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Precision Castparts Downsizing, Berkshire Takes the Loss

Aug. 18, 2020
Warren Buffet's portfolio business took a $9.8-billion writedown on its aerospace-focused manufacturing group, which shed 30% of its workforce during the first half of 2020.

Warren Buffet's Berkshire Hathaway Inc. took a $9.8-billion writedown on its Precision Castparts Inc. holding, an aerospace components manufacturer that Berkshire bought for $32.1 billion in 2016. The investment casting, forging, and fasteners manufacturing business also reduced total employment by 30%, or about 10,000, during the first half of 2020.

The conglomerate's 2Q report showed Precision Castparts with a pre-tax loss of $78 million and a 30% decline in revenue. The manufacturer is now undertaking an “aggressive restructuring” of its operations, the details of which were not announced.

Other Berkshire Hathaway holdings also suffered significant losses during second-quarter 2020, including BNSF, Kraft Heinz Co., Occidental Petroleum Corp. Even so, the report showed Berkshire's total net earnings during the second quarter were $26.3 billion. Its profitable holdings for the quarter included Apple Inc. and Geico.

The group attributed its devaluation of Precision Castparts to the substantial disruption to the commercial aviation sector resulting from the COVID-19 pandemic, which has cut into airlines' schedules, reduced aircraft service requirements, and prompted cancellation for hundreds of new-aircraft orders previously booked with OEMs.

The same conditions have been cited recently by Howmet Aerospace for its elimination of more than 750 positions during Q2.

Portland, OR-based Precision Castparts has three divisions: Forged Products, including Wyman-Gordon, PCC Energy Group, Titanium Metals Corp. (TIMET), and Special Metals Corp. (SMC); Investment Cast Products, including PCC Structurals and PCC Airfoils; and Airframe Products, including PCC Fasteners and PCC Aerostructures. While it is heavily focused on aerospace manufacturing, it also supplies energy and industrial markets.