Precision Castparts Corp

Origin of Relationship

Precision Castparts Corp (PCC) is the world's premier manufacturer of complex metal components for the aerospace, industrial, and energy markets. Brought to Warren Buffett's attention by Todd Combs, Berkshire Hathaway acquired PCC in 2016 for $32.1 billion—the largest acquisition in Berkshire's history.

Major Milestones

• 2015: Berkshire announces the acquisition of PCC for $32.1B, elevating Berkshire's top non-insurance group to the "Powerhouse Six."
• 2016: The acquisition officially closes. Buffett highlights CEO Mark Donegan as an extraordinary manager whose retention was a prerequisite for the deal.
• 2017: Makes a bolt-on acquisition by purchasing Wilhelm Schulz GmbH.
• 2018: Heavily praised at the Annual Meeting. Buffett and Munger cite PCC as a prime example of a business requiring significant capital expenditure but delivering exceptional long-term value, driven by Donegan's intense operational focus.
• 2020: Berkshire records an $11 billion non-cash impairment charge against PCC's carrying value, the single largest write-down in Berkshire's history. COVID-19 collapsed commercial aviation demand, cutting Boeing's production orders and therefore PCC's aerospace business. Buffett accepted personal responsibility for the overpayment, explicitly stating he paid too much in 2016 given the implicitly required earnings trajectory. PCC's defense business remained sound; the commercial aerospace and regional jet segments were severely impacted. Greg Abel confirmed PCC was having weekly calls with Boeing to track production adjustments. Recovery trajectory is tied directly to commercial aviation's return to pre-COVID passenger volumes.

Strategic Importance

PCC represents the culmination of Berkshire's transition from buying "businesses any idiot could run" to buying highly complex, capital-intensive industrial manufacturers that require extraordinary, specialized management. By acquiring PCC and leaving Donegan entirely alone to run it, Berkshire demonstrated the ultimate power of its "Buyer of Choice" model: offering a permanent home where elite industrial CEOs can focus 100% on operations without the distractions of public markets.

The 2020 write-down underscores Berkshire's intellectual honesty standard: impairments are taken when facts change, not deferred for the convenience of near-term earnings optics.

🔗 Connections

• People: Mark Donegan, Todd Combs, Greg Abel
• Concepts: Buyer of Choice, Bolt-on Acquisitions, Managerial Non-Intervention, Capital Allocation, Darwinian Record-keeping, Errors of Commission
• Peers: BNSF, Berkshire Hathaway Energy, Marmon Group, Lubrizol, ISCAR
• Sources: 2015 Letter, 2015 Meeting, 2016 Letter, 2016 Meeting, 2017 Letter, 2018 Meeting, 2020 Letter, 2020 Meeting