In 1982, John A. McKinney, chairman and chief executive of the Manville Corporation, decided to file for protection under Chapter 11 of Federal bankruptcy laws to deal with mounting claims filed by victims of asbestos-related disease.
Nearly four years later, a Federal bankruptcy court has approved Manville's reorganization plan, and the company expects to emerge from bankruptcy proceedings by mid-1987.
But Manville faces several challenges. It is trying to force the Government to help compensate asbestos victims, maintaining that many who have sued the company were exposed to asbestos in Government-owned or controlled shipyards.
Manville has pledged more than $2.5 billion to a trust for compensating victims. But the trustees of the ''settlement vehicle'' could possibly wield considerable influence over Manville because the trust will own up to 80 percent of the company.
Manville is also undergoing a management transition. A new board has just been selected, and Mr. McKinney, 62 years old, plans to retire Sept. 1. His heir apparent, Josh T. Hulce, unexpectedly resigned as president in April. Mr. McKinney recently discussed these challenges.
Q. Do you expect the trustees to be involved in setting management policy?
A. If I were a trustee, I would be very reluctant to get involved in any way in the management of the operating company. We're not going to try to run the trust, and the trust is not going to try to run the company.
Q. There has been some speculation that the attorneys of asbestos victims in the bankruptcy proceedings, including Leon Silverman, forced out Mr. Hulce. Is that true?
A. In an April meeting with Silverman, I told him my plan was to step down as chief executive on Sept. 1 and to remain as chairman for a time -until the first of the year - because of the relative youth of senior management.
It was then our plan not to have a chairman but to go back to having the president and chief executive officer preside at board meetings. Silverman objected to the elimination of the job of chairman on the basis that the operating management was relatively inexperienced. He proposed a chairman from the outside. Our board decided it would not accept a non-employee chairman.
The judge wanted us to compromise, which was that one of our experienced directors, George C. Dillon, who retired early as chairman of the Butler Manufacturing Company, would take the job. Q. Then why did Mr. Hulce quit? A. There was a lot of acrimonious debate with some people in working out the plan of reorganization. He felt it might hurt his effectiveness in dealing with, for instance, our commercial and trade creditors after confirmation of the plan.
Q. What is your response to critics who say your $1.3 million severance package and Mr. Hulce's $530,000 arrangement are extravagant ''golden parachutes''?
A. The use of the word ''golden parachute'' is totally inappropriate. This is a normal program based on Manville's standard separation policy.
Q. Manville has agreed to create a fund of at least $125 million to settle property-damage claims. How much will those ultimately cost?
A. Outside of our Chapter 11, there is a lot of litigation going on related to property damage. I don't really know how the property damage thing will play out. My own belief is there really isn't any liability. We've negotiated that $125 million figure. I don't think it will be more than that.
Q. What are the remaining obstacles to be overcome to emerge from Chapter 11?
A. There is litigation on behalf of the common shareholders, whose holdings will be diluted by up to 98 percent. The trust will get up to 80 percent of the stock and the commercial and trade creditors and preferred shareholders will also get some common stock. I don't know how big an obstacle that litigation will be. The ultimate risk in bankruptcy falls on common shareholders. I regret very much what happened.
Q. You are still trying to force the Government, in lawsuits and in Congress, to help compensate asbestos-health victims. What are the chances of Congress passing such legislation?
A. It's not difficult to convince senators and Congressmen that it's unfair for industry to pay for the consequences of the acts of government. But to phrase it simply, it's not enough to be right in Washington.