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Warren Buffett’s $10 billion mistake: Precision Castparts



(Reuters)-Warren Buffett also makes mistakes.

The 90-year-old billionaire admitted on Saturday that when his Berkshire Hathaway Inc (Berkshire Hathaway Inc) spent $32.1 billion in 2016 to acquire Precision Castparts Corp, a manufacturer of aircraft and industrial parts, he “Paid too much”, this is its biggest acquisition.

Berkshire wrote off Precision’s value of $9.8 billion in August last year because the coronavirus pandemic reduced demand for air travel and products from Portland, Oregon.

Buffett said in his annual letter to investors that he had acquired “an excellent company-the best company in the industry”

;, and Berkshire Hathaway was lucky to have Precision CEO Mark Dorngen (Mark Donegan) Remain in charge.

But Buffett said he was “too optimistic about PCC’s normalized profit potential.”

Berkshire Hathaway said that by 2020, Precision has reduced 13,400 jobs, accounting for 40% of its total workforce, and has only recently begun to increase its profit margins.

Buffett wrote: “I was wrong in judging the average future return, so I was wrong in calculating the appropriate price to pay for the business.” “PCC is far from my first mistake. But. This is a big one.”

Two years ago, Buffett admitted that Berkshire and private equity firm 3G Capital merged with HJ Heinz Co in 2015 to form Kraft HeinzCo.

Buffett said in his 2008 annual letter that his 1993 acquisition of Dexter Shoe was the “worst deal” ever. He said he had acquired a “valueless company” and used Berkshire stocks, instead of cash, provided funding for the acquisition, compounding his mistakes.

He wrote: “I will make more mistakes in the future-you can bet.”

Berkshire long-term investor Tom Russo welcomes Buffett’s frankness.

He said: “I appreciate Warren’s personal responsibility for Precision Castparts.” “Very few managers are willing to take responsibility rather than blame themselves.”

Reporting by Jonathan Stempel in New York; Editing by Marguerita Choy


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