PORTLAND — Precision Castparts, one of Oregon’s largest companies, eliminated 10,000 jobs worldwide in the first half of the year as orders for its aerospace components evaporated.
This year’s job cuts represent about a third of Precision Castparts’ global workforce, according to Berkshire Hathaway, Precision Castparts’ parent company.
In June, Precision Castparts said it had laid off 717 workers in Portland and Clackamas County due to the coronavirus outbreak. It’s not clear how many employees remain in Oregon.
Portland-based Precision Castparts makes heavy metal components for airplane manufacturers, energy producers and other industrial companies. Berkshire Hathaway, Warren Buffett’s investment firm, paid $37 billion for Precision Castparts in 2016.
In its quarterly report issued Saturday, and a detailed regulatory filing Monday, Berkshire Hathaway said that it wrote down the value of Precision Castparts (PCC) by $9.8 billion.
“The COVID-19 pandemic produced material declines in commercial air travel during the second quarter,” Berkshire Hathaway wrote. “Airlines responded by reducing and/or cancelling aircraft orders, which is resulting in significant reductions in build rates by aircraft manufacturers and significant inventory reduction initiatives being implemented by PCC’s customers.”
The writedown is an acknowledgement that Berkshire Hathaway paid too much for the Portland company, and that Precision Castparts has not been operating well under the new ownership, CFRA research analyst Cathy Seifert told Reuters.
“It’s a recognition of what the market has long believed,” she said, “that the purchase price was rich, and the integration not as smooth as many would have hoped.”
Boeing’s sustained troubles with the 737 MAX, which have grounded those aircraft for more than a year, further damaged Precision Castparts’ performance last quarter, according to Berkshire Hathaway.
Precision Castparts’ revenues fell by one-third in the second quarter, to $1.8 billion. And the company recorded a pre-tax loss of $78 million last quarter, compared to a $481 million profit during the same period of 2019.
Precision Castparts took a $250 million charge last quarter to cover restructuring costs and write down the value of inventory and fixed assets. Berkshire Hathaway said it expects the Portland company’s profits will be hurt throughout 2020 due to “inefficiencies” caused by declining aircraft production.
Precision Castparts had been struggling even before the pandemic hit due to unspecified production problems, and its revenue had grown little since the Portland company’s 2016 sale.
Berkshire Hathaway warned Monday that Precision Castparts’ performance may suffer indefinitely due to the uncertain outlook for the air travel sector.
