Goodrich Corporation (Charlotte, North Carolina) - formerly BFGoodrich Company - has completed its previously announced acquisition of Glacier Industrial Bearings from Dana Corporation (Toledo, Ohio). The company will be rolled under Goodrich's Garlock self-lubricated polymer bearings business and the entity renamed Glacier Garlock Bearings. Dana's Glacier Vandervell engine bearings operation was not involved in the transaction.

The Glacier Garlock division will have annual sales of approximately USD $150 million, $50 million from the existing Garlock operations and $100 million from the acquired Glacier operation. Goodrich has also acquired Dana's minority interest in a joint venture which manufactures metal-backed polymer bearings.

Following immediately on the heels of the announcement that the acquisition had been completed, Goodrich announced that it intends to spin off the entire Engineered Industrial Products segment, tax-free, as a stand-alone publicly traded business. Goodrich will focus entirely on the aerospace industry.

The new company will include Glacier Garlock Bearings, along with Quincy, Stemco and Fairbanks Morse brands. Sales at the new company should be in the neighborhood of $800 million and employ approximately 5,000 people. Debt load will be $190 million.

The new company does not yet have a name, but Goodrich said it the spinoff should be complete by early 2002. The new company would be headquartered in Charlotte, North Carolina. Ernest Staub, current COO of the segment, will be its CEO. Michael Leslie, currently Group President - Sealing Products will become COO.

Under the plan, Goodrich shareholders will receive one share in the new company for every five Goodrich shares they own as of the record date for the distribution. As of the end of third quarter 2001, October 1, Goodrich will treat the Engineered Products segment as a discontinued operation.

David Burner, Chairman and CEO, said, "We are taking this action to enhance shareholder value. By establishing two separate companies, investors will be better able to evaluate the investment merits of our aerospace and industrial businesses in light of their respective performance and opportunities versus peer companies."

Over the past year, Goodrich has had a difficult time in the stock market as its core aerospace business continued strong. But overall performance was dragged down by its industrial businesses struggling, mired in the worldwide manufacturing slowdown.

In the latest quarter, for example, aerospace sales grew 19% and operating income grew 19%, while engineered industrial products sales fell 5% and operating income fell 24%.

The spinoff also serves a critically important, but far less obvious, purpose: insulating Goodrich from asbestos liability. Not only does the move shield Goodrich financially, but it also removes the company from investment "black lists" tied to its asbestos litigation exposure.

Garlock Bearing and Goodrich's now-defunct Anchor Packing Company are both defendants in asbestos-related claims actions. By spinning them off to an unrelated legal entity, Goodrich is able to completely disassociate itself from the tide of asbestos claims hitting those companies.

Garlock and Anchor manufactured products using encapsulated asbestos products, but even then discontinued distributing those products in the United States during 2000.

In the first six months of 2001, Goodrich paid out $90.7 million in asbestos claims for the two companies, $47.4 million of which was not covered by insurance. This is up sharply from the $59.0 million in claims paid during the first half of 2000, $22.7 million of which was not covered by insurance. Of Garlock's $965 million in asbestos-liability insurance, $216 million has been committed as of June 30, 2001.

Asbestos liability claims have proven to be exceptionally difficult to predict. Federal-Mogul, for example, once believed its claims resulting from the acquisition of T&N plc could be controlled - they have now spiraled out of control with no end in sight. The RAND Group has conducted a study indicating that asbestos liability claims can be expected to double. Even Goodrich, in its most recent financial statements, indicated it expects an increase in new actions against it during 2001.

Currently, Garlock and Anchor are facing 87,200 open actions, only 2,218 of which are classified as in "advanced stages" of resolution. In the first half of 2001 alone, more than 18,700 new actions against the companies poured in. Also, as in Federal-Mogul's case, when co-defendants file bankruptcy it only increases the risk and exposure of the remaining participants in the litigation.

The overall impact of asbestos claims on the new company is difficult to predict. While approximately $90 million per year in unreimbursed asbestos claims expense may not have been a large number for Goodrich with $4.4 billion sales, that same $90 million could be devastating for the standalone Industrial segment with only $800 million sales.

This latest announcement may mean Glacier's hot potato status may at last be coming to an end. Glacier has bounced through five owners in three years, from T&N to Federal-Mogul to Dana to Goodrich and now to the new company.

Federal-Mogul owned Glacier Vandervell and Clevite as a result of its 1998 acquisition of British autoparts maker T&N plc. However, antitrust authorities required that F-M divest all of T&N's polymer bearing and thinwall engine bearing operations, meaning the Glacier Vandervell and Clevite businesses. Dana acquired those companies for $430 million. Goodrich's acquisition cost has not yet been released, but Dana is expected to book an $11 million gain from the sale.