By Thomas Gryta
Garrett Motion Inc. is suing its former parent, Honeywell International Inc., alleging that it was forced into a burdensome agreement related to asbestos liabilities.
Garrett is Honeywell's former transportation-systems division, making turbochargers and compressors for cars and trucks, and became a separate public company in October 2018.
The complaint, filed Monday in New York state court, alleges that Honeywell unilaterally imposed an "oppressive and unconscionable" 30-year indemnification agreement before the spinoff.
Garrett, which is based in Switzerland, said it failed to reach a negotiated agreement with Honeywell's leadership over the matter and now is trying to nullify the agreement in court.
"Honeywell's spinoff of Garrett into a standalone company fully complied with applicable law," Honeywell said in a statement, calling the claims without merit. Honeywell spun off 100% of Garrett when the two separated and has no controlling interest or seats on its board.
Honeywell continues to face lawsuits related to use of asbestos in its North American Refractories Co., which it sold in 1986, and from Bendix, an automotive brake division Honeywell sold in 2014. A recent filing shows Honeywell has $2.4 billion in asbestos liabilities with $6.4 billion in unresolved claims against it.
Honeywell said the asbestos liabilities covered by the agreement with Garrett originated in the former transportation business that is now Garrett. It contends the agreement is enforceable and "was structured and sized to enable Garrett to generate sufficient cash flow" to make the payments and operate as a stand-alone company.
Garrett said it was forced into the agreement and is required to cover punitive damages awarded against Honeywell, even though it doesn't have control over the legal proceedings. The payments have an annual limit under the agreement.
Garrett had revenue of $2.4 billion in the first nine months of 2019, compared with $27.2 billion at Honeywell. A recent regulatory filing shows Honeywell received $114 million in payments from Garrett in the first nine months of 2019.
Honeywell, which is based in Charlotte, N.C., has made hundreds of millions of dollars' of asbestos-liability payments in recent years. Before spinning off Garrett and another company, Honeywell said it expected to receive up to $315 million a year from the spun-off companies to help cover future expenses.
Write to Thomas Gryta at firstname.lastname@example.org