Mark Donegan

Under CEO Mark Donegan, PCC has become the world’s premier supplier of aerospace components (most of them destined to be original equipment, though spares are important to the company as well). Mark’s accomplishments remind me of the magic regularly performed by Jacob Harpaz at IMC, our remarkable Israeli manufacturer of cutting tools. The two men transform very ordinary raw materials into extraordinary products that are used by major manufacturers worldwide. Each is the da Vinci of his craft.

JONATHAN BRANDT: My first question is about Precision Castparts. Besides your confidence in its talented CEO Mark Donegan, what in particular do you like about their business that gave you the confidence to pay historically high multiple? Are there ways Precision can be even more successful as, essentially, a private company? For instance, are there long-term investments to support client programs or acquisitions that Precision can make now that they couldn’t realistically have done as a publicly traded entity? WARREN BUFFETT: Yeah, we completed the acquisition of Precision Castparts at the end of January this year. We agreed — we made the deal last August. And you covered the most important asset in your question. Mark Donegan, who runs Precision Castparts, is an extraordinary manager. I mean we’ve seen very — and Charlie and I’ve seen a lot of managers over the years — and I would almost rank Mark as one of a kind. I mean he is doing extremely important work, in terms of making — primarily making — aircraft parts. I would say that there’s certainly no disadvantages to him to be working as a — and for that company to be a subsidiary of Berkshire and not be a public company. And I think he would say, and I think Charlie and I would agree with him, that over time, there could be some significant advantages. For one thing, he can spend 100 percent of his time now on figuring out better things to do with aircraft engines.

And we say, “Well, we’d be glad to help you out, but we’d like about a five-year contract, if we’re going to do it because we’re just not going to make up for these other guys’ shortfalls periodically.” But that sort of thing has a very long lead time. The business is a very good business. One thing you will see their earnings charged with is about $400 million - little over $400 million a year - of intangible - nondeductible in that case amortization of goodwill, which is really - is not an economic cost in my view. We have a significant amount of that through Berkshire, but by far, the largest amount is related to the Precision acquisition. So whatever you see, you can add about 400 million that in my view is not an economic expense, but the accountants would argue otherwise. But it’s our money, so we’ll take my view. The - (Laughter) Mark Donegan, who runs that operation, is incredible, and he has been not only - he’s a fabulous manager. I wouldn’t have bought it without him in charge.

In purchasing PCC, Berkshire bought a fine company — the best in its business. Mark Donegan, PCC’s CEO, is a passionate manager who consistently pours the same energy into the business that he did before we purchased it. We are lucky to have him running things.