SOLUTIA FILES FOR BANKRUPTCY
Firm seeks protection from crushing retiree and environmental costs
If ever a chemical company had the deck stacked against it, Solutia did. Spun out of Monsanto in 1997, the firm has had to deal with a host of legacy environmental and retiree obligations even as it confronted profound economic and competitive difficulties.
And so last week, Solutia did what it has threatened to do: It filed for bankruptcy reorganization in the U.S. Bankruptcy Court for the Southern District of New York. Separately, Solutia sued the Pharmacia unit of Pfizer in an effort to assign it responsibility for $475 million in retiree benefit liabilities. Pharmacia owned Monsanto until it spun it off last year.
"We simply could not continue to sustain our operations burdened by Monsanto's legacy liabilities," says John C. Hunter III, Solutia's CEO. Those liabilities--costing more than $100 million annually--include retirement pensions for former Monsanto employees as well as the legal and remediation costs of dealing with polychlorinated biphenyl contamination at a former Monsanto manufacturing site in Anniston, Ala.
"We believe that the Chapter 11 process will give us a forum to shed" those costs, Hunter says.
Though Monsanto picked up the bulk of the $600 million cost to settle Anniston residents' legal claims, "the straw that broke the camel's back," according to Buckingham Research analyst John E. Roberts, came earlier this month when Monsanto refused to assume a $3 million settlement in two legacy asbestos cases.
Although it refused to pay that bill, Monsanto may now have to kick in cash if ordered by the bankruptcy court. Hugh Grant, Monsanto CEO, says his firm is "fully prepared to manage potential liabilities that may come to it" because of Solutia's filing.