By Erik Holm
March 3 (Bloomberg) -- Billionaire investor Warren Buffett’s Berkshire Hathaway Inc., which recorded its worst financial results ever in 2008, will cut manufacturing jobs and close facilities as the recession deepens.
Berkshire reduced the number of employees at Clayton Homes Inc., which builds manufactured housing, by 16 percent last year to 11,998. Shaw Industries, the largest U.S. carpet-maker, cut 6.2 percent of its workforce and employed 28,974 at yearend, Omaha, Nebraska-based Berkshire said in its annual report.
“Berkshire’s operating companies have taken and will continue to take cost reduction actions in response to the current economic situation, including curtailing production, reducing capital expenditures, closing facilities and reducing employment to partially compensate for the declines in demand,” the firm said in a regulatory filing yesterday.
Berkshire joins companies, including General Motors Corp. and Macy’s Inc., in dismissing workers as the worst financial crisis in seven decades causes manufacturing, real estate and service industries to slow. President Barack Obama, who has reached out to Buffett for advice on economic matters, has said his stimulus plan will save or create 3.5 million jobs, and the Federal Reserve is flooding markets with liquidity to revive lending and restore growth.
The U.S. unemployment rate was 7.6 percent in January, its highest since 1992, the Labor Department said. A survey by Bloomberg News shows economists predict the figure will be 7.9 percent when February figures are announced March 6.
Bricks, Paint
Berkshire, which lists more than 70 operating businesses in its latest annual report to shareholders, also cut jobs at brickmaker Acme Building Brands, paint manufacturer Benjamin Moore, R.C. Willey Home Furnishings and Forest River Inc., which makes recreational vehicles.
“Buffett can’t be Social Security,” said Justin Fuller, a partner at Midway Capital Research & Management who runs the buffettologist.com Web site. “The demand for some of those products fell way off. The RV business is probably at a complete standstill.”
Buffett, who serves as Berkshire’s chairman and chief executive, said in his annual letter to shareholders Feb. 28 that the economy will be “in shambles” this year, and perhaps longer, before recovering from the reckless lending that caused the worst “freefall” he’s ever seen in the financial system.
Berkshire had 246,083 employees at yearend, an increase of 5.7 percent over 12 months, resulting from the firm’s $4.5 billion acquisition of Marmon Holdings Inc., the Pritzker family’s collection of 125 companies. Excluding Marmon’s 18,000 workers, Berkshire’s overall headcount fell 2 percent.
Granting Autonomy
“Buffett gives a lot of autonomy to his managers, so he may not be the one who’s making those decisions,” Fuller said. Buffett didn’t respond to a request for comment left with spokeswoman Carrie Kizer.
Berkshire’s fourth-quarter net income fell 96 percent to $117 million, the firm said Feb. 28. Book value per share, a measure of assets minus liabilities, slipped 9.6 percent for all of 2008, the worst performance under Buffett’s watch, on the declining value of derivatives and the stock portfolio.
The number of employees at insurance subsidiaries slipped less than 1 percent to 28,188. MidAmerican Energy Co. employed 3,150 on Dec. 31, which is six fewer than a year earlier.
“We are fortunate that Berkshire’s two most important businesses - our insurance and utility groups - produce earnings that are not correlated to those of the general economy,” Buffett wrote. “Both businesses delivered outstanding results in 2008 and have excellent prospects.”
‘Hungry Mosquitoes’
Buffett told shareholders that he and Geico CEO Tony Nicely feel like “two hungry mosquitoes in a nudist camp” because of opportunities to increase sales at the unit. The insurer set a monthly sales record in January, he said.
In his letter to shareholders, Buffett predicted that the economy and stocks will rebound, and the best days for the U.S. are ahead.
“Though the path has not been smooth, our economic system has worked extraordinarily well over time,” Buffett wrote. “It has unleashed human potential as no other system has, and it will continue to do so.”
Buffett, ranked the richest man in America by Forbes magazine in October, transformed Berkshire from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate jet leasing. The Berkshire holding company employed 19 people at yearend, a figure that was unchanged from a year earlier.
To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.
Posts
No comments:
Post a Comment