ABB, the Swiss engineering firm, has announced a $1.2bn (�745m) package aimed at settling asbestos liabilities arising from its Combustion Engineering unit.

The deal is still to be voted on by claimants but would lift a huge cloud from ABB's future and shield it from any future, and potentially crippling, claims.

The company also announced a bankruptcy plan for the Combustion Engineering unit, which it bought in 1990 but which had used asbestos in the production of boilers.

ABB has been struggling to hold onto its position as Europe's biggest engineering group amid spiralling debt and profit warnings.

'Closure'

ABB finance director Peter Voser said the deal was a crucial step towards "full closure" of the asbestos issue, which has cast a dark shadow over the group's future.

The $1.2bn liabilities would cover current and future claims for all ABB units.

Workers at the US Combustion Engineering unit have already received compensation but a number of other plaintiffs are claiming for coming into contact with the unit's products.

Asbestos particles can cause a lethal illness that takes up to 30 years to manifest itself.

Still not over

Analysts said the deal was at the lower end of expectations but would still result in significant losses on ABB's balance sheet.

They also warned that it could still not mean the end of the issue, as it depends on court approval as well as that of the 111,000 plaintiffs.

"It is a good step but it is not over yet," said Andreas Riedel, an analyst at Sarasin.

ABB sold Combustion Engineering's operational assets to French group Alstom in 2000, but is still responsible for the claims.

It has now filed for Chapter 11 reorganisation of the US unit and said it was on course to file a bankruptcy case before the end of February.