Warren Buffett: cutting jobs is standard capitalist formula

Warren Buffett has defended the Brazilian buyout house with which he attempted to take over Unilever, by saying 3G was only following a “standard capitalist” stance to doing business by slashing costs and cutting staff.

Buffett’s investment group Berkshire Hathaway and 3G, backed by the Brazilian billionaire Jorge Lemann, own 51% of Kraft Heinz, which made a £115bn approach to household groups company Unilever in February.

But the offer for the Anglo-Dutch maker of Marmite, Flora and Ben & Jerry’s was abandoned only 48 hours later – when Kraft Heinz gave up on its chances of pulling off the second-largest corporate deal in history.

The Brazilian buyout house is well known for its approach to cutting costs but the 86-year-old Buffett told CNBC that 3G was just trying to make the businesses it owned more efficient.

“They have followed the standard capitalist formula ... of trying to do the same business with fewer people,” Buffett said. “People live better when there is more output per capita.”

Often dubbed the “Sage of Omaha” because of his ability to make lucrative investments, Buffett said “it’s a defect of mine” that he was not more focused on efficiency in his own businesses. He also acknowledged, though, that cutting jobs can be a “painful process”.

He worked with 3G buying Heinz and then merged the ketchup owner with Kraft Foods in 2015. At the time, the marriage of the two companies raised fears for the workforce because of the ruthless approach 3G took when it controlled Heinz – replacing 11 of the 12 top bosses and cutting thousands of jobs.

Buffett was speaking to CNBC after his annual meeting at the weekend of shareholders in Berkshire Hathway, which owns stakes in a wide range of companies including Coca-Cola, IBM, Apple and Wells Fargo.

At the meeting in Omaha, to which thousands of Berkshire Hathway’s shareholders flock each year to what is sometimes dubbed “the Woodstock of capitalism”, he had said “it is absolutely essential to America that we become more productive”.

His remarks on 3G coincided with a pledge by the Brazilian group to avoid making hostile bids on target companies. “We don’t need to go anywhere that we are not welcome by shareholders in order to do a deal,” Alex Behring, 3G’s co-founder, told the Financial Times.

He said the approach to Unilever had intended to be friendly. “Our intention was to proceed on a friendly basis only. As it became clear that Unilever did not wish to pursue a transaction we withdrew the offer.”

Original Article
Source: theguardian.com
Author: Jill Treanor