If you want to see how a billionaire can prosper at the expense of blue-collar workers’ jobs, take a look at Warren Buffett. Yes, Warren Buffett — the widely admired, plain-spoken, venerated guy who wants taxes raised on people such as himself and who has led a campaign to get billionaires to leave at least half their assets to charity.
Sure, it sounds unbelievable that someone who sounds as saintly as Buffett is profiting directly from blue-collar misery. But he is. You can see that if you do what I did and link two recent announcements made a day apart.
On Nov. 5, the Kraft Heinz food conglomerate, which Buffett’s backing helped create five months ago, said it was cutting 2,600 Kraft jobs in North America and closing seven factories.
The following day, Buffett’s company, Berkshire Hathaway, reported its biggest-ever quarterly profit. Close to half of it — $4.4 billion of $9.4 billion — came from an accounting gain on Berkshire’s stake in Kraft Heinz, which it financed heavily and in which it is the largest single shareholder.
(Berkshire’s pre-tax gain on Kraft Heinz, a more telling number, was a whopping $6.8 billion. But for reasons I won’t bore you with, Berkshire isn’t paying any tax on the non-cash gain, which shows up on its balance sheet and income statement but not on its corporate tax return.)
I was struck by the confluence of the announcements. One day, the slash-and-burn artists at 3G Capital, whom Buffett has backed with $29.5 billion Berkshire bucks (by my count), whack 2,600 jobs. That’s the kind of thing that they’re known for and that Buffett had to have known they would do if he helped them get control of Kraft.
The next day, Buffett’s company (whose shareholders include me) announces a multibillion-dollar profit because 3G’s cuts have boosted the market value of Kraft and Heinz, whose takeover Buffett helped finance in 2013.
I wanted to ask Buffett, who according to Bloomberg News is the world’s third-richest man, about Berkshire profiting while blue-collar jobs are vaporized. Alas, he wouldn’t talk to me.
Buffett has often criticized — rightly, in my opinion — the “private equity” model of taking over companies and gutting them to quickly raise profits. 3G Capital has done that time and again. Its U.S. deals include Anheuser-Busch InBev, done before hooking up with Buffett, in which 3G gutted Anheuser-Busch. But Buffett was involved in three deals in which 3G gutted North American firms: the takeover of Heinz in 2013, 3G-run Burger King’s acquisition of Tim Hortons in 2014, and this year’s Heinz takeover of Kraft.
Not only has Buffett provided money for these deals, but political cover, as well. When U.S.-based Burger King took over Canada-based Tim Hortons and did a corporate desertion by becoming a subsidiary of a Canadian company, Buffett said that was perfectly fine.
Buffett, with whom I had a friendly relationship dating back decades, didn’t like the way that I wrote about the Burger King deal and has refused to talk to me since.
Based on my years of watching him, I’m sure that if Buffett were willing to talk with me, he’d say that 3G isn’t like the private-equity players because those firms sell their gutted properties as quickly as they can, while 3G plans to hold its properties indefinitely. But if you happen to be one of the thousands of 3G job-cut victims, that’s a distinction without a difference.
Why is Buffett backing the job-slashers at 3G? It’s pretty straightforward: It’s very profitable for him. Although Buffett has a social conscience, when he does business, he’s focused on making money, not on doing good.
Should you happen to get between him and something he wants when he’s in profit-seeking mode, there will likely be a hole in you the size of Warren Edward Buffett. That’s the lesson that 2,600 Kraft workers learned earlier this month.
That’s also the lesson that thousands of employees at Coca-Cola, in which Berkshire is the biggest shareholder, will learn if he ever unleashes 3G on Coke. I hope that doesn’t happen — but I won’t be surprised if it does.