While Supply Chain Matters continues on its last week of summer break, news developments impacting various industry and global supply chains obviously continue. These past few days, we have noted three significant news items worthy of brief mention.
The first is a major acquisition involving a precision parts manufacturer. The second is China’s sudden de-valuation of its currency. Finally and perhaps with more news forthcoming, are the severe floods and storm damage caused by the typhoon that struck Taiwan and coastal China. A follow-on commentary will delve into the latter two developments.
Berkshire Hathaway’s announced acquisition of Precision Castparts, a prominent manufacturer supporting both aerospace and energy generation supply chains has implications for aerospace supply chains. The approximate $37.2 billion acquisition places Warren Buffet’s investment firm again center stage in investing in a well-respected manufacturer with strategic implications. In the case of Precision Castparts, nearly two-thirds of current revenues are derived from supply arrangements within the aerospace industry. These include precision components supplied to both Airbus and Boeing as well as turbine fans supplied to major aircraft engine producers.
Berkshire has had a track record of strategic investments involving broader supply chain implications. In 2010, the firm acquired the BNSF railroad in the United States amid initial speculation as to why. We all later discovered the why was the subsequent boom in share-oil discoveries across the Western United States which led to an explosive need for rail tank car transportation requirements to move crude oil to oil refineries located among the U,S. Gulf and East Coast ports. In this latest investment, speculation is ripe that Berkshire is now looking to leverage the multi-year order backlogs and production boom involving new commercial aircraft orders. Supply Chain Matters has featured multiple commentaries related to the industry’s opportunities as well as potential threats.
There is already Wall Street speculation involving further bolt-on acquisitions involving additional aerospace component suppliers.
Supply Chain Matters will provide more in-depth analysis of this development later this month. Suffice to note that we believe this news is noteworthy and bears additional observation.