Careful, this asbestos thing may continue to have legs...
Halliburton, Too, a Victim of Asbestos
By James J. Cramer
12/10/2001 07:07 AM EST
Don't be misled by well-meaning but over-their-head managers from Halliburton. The 40% decline in HAL on Friday has nothing to do with fears that it is another Enron.
Instead, it has everything to do with Johns Manville, Eagle-Picher, Owens-Illinois, Owens Corning, W.R. Grace and dozens of other smaller companies that have been forced to reorganize (read: go bankrupt) to protect the assets of the company from those who were hurt by asbestos.
People didn't panic on Friday because HAL might have billions in off-balance sheet liabilities well-hidden from everyone, including the board. People didn't bail because they fear that the gains HAL had were all chimerical, brought on by chicanery and partnerships named after Star Wars characters.
They bailed because every time a management has assured people about asbestos liabilities, those assurances have proved to be bogus. The simple truth is that no one really knows what will happen to all of these claims, but that the claims, which should have gone away by now according to the executives who are reassuring us, are now mounting.
Why is asbestos so bad? Why do juries keep awarding multimillion dollar verdicts to these plaintiffs? Was Halliburton at one time a lying, evil corporation that didn't tell its workers not to inhale asbestos?
No, not at all. In fact, the anger the Halliburton executives feel, the palpable anger, is completely justified. These oilmen had nothing to do with asbestos. They simply merged with a company, Dresser, that at one time was very involved with asbestos, and even though that asbestos liability was supposed to be insured against, the insurance company doesn't have the means to back it up.
Or, to put it in a way that states the problem clearly: HAL is being sued because HAL still has money to pay. It will keep being sued until HAL runs out of money. Then someone else will be sued. But by that time Halliburton won't exist in its current form.
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