Berkshire's Payroll Rises by 17,000 as Buffett Extends Reach

Tuesday, 29 Jan 2013 05:00 PM

 

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Berkshire Hathaway Inc. added about 17,000 employees since the end of 2011 as Chairman and Chief Executive Officer Warren Buffett expanded manufacturing, media, insurance and retail operations.

Berkshire and its more than 70 operating subsidiaries have about 288,000 workers, the Omaha, Nebraska-based firm said Monday in a regulatory filing. That’s 6.3 percent higher than the 270,858 disclosed in the 2011 annual report.

Buffett’s willingness to invest in a variety of industries has reduced Berkshire’s reliance on insurance operations and made the firm one of the largest U.S. employers. Companies that primarily sell insurance, such as Travelers Cos. and Chubb Corp., have trimmed staff in the five years through the end of 2011 as they returned capital to shareholders. Berkshire pays no dividend and went decades without buying back shares.

Buffett has become more focused on “hard assets and older- fashioned business,” such as railroads and manufacturing, said Meyer Shields, an analyst at Stifel Nicolaus & Co.

Berkshire’s workforce has soared from about 147,000 a decade ago as Buffett, 82, has made some of his largest acquisitions, including the 2010 purchase of railroad Burlington Northern Santa Fe for $26.5 billion and 2011’s addition of chemical maker Lubrizol Corp. for about $9 billion.

“When you’re buying a company with a market value in the billions or tens of billions, then you’re going to get significant headcount associated with that,” Shields said.

Buffett also has empowered deputies to make deals to expand their businesses. Berkshire managers including Lubrizol CEO James Hambrick and Victor Mancinelli, who leads farm-product unit CTB Inc., announced deals last year to expand operations in the U.S. and Europe. Such “bolt-on” purchases cost Berkshire about $1.8 billion in the nine months ended Sept. 30.

Party Supplies

Buffett also acquired more than 60 newspapers including the Richmond Times-Dispatch and bought Oriental Trading Co., the seller of party supplies. The billionaire has said he prefers buying companies outright to investing in their stock.

The expansion means Buffett employs a growing share of U.S. workers. There were about 134 million U.S. employees on non-farm payrolls at the end of last year, compared with 130.2 million 10 years earlier, according to Labor Department data.

Job growth in the U.S. economy was 1.4 percent last year, matching the gain of 2011. It was the best back-to-back reading since 2005-2006.

Berkshire shares have advanced 9.3 percent this year in New York trading, beating the 5.7 percent gain in the Standard & Poor’s 500 Index. Buffett’s company rallied 17 percent last year while the index climbed 13 percent.

Real Estate

A rebounding U.S. residential real estate market has helped Berkshire’s subsidiaries that make carpet, bricks, insulation and other building products. Housing starts climbed to a 954,000 annual pace in December, the highest level since 2008, Commerce Department figures show.

Buffett cut the workforce in 2009 by more than 20,000 as manufacturing and retail operations slumped amid a U.S. recession.

“We will be adding people at some point, but we won’t do it until we see the demand come back,” Buffett said in a 2009 interview conducted by the CEO of Business Wire, the Berkshire unit that posts corporate press releases. “It’ll be a little slow because we don’t want to go through what we did before. Although, I will guarantee you that three years from now, our brick companies, our carpet company, and our insulation company will all be employing far more people than now.”

The latest disclosure, in a filing tied to debt issuance, didn’t break down employment by unit. The 2011 annual report, issued February of last year, showed 39,000 workers at the railroad, more than 27,000 at Fruit of the Loom, about 26,000 at auto-insurer Geico and 22,650 at carpet maker Shaw.

Geico said in December that it was planning to hire more than 4,000 new employees in 2013 after expanding its payroll by almost 20 percent in the last five years.

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