Solutia shares drop on chemical dumping worries

 USA: January 7, 2002

 NEW YORK - Shares of chemicals company Solutia Inc. fell 25 percent
 on Thursday as investors reacted nervously to a newspaper article
 alleging dumping of potentially toxic chemicals by Monsanto Co.,
 Solutia's former parent.

 The Washington Post on Wednesday said managers at Monsanto, which
 spun off its chemicals operations in 1997 to create Solutia, knew by
 the late 1960s that PCB levels near its Anniston, Alabama plant were
 extraordinarily high.

 Fish submerged in a creek that Monsanto used for chemical discharge
 turned belly-up, their skin sloughing off, within 10 seconds during one
 study, the newspaper said.

 But managers at Monsanto, which made the now-banned industrial
 coolants known as PCBs for 40 years, decided then - and for years after
 - that there was little reason to employ expensive methods to limit PCB
 discharge, the article said.

 Calls by Reuters to Monsanto seeking comment on the newspaper article
 were not immediately returned.

 On Thursday Solutia's shares sank $3.16, or more than 25 percent, to
 $9.39 on the New York Stock Exchange.

 In response to the article, Solutia said PCBs were made at the Anniston 
 facility for 40 years and that the chemicals have been found in the
 surrounding environment.

 The St. Louis-based company said, however, that there is "no consistent,
 convincing evidence that PCBs are associated with serious, long-term
 health effects."

 Moreover, Solutia said it believed it has adequately identified and
 accounted for any of its potential liability related to environmental
 and legal issues.

 But investors traded the company's shares sharply lower on doubts over
 the assessment of its potential legal risk, analysts said.

 "The hard part is, how do you define what the potential liability is?"
 said William Young, an analyst at Credit Suisse First Boston.

 "They don't tell you what their insurance coverage is - they have
 self-insurance, and they don't tell you how much they have."

 Solutia announced in mid-December it would take fourth-quarter charges
 totaling $90 million to $100 million after taxes, including about $30
 million to cover environmental work and increase its self-insurance reserves.

 Still, Young said it was very difficult to estimate whether Solutia's
 financial preparations would in fact be adequate for any future liability based
 on its discharge of toxic chemicals.

 "Just because they say it, doesn't mean it's true," he said. "On the
 other hand, I don't think they're going out trying to mislead people."

 REUTERS NEWS SERVICE