By Jamie McGee and Joel Schectman <\/p>\n
March 2 (Bloomberg) — Berkshire Hathaway Inc.\u2019s Fruit of the Loom and carpet maker Shaw Industries reported the biggest job cuts among the parent company\u2019s units in 2009 as the recession weighed on results.<\/p>\n
Fruit of the Loom, a maker of underwear and other clothing, cut 7,944 workers last year, or 23 percent of staff, and Shaw shed 3,482 jobs, or 12 percent, according to Berkshire\u2019s Feb. 27 annual report. The Omaha, Nebraska-based company, run by billionaire Warren Buffett, said its overall workforce fell last year by about 9.7 percent, or 23,970 jobs. That excludes staff gained through Berkshire\u2019s purchase last month of railroad Burlington Northern Santa Fe Corp.<\/p>\n
\u201cBerkshire Hathaway has not been able to repeal the laws of economics, and the laws of economics are that when demand is down you have to reduce the costs,\u201d said Guy Spier, a principal at Aquamarine Funds LLC. \u201cIn a period of unusually low demand you are going to have to try to reduce all non-essential staff. We are seeing that at Berkshire businesses.\u201d<\/p>\n
The U.S. unemployment rate climbed to a 26-year high of 10.1 percent and construction spending fell in 2009. The worst housing decline since the Great Depression pressured Buffett\u2019s units tied to residential and commercial construction, including Shaw, which \u201ccontinue to bump along the bottom,\u201d Buffett said in his letter to shareholders.<\/p>\n
\u201cTo the extent we\u2019ve got a consumer spending-driven economy and unemployment is not only high, but it is likely to remain high for quite a while, it\u2019s appropriate from a business standpoint that the level of expense has to be much lower than before the recession started,\u201d said Meyer Shields, an analyst at Stifel Nicolaus & Co.<\/p>\n
\u2018Under Pressure\u2019<\/p>\n
Profit at Shaw, the world\u2019s largest carpet manufacturer, fell 30 percent to $144 million in 2009, Berkshire said.<\/p>\n
\u201cWe are not seeing a lot of construction or refurbishment,\u201d Shields said of the Dalton, Georgia-based company. \u201cThose segments are going to remain under pressure for a while.\u201d<\/p>\n
Earnings from Berkshire\u2019s manufacturing segment that includes Fruit of the Loom fell by more than half to $814 million in 2009.<\/p>\n
Marmon Group, the collection of more than 100 businesses purchased by Berkshire from the Pritzker family, reduced staff by 14 percent, cutting 2,590 workers. The unit\u2019s operations include leasing railroad tank cars and making wire and cable products. Its profit fell 6.4 percent to $686 million in 2009.<\/p>\n
Buffett didn\u2019t reply to a request for comment left with his assistant, Carrie Kizer. John Shivel, a spokesman for Fruit of the Loom, and David Dees of Marmon declined to comment. Susan Rich, a Shaw spokeswoman, didn\u2019t immediately respond to a request for comment.<\/p>\n
Geico Grows<\/p>\n
Geico Corp., the third-largest auto insurer in the U.S., was among Berkshire\u2019s companies adding to staff last year. The Chevy Chase, Maryland-based auto insurer increased its workforce by 5.8 percent, adding 1,300 jobs.<\/p>\n
\u201cGeico is a low-cost provider,\u201d Shields said. \u201cThey have got enough scale and enough control over expenses that they are going to grow particularly well in a weak economy.\u201d<\/p>\n
Berkshire reported its overall job cuts earlier last month without providing a breakdown for individual units. The total job count at Berkshire units is 257,113 including 35,000 railroad staff from the Burlington acquisition, according to the Feb. 27 filing.<\/p>\n
Berkshire\u2019s fourth-quarter net income climbed to $3.06 billion, or $1,969 a share, from $117 million or $76 in the year-earlier period. The company had net income of $8.06 billion for all of 2009, a 61 percent gain from the year before.<\/p>\n
Berkshire\u2019s stock has gained 56 percent in the past year as the value of the firm\u2019s top stocks rose. The Class A shares rose 2.5 percent to $122,801 yesterday in New York Stock Exchange composite trading.<\/p>\n
–Editors: Dan Reichl, Dan Kraut.<\/p>\n
-0- Mar\/02\/2010 05:00 GMT<\/p>\n
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