Berkshire Hathaway Inc.’s Fruit of the Loom and carpet maker Shaw Industries reported the biggest job cuts among the parent company’s units in 2009 as the recession weighed on results.

Fruit of the Loom, a maker of clothing, cut 7,944 workers last year, or 23 percent of staff, and Shaw shed 3,482 jobs, or 12 percent, according to Berkshire’s 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’s purchase last month of railroad Burlington Northern Santa Fe Corp.
“Berkshire 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,” said Guy Spier, a principal at Aquamarine Funds LLC. “In 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.”
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’s units tied to residential and commercial construction, including Shaw, which “continue to bump along the bottom,” Buffett said in his letter to shareholders.
“To the extent we’ve got a consumer spending-driven economy and unemployment is not only high, but it is likely to remain high for quite a while, it’s appropriate from a business standpoint that the level of expense has to be much lower than before the recession started,” said Meyer Shields, an analyst at Stifel Nicolaus & Co.
Profit at Shaw, the world’s largest carpet manufacturer, fell 30 percent to $144 million in 2009, Berkshire said. “We are not seeing a lot of construction or refurbishment,” Shields said of the Dalton, Georgia-based company.
Earnings from Berkshire’s manufacturing segment that includes Fruit of the Loom fell by more than half to $814 million in 2009.
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’s operations include leasing railroad tank cars and making wire and cable products. Its profit fell 6.4 percent to $686 million in 2009.
Buffett didn’t 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’t immediately respond to a request for comment. Geico Grows
Geico Corp., the third-largest auto insurer in the U.S., was among Berkshire’s companies adding to staff last year. The Chevy Chase, Maryland-based auto insurer increased its workforce by 5.8 percent, adding 1,300 jobs.
“Geico is a low-cost provider,” Shields said. “They have got enough scale and enough control over expenses that they are going to grow particularly well in a weak economy.”
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.
Berkshire’s 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.
(Source: Bloomberg)