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UPDATE 2-Auto parts retailers slump on asbestos jitters

(Recasts first sentence, adds analyst comments and other details, updates share prices, changes dateline previously MEMPHIS)

By Susan Kelly

CHICAGO, Nov 26 (Reuters) - Asbestos liability concerns pressured shares of auto parts retailers on Tuesday after the largest U.S. chain, AutoZone Inc. , said it was named as a defendant in lawsuits involving the sale of brake parts.

Memphis, Tennessee-based AutoZone said it has never manufactured or installed brake products and does not believe it has material liability in the cases. An AutoZone spokesman declined to comment further.

The company, which sells vehicle parts, chemicals and accessories through more than 3,000 stores, said it will vigorously defend each case.

Shares of AutoZone fell by 2 percent, but stocks of two chains that install auto parts in their repair bays -- Pep Boys - Manny, Moe & Jack and Monro Muffler Brake Inc. -- suffered bigger hits.

Pep Boys stock fell 79 cents, or 6.8 percent, to $10.76 on the New York Stock Exchange, while Monro Muffler was off $1.25, or 7.2 percent, at $16.20 on the Nasdaq. Officials for Pep Boys and Monro Muffler were not immediately available.

Bret Jordan, an analyst with Advest Inc., said investors may be worried that chains that perform repairs could face greater liability than those that only sell brakes.

Jordan, whose firm does not have a banking relationship with the parts retailers, said the asbestos issue is not new to the sector and was unlikely to result in large damages against the retail chains.

"The real liability is with the manufacturers," he said.

Hundreds of U.S. companies, from the Big Three U.S. automakers to Halliburton Co. and Honeywell International Inc. , are facing lawsuits from claimants exposed to asbestos, a fire-resistant material than can cause a form of lung cancer and other fatal diseases. Asbestos was once used as a component of brake products.

Auto parts supplier Federal-Mogul Corp. was driven into bankruptcy in October 2001 after the number of asbestos-related claims against the company soared.

AutoZone said it was named as a defendant, along with numerous others, in an "insignificant" number of lawsuits.

AutoZone's stock fell by about 2 percent to $81.44 on Tuesday afternoon on the New York Stock Exchange. The shares are up 12 percent for the year so far.

"The stock had a huge runup over the last 70 weeks and investors feel there is vulnerability in the stock," said Paul Foster, a strategist at Mercury Trading Corp., an options specialist firm, who said trading in AutoZone options has been fairly active.

AutoZone's statement followed Advance Auto Parts Inc.'s disclosure last week that it was named as a defendant in several lawsuits alleging injury from exposure to asbestos-containing products such as brake and clutch parts and roofing materials.

Advance Auto said in a regulatory filing last week that damages sought in some of the lawsuits were "substantial." It also said it had valid defenses against the claims, and most would be at least partially covered by insurance, but it cautioned that an adverse verdict or a substantial increase in the number of claims could hurt operating results.

Shares of Advance Auto fell 41 cents to $50.05 on the NYSE. (Additional reporting by Doris Frankel in Chicago)