982 the company, then Johns-Manville, was a $1.8 billion building products giant and one of the world's largest asbestos manufacturers. That month it shocked the business community by becoming the biggest US industrial company ever to seek Chapter 11 bankruptcy protection from creditors.
What led the directors of Johns-Manville to thrust a thriving company into bankruptcy was a growing torrent of lawsuits. Nearly 16,000 cases had already charged the company with making asbestos products without warning they could be harmful. With tens of thousands more suits expected, the directors cited auditors who said potential liabilities exceeded the company's net worth.
Since then, other companies, including A.H. Robins, which produced the Dalkon Shield, have based bankruptcy petitions on a major contingent liability.
Immediately after Manville filed, lawyers for those harmed by asbestos charged a ``perversion'' of the bankruptcy laws and castigated the company for ducking its responsibility.
One of those critics was Ronald Motley, a lawyer whose Barnwell, S.C., firm represents about 20,000 people allegedly harmed by asbestos. About 2,500 of Mr. Motley's asbestos clients have claims against Manville. He worked with Stephens and others on the multibillion-dollar settlement.
``I believed and still believe that the company's prior management went into bankruptcy to stymie the suits,'' Motley says. ``Those people are gone now. And as far as I'm concerned, God bless Tom Stephens and Manville.''
Other lawyers are less sanguine. ``I don't think it worked for the victims at all,'' says Aaron Simon, who represents 800 clients allegedly harmed by asbestos. ``It's a limited fund set up for virtually an unlimited number of people - a fund everyone knows will run out of money.'' Mr. Simon also worries about the precedent. ``This is an off-the-hook device for a large corporation.''
There is also one other very unhappy group of people - the former and current investors in Manville stock. As part of the deal management worked out, shareholders are left in the cold. After the company gets out of bankruptcy, most of its stock will be converted to the trust's ownership, ultimately diluting its value as much as 98 percent.
``What Manville did was highly unethical to its shareholders,'' says Calvert Crary, a litigation analyst with Martin Simpson & Co. ``Management and the asbestos victims teamed up and took the equity for themselves - and basically wiped out common-stock holders.''
Paul Klenaitis, an analyst with Duff & Phelps, an investment-research and financial-management firm in Chicago, says Manville's restructuring has left it a well-diversified company with strong potential to increase earnings. Sales hit $2 billion in 1987. Earnings in the first half of 1988 were down slightly.
By December 1985, Manville had divested itself of all asbestos products. Today, the down-sized company concentrates on forest products, fiberglass, and specialty products like roofing and filtration materials.
Despite criticism of the settlement, Stephens says Manville will try to set an example for ethical behavior in the future. Already it has begun warning workers about a medical study, far from conclusive, on health effects related to fiberglass.
``This asbestos case, more than anything, has reflected the views of society about what it expects from a company,'' Stephens says. ``Society has sent a very clear message: `We want producers of products to fully inform us about the risks we take when we consume a product, and we have the right to assume it is safe, unless we've been warned.'''