Tags: PCC / Lubrizol / Marmon
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We provide an in-depth analysis of Berkshire Hathaway's industrial products manufacturing subsidiaries, highlighting their operations, contributions to the conglomerate's financial performance, and challenges faced. We discuss the historical context of Berkshire Hathaway's investment strategy and the future outlook for these companies in a rapidly evolving global economy.
The article is based on Berkshire Hathaway's 2022 Annual Report.
Introduction
Berkshire Hathaway has established itself as a powerful force in various sectors, including insurance, freight rail transportation, utilities, energy, manufacturing, retailing, and services. Berkshire Hathaway's subsidiaries range from well-known names like GEICO, BNSF, Berkshire Hathaway Energy, and McLane Company, to manufacturing powerhouses like Marmon Holdings, Lubrizol, and Precision Castparts Corp. (PCC).
This article delves into the realm of Berkshire Hathaway's manufacturing subsidiaries in the industrial products sector, focusing on Precision Castparts Corp., Lubrizol, Marmon, and other key players. We will explore their history, operations, competition, and contributions to Berkshire Hathaway's success, while also examining the employment landscape within these subsidiaries. This thorough analysis will provide shareholders of Berkshire Hathaway and other knowledgeable adults with an interesting, entertaining, and comprehensive look into the world of industrial products manufacturing under the Berkshire Hathaway umbrella.
Precision Castparts Corp.: A Leading Supplier of Metal Components
Precision Castparts Corp. (PCC) is a vital part of Berkshire Hathaway's manufacturing portfolio. Acquired in January 2016, PCC has its headquarters in Portland, Oregon, and employs over 30,000 people. As a major supplier of complex metal components and products, PCC serves the aerospace, power generation, and general industrial markets. The company operates more than 150 manufacturing facilities worldwide, making it a global leader in its field.
PCC is divided into three main segments: Investment Cast Products, Forged Products, and Airframe Products. With customers such as Boeing, General Electric, Airbus, and United Technologies, PCC is subject to governmental regulations and industry standards that ensure the safety and quality of its products.
Now, let's move on to another significant player in Berkshire Hathaway's manufacturing subsidiaries – Lubrizol Corporation.
Lubrizol Corporation: A Specialty Chemical Powerhouse
Lubrizol Corporation, headquartered in Wickliffe, Ohio, is a specialty chemical and performance materials company that has been part of Berkshire Hathaway's manufacturing portfolio since its acquisition. The company operates globally, boasting over 100 offices, laboratories, production facilities, and warehouses on six continents. Lubrizol is divided into two main business segments: Lubrizol Additives and Lubrizol Advanced Materials.
Lubrizol competes with major players in the specialty chemicals industry, including Infineum International, Chevron Oronite, and Afton Chemical Corporation. In 2022, no single customer accounted for more than 10% of Lubrizol's consolidated revenues, showcasing the company's diversified customer base. Lubrizol has faced challenges in recent years, such as the impact of COVID-19, supply chain disruptions, severe weather, and fires at certain facilities, but it continues to adapt and innovate in the face of adversity.
Marmon Holdings: A Diversified Industrial Conglomerate
Marmon Holdings is another crucial component of Berkshire Hathaway's manufacturing subsidiaries, operating as a diversified industrial conglomerate. Headquartered in Chicago, Illinois, Marmon operates more than 100 autonomous manufacturing and service businesses organized into 11 business groups. These groups include Foodservice Technologies, Water Technologies, Transportation Products, Retail Solutions, Metal Services, Electrical, Plumbing & Refrigeration, Industrial Products, Rail & Leasing, Crane Services, and Medical.
Marmon operates around 400 facilities in the U.S. and 18 other countries, exemplifying its global reach. The company is responsible for a combined fleet of approximately 120,000 railcars through Union Tank Car Company (UTLX) and Procor, while EXSIF Worldwide has a fleet of approximately 74,000 intermodal tank containers. Crane Services operates a fleet of around 1,100 cranes in North America and Australia.
Certain industries within Marmon's business groups, such as Rail and Medical, are subject to government regulation and oversight. This regulatory environment presents challenges for the company while ensuring safety and compliance in its operations.
Other Industrial Products Subsidiaries
In addition to the aforementioned manufacturing subsidiaries, Berkshire Hathaway also owns several other companies in the industrial products sector. These include:
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CTB International Corp.: Headquartered in Milford, Indiana, CTB designs, manufactures, and markets a range of agricultural systems and solutions. The company operates globally through a network of independent distributors and dealers, competing on factors like price, value, reputation, quality, design, and customer service. CTB primarily uses materials such as galvanized steel, steel wire, stainless steel, and polymer materials.
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LiquidPower Specialty Products Inc. (LSPI): As a global leader in drag reduction application (DRA) technology, LSPI is headquartered in Houston, Texas. The company treats over 50 million barrels of hydrocarbon liquids per day and operates in over 20 countries on five continents. LSPI is subject to environmental laws and regulations aimed at limiting manufacturing waste and emissions.
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The Scott Fetzer Companies: These companies manufacture, distribute, service, and finance various products for residential, industrial, and institutional use. This group includes the manufacturing subsidiaries of Alleghany, which were acquired in October 2022. Alleghany businesses focus on structural steel fabrication products through W&W|AFCO Steel, while other smaller manufacturers primarily became part of Marmon.
Employment in Berkshire Hathaway's Industrial Products Sector
A significant number of employees work in Berkshire Hathaway's industrial products manufacturing subsidiaries. As of the latest data available, the following number of employees were reported for each company:
| Subsidiary | Employees |
|---|---|
| Alleghany (manufacturing) | 6,417 |
| CTB | 2,637 |
| Lubrizol | 8,292 |
| Marmon | 24,175 |
| Precision Castparts | 23,164 |
| Scott Fetzer Companies | 1,765 |
The combined total employment across these industrial products subsidiaries is a bit more than 64,000. The manufacturing arm of Berkshire exhibits more than 190,000 employees. This vast workforce contributes to the continued growth and success of Berkshire Hathaway's manufacturing endeavors. The total Berkshire workforce is more than 382,000 as end of 2022!
Historic and Economic Context
In analyzing the industrial products subsidiaries of Berkshire Hathaway, it is essential to consider the historic and economic context in which they operate. Since the takeover of Berkshire Hathaway by Warren Buffett, the company has consistently sought to invest in businesses that demonstrate strong fundamentals, sound management, and potential for growth.
Berkshire Hathaway's acquisition strategy has largely centered around companies with sustainable competitive advantages, often referred to as "economic moats." Many of the industrial products subsidiaries possess such moats, whether it be through proprietary technology, strong brand recognition, or economies of scale.
As global economic conditions evolve and industries continue to face challenges such as supply chain disruptions, Berkshire Hathaway's industrial products subsidiaries will need to remain agile and innovative. Their ability to adapt will play a crucial role in the conglomerate's future success and shareholder value creation.
Conclusion
In summary, Berkshire Hathaway's industrial products manufacturing subsidiaries, including Precision Castparts Corp., Lubrizol, Marmon Holdings, and others, form a significant part of the conglomerate's diverse portfolio. These companies operate across various industries and geographical markets, offering products and services that cater to a wide range of customers.
Berkshire Hathaway's focus on investing in companies with strong competitive advantages has led to the success of these subsidiaries and, in turn, the overall growth of the conglomerate. As global economic conditions continue to change, the adaptability and innovation of these companies will be key to maintaining their competitive edge and contributing to Berkshire Hathaway's ongoing success.
