Federal-Mogul Corp. is Back on Track

April 25, 2008

Brent Snavely, Detroit Free Press.

Parts maker is now ready to grow

Southfield-based Federal-Mogul Corporation, finally free from the shackles of bankruptcy, is now flush with cash, has a new owner, $3.5 billion in borrowing availability, and is looking to make acquisitions.

After reporting an operating profit but a net loss during the first 3 months of the year, company executives talked about the healthy financial position of the firm and the opportunities associated with it.

President and CEO José Maria Alapont said, "Because we have clear available liquidity we are going to be monitoring potential business opportunities."

Senior Vice President Robert Goodman, of CRT Capital Group LLC, an equity research firm in Stamford, CT., said that he expects that the company will move cautiously but that its deep pockets will provide lots of options.

Goodman said, "This company has tremendous capital flexibility."

Return to big stock exchange today

In October 2001, Federal-Mogul filed for bankruptcy protection, mostly because it had acquired two companies in the 1990s with massive asbestos liabilities. The company dealt for years with reorganization issues both in the United States and Britain, but on December 27 it finally emerged.

Alapont rang the opening bell on the Nasdaq global market in New York to celebrate the major stock market return.

Alapont said, "After 6 1/2 years of bankruptcy, this is very important." In April 2002, Federal-Mogul was delisted from the New York Stock Exchange. Since then, its stock has only traded on far less visible exchanges. Federal-Mogul's stock is will begin trading under the symbol FDML on Nasdaq.

Goodman said, even on the high-profile stock exchange, Federal-Mogul shares might trade below their true value because one owner has around 75% of the stock locked up.

Thornwood Associates Ltd. Partnership exercised an option to purchase 50.1 million shares of common stock originally distributed to an asbestos trust fund on February 25. The company now owns 75% of Federal-Mogul's common stock. It is an entity controlled by Carl Icahn, corporate raider and private-equity investor.

In a recent equity report Goodman still placed a "buy" recommendation on Federal-Mogul, as long as it trades at less than $29 per share. On Tuesday, shares closed at $19.40 gaining 15 cents, or 0.8%.

Charge results in 1st-quarter loss

Federal-Mogul posted a $31.5 million first-quarter loss (31 cents per share), after taking a $68-million charge in order to emerge from Chapter 11 bankruptcy. Federal-Mogul reported net income of $4.5 million, or 5 cents per share for the same period last year.

The $68-million charge, according to Federal-Mogul, was the result of the need to revalue its inventory, an accounting procedure related to the company's exit from bankruptcy court protection. Federal-Mogul said its net income would have been $32 million, or 1.7% of sales without the inventory charge.

First quarter sales increased to $1.86 billion, up 8% from the first quarter last year. The sales increase was boosted by $120 million due to favorable currency exchange rates and a $23 million increase in sales to European automakers, said the company.

Federal-Mogul sells replacement parts to the public and makes a variety of piston rings, seals, bearings, gaskets and brakes for automakers.