Month: July 2022

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Lessons From Warren Buffett

Lessons From Warren Buffett: Which Annual Reports Are Worth Reading?

There are so many public companies, each producing an annual report, that it can overwhelming as to where to start if you want read annual reports. Warren Buffett uses a very simple approach, he starts with reading the reports of companies that he understands and avoids the rest. How valuable is an annual report? Buffett believes it has all you need to know in order to decide whether to buy a stock. He cites his purchase of Coca-Cola stock as a prime example.

“We start by looking at the reports of companies that we think we can understand,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “And then we see from that report whether the management is telling us about the things that we would want to know about if we owned a hundred percent of the company. . . . For example, I would say that the Coca-Cola annual report over the last good many years is an enormously informative document. I mean, I can’t think of any way if I’d have a conversation with Roberto Goizueta, or now Doug Ivester, and they were telling me about the business, they would not be telling me more than I get from reading that annual report. We bought that stock based on an annual report. We did not buy it based on any conversation of any kind with the top management of Coca-Cola before we bought our interest. We simply bought it based on reading the annual report, plus our knowledge of how the business worked.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Insurance

Berkshire Hathaway’s Trident Mortgage Company To Pay $22 Million for Deliberate Discrimination Against Minority Families

(BRK.A), (BRK.B)

The Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) took action to end Berkshire Hathaway’s Trident Mortgage Company’s intentional discrimination against families living in majority-minority neighborhoods in the greater Philadelphia area.

The CFPB and DOJ allege Trident redlined majority-minority neighborhoods through its marketing, sales, and hiring actions. Specifically, Trident’s actions discouraged prospective applicants from applying for mortgage and refinance loans in the greater Philadelphia area’s majority-minority neighborhoods. If entered by the court, the settlement, among other things, would require Trident to pay a $4 million civil penalty to the CFPB to use for the CFPB’s victims’ relief fund. The Attorneys General of Pennsylvania, New Jersey, and Delaware also finalized concurrent actions.

“Trident illegally redlined neighborhoods in the Philadelphia area, excluding qualified families seeking to own a home,” said CFPB Director Rohit Chopra. “With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach.”

“Last fall, I announced the Department’s Combatting Redlining Initiative and promised that we would mobilize resources to make fair access to credit a reality in underserved neighborhoods across our country,” said Attorney General Merrick B. Garland. “As demonstrated by today’s historic announcement, we are increasing our coordination with federal financial regulatory agencies and state Attorneys General to combat the modern-day redlining that has unlawfully plagued communities of color.”

“This settlement is a stark reminder that redlining is not a problem from a bygone era. Trident’s unlawful redlining activity denied communities of color equal access to residential mortgages, stripped them of the opportunity to build wealth and devalued properties in their neighborhoods,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This settlement ensures that significant lending resources will be infused into neighborhoods of color in and around Philadelphia that have historically experienced racial discrimination. Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable when they run afoul of our fair lending laws.”

Trident Mortgage Company is a limited partnership incorporated in Delaware. Trident is a wholly owned subsidiary of Fox & Roach LP, which is owned by Home Services of America, Inc. The ultimate holding company of Trident is Berkshire Hathaway, Inc.

Until it stopped accepting mortgage loan applications in 2021, Trident was a non-depository mortgage company operating in Delaware, Maryland, New Jersey, and Pennsylvania. Trident’s lending focus was first mortgage loans and refinancing home loans. Between 2015 and 2017, about 80% of Trident’s mortgage applications came from the Philadelphia Metropolitan Statistical Area (referred to as the Philadelphia MSA.) The Philadelphia MSA includes the cities of Philadelphia, PA, Camden, NJ, and Wilmington, DE, as well as Cecil County, MD.

The complaint describes how Trident redlined majority-minority neighborhoods in the Philadelphia MSA and actively discouraged applications from the people living in those neighborhoods. Trident’s self-defined market areas included majority-minority neighborhoods. However, Trident’s application data show it did not serve neighborhoods within its market areas equally. Only 12% of its mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia MSA are majority-minority. Of the mortgage loan applications Trident did receive from applicants in majority-minority neighborhoods, most of the applicants were white. For example, in Philadelphia MSA neighborhoods that were more than 80% minority, more than half of the applications Trident generated were from white applicants.

Trident’s discriminatory actions, alleged by the CFPB and the DOJ, violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act. The DOJ also alleged a violation of the Fair Housing Act. Specifically, the government’s investigation uncovered a wide range of problematic conduct by Trident, such as:

  • Distributing racist language and messages about certain neighborhoods: Trident’s loan officers, assistants, and other employees received and distributed e-mails containing racial slurs and racist content. In addition to using racist tropes and terms, communications sent on work e-mails included pejorative content specifically related to real estate properties’ locations and appraisals. The racist content also targeted the people living in majority-minority neighborhoods.
  • Avoiding sending its loan officers to market to majority-minority neighborhoods: Trident’s loan officers worked out of 53 different offices in the Philadelphia MSA, the locations of which were displayed on Trident’s website. Fifty-one of those offices were in majority-white neighborhoods. The other two offices were in neighborhoods with minority groups representing roughly 50% of the population. All 23 offices within the Philadelphia and Camden metropolitan areas that were within Trident’s lending area were in majority-white neighborhoods.
  • Developing marketing campaigns and advertisements that discouraged and ignored minority mortgage loan applicants: For example, between 2015 and May 2018, Trident conducted 15 direct mail marketing campaigns. All the individuals pictured in the campaigns’ marketing materials—both models and Trident employees—appeared to be white. These direct mail marketing campaigns would have discouraged applicants from majority-minority neighborhoods. Additionally, Trident targeted its marketing materials to majority-white neighborhoods. Trident’s open house flyers, for instance, were overwhelmingly concentrated in majority-white neighborhoods, and its online advertisements appeared for home listings overwhelmingly located in majority-white neighborhoods.

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of

Categories
Kraft Heinz

Kraft Heinz Has Strong Q2 Earnings Growth

Jul. 27, 2022– The Kraft Heinz Company (Nasdaq: KHC) (“Kraft Heinz” or the “Company”) today reported financial results for the second quarter of 2022 that reflected strong price realization and resilient demand.

“We delivered yet another quarter of strong results as we continue to successfully navigate near-term headwinds, enabled by further advancements of our long-term strategy,” said Kraft Heinz CEO and Chair of the Board Miguel Patricio. “Though the environment remains fluid, we are better able to anticipate dynamic conditions, adapt to this constantly changing environment, and demonstrate our resiliency against new challenges. We are anticipating and adapting to changing market conditions while managing inflation through pricing realization and gross efficiencies. I am very proud of the Kraft Heinz team because, despite all of the challenges, employees across the organization continue to do a tremendous job.”

Net Sales

In millions

Net Sales

Organic Net Sales(1) Growth

June 25, 2022

June 26, 2021

% Chg vs
PY

YoY Growth
Rate

Price

Volume/Mix

For the Three Months Ended

North America

$

5,039

$

5,202

(3.1)%

9.8%

13.1 pp

(3.3) pp

International

1,515

1,413

7.2%

11.0%

10.3 pp

0.7 pp

Kraft Heinz

$

6,554

$

6,615

(0.9)%

10.1%

12.4 pp

(2.3) pp

For the Six Months Ended

North America

$

9,640

$

10,202

(5.5)%

8.4%

11.2 pp

(2.8) pp

International

2,959

2,807

5.4%

8.8%

9.3 pp

(0.5) pp

Kraft Heinz

$

12,599

$

13,009

(3.2)%

8.5%

10.8 pp

(2.3) pp

Net Income/(Loss) and Diluted EPS

In millions, except per share data

For the Three Months Ended

For the Six Months Ended

June 25, 2022

June 26, 2021

% Chg vs
PY

June 25, 2022

June 26, 2021

% Chg vs
PY

Gross profit

$

1,984

$

2,291

(13.4)%

$

3,915

$

4,492

(12.8)%

Operating income/(loss)

542

1,235

(56.2)%

1,657

2,324

(28.7)%

Net income/(loss)

265

(25)

1,136.4%

1,046

543

92.7%

Net income/(loss) attributable to common shareholders

265

(27)

1,051.7%

1,041

536

94.3%

Diluted EPS

$

0.21

$

(0.02)

1,150.0%

$

0.84

$

0.43

95.3%

Adjusted EPS(1)

0.70

0.78

(10.3)%

1.30

1.50

(13.3)%

Adjusted EBITDA(1)

$

1,520

$

1,706

(10.9)%

$

2,862

$

3,286

(12.9)%

Q2 2022 Financial Summary

  • Net sales decreased 0.9 percent versus the year-ago period to $6.6 billion, including a negative 9.3 percentage point impact from divestitures net of acquisitions and a negative 1.7 percentage point impact from currency. Organic Net Sales(1) increased 10.1 percent versus the prior year period. Pricing was up 12.4 percentage points versus the prior year period with growth in both reportable segments that was primarily driven by price increases to mitigate rising input costs. Volume/mix declined 2.3 percentage points versus the year-ago period reflecting continued strong demand in retail and foodservice channels that was offset by supply constraints and elasticity impacts from pricing actions. On a segment level, unfavorable volume/mix in the North America segment more than offset favorable volume/mix in the International segment.
  • Net income/(loss) increased 1,136.4 percent versus the year-ago period to $265 million primarily driven by lower tax expenses in the current year period, lower interest expense primarily due to debt extinguishment costs in the prior year period, and favorable changes in other expense/(income). These factors were partially offset by higher non-cash impairment losses and lower Adjusted EBITDA versus the prior year period. Adjusted EBITDA(1) decreased 10.9 percent versus the year-ago period to $1.5 billion with performance including an unfavorable impact from divestitures of 5.9 percentage points and an unfavorable 1.1 percentage point impact from currency. The remaining year-over-year decrease in Adjusted EBITDA is a result of higher pricing and efficiency gains that were offset by higher commodity costs (primarily in dairy, packaging materials, soybean and vegetable oils, and meat) and supply chain costs (reflecting inflationary pressure in procurement, logistics and manufacturing costs), as well as unfavorable volume/mix. Results continue to reflect the difference in timing between inflationary pressures and the mitigating actions we have taken.
  • Diluted EPS was $0.21, up 1,150.0 percent versus the prior year period, driven by the net income/(loss) factors discussed above. Adjusted EPS(1) was $0.70, down 10.3 percent versus the prior year period, primarily driven by lower Adjusted EBITDA, including a negative $0.07 impact from divestitures, and higher taxes on adjusted earnings. These factors more than offset lower interest expense and favorable changes in other expense/(income) versus the prior year period.
  • Year-to-date net cash provided by operating activities was $788 million, down 61.2 percent versus the year-ago period, primarily driven by higher cash tax payments on divestitures in 2022 related to the Cheese Transaction, higher cash outflows for inventories primarily related to stock rebuilding and increased input costs, and lower Adjusted EBITDA. These impacts were partially offset by lower cash outflows for interest primarily due to prior year reduction of long-term debt, and lower cash outflows for variable compensation in 2022 compared to 2021. Year-to date Free Cash Flow(1) was $353 million, down 78.0 percent versus the comparable prior year period due to the same drivers of net cash provided by operating activities.

Outlook

The Company continues to expect strong financial performance in 2022. The Company is raising expectations for 2022 Organic Net Sales(2) to a high-single-digit percentage increase versus the prior year period, as compared to previous expectations of a mid-single-digit percentage increase, reflecting strong performance to date and ongoing business momentum. The Company continues to expect 2022 Adjusted EBITDA(2) to be in the range of $5.8 billion to $6.0 billion, with a 45 percent to 55 percent third quarter to fourth quarter split. This full year Adjusted EBITDA outlook reflects a 53rd week in 2022, an increase in foreign currency headwinds based on current exchange rates, the impact of divestitures versus the prior year, strong Organic Net Sales, as well as the Company’s ongoing efforts to manage inflationary pressures, including unlocking gross efficiencies, as it continues to invest in long-term growth.

Categories
Clayton Homes

Berkshire’s Clayton is Building Affordable Homes in Denver

Berkshire Hathaway’s Clayton Homes’ subsidiary, Oakwood Homes, has listed 96 single-family homes for sale at Green Valley Ranch, one of the fastest-growing communities in metro Denver.

On2 Homes, Oakwood Homes’ newest brand, is offering four distinct floor plans, with two-and-three-bedroom options available to prospective buyers. With a starting listing price in the low $300’s, On2 Homes’ prices start at half the median cost of a single-family home in metro Denver, now more than $600,000.

“Our customers have been stuck,” said Kristen Nelson, president of the On2 Homes division for Oakwood Homes. “They want to get their foot in the door of the Denver housing market, but steep entry prices keep them trapped in the renting cycle. With On2 Homes, we’re launching a product that delivers the quality of a traditional single-family home at a uniquely affordable price point.”

The affordability of On2 homes is driven by an innovative approach that merges off-site and site-built construction and supply processes, resulting in decreased build time and cost for homeowners. This method also demonstrates Oakwood Homes continued success in making homes constructed with off-site-built and site-built practices indistinguishable from one another.

Built in an off-site home building facility, On2 offers cost-effective, energy-efficient and high-quality homes at a fraction of the cost of site-building. At off-site design centers, On2 Homes uses precision-building techniques to maximize cost, speed and energy efficiency without compromising quality. With unique design features like EnergySmart® utility systems and weather proofing, On2’s single-family homes deliver high quality finishes at a price accessible to more Coloradans. Oakwood guarantees every On2 homebuyer full ownership over their property’s land rights – an increasingly rare opportunity in today’s housing market.

In 2021, metro Denver experienced a 19.3% year-over-year increase in the median listing price of a single-family home. With single-family starter homes beginning at more than $600,000, many Denver residents find themselves priced out of the housing market. With On2 Homes, Oakwood hopes to address Denver’s shortage of affordable single-family homes, expanding the possibility of homeownership to all the city’s residents.

As of December, Colorado has the fourth worst housing shortage in the United States. To keep pace with population gains, the state needs to build 54,000 new housing units annually over the next five years. Much of this burden falls on the homebuilding and construction industry. By utilizing efficiencies found in off-site home building and modular construction, the homebuilding industry can help answer the demand for affordable housing.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: This Is the Best Time to Start Saving

Is there a best time to start saving? Warren Buffett says there definitely is.

“Any money you save before you get out and start having a family … any dollar is probably worth $10 later on simply because you can save it,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “The time to save is young, and you’ll never have a better time to save than really, pre-formation of a family. Because the expenditures come along then whether you like them or not.”

Buffett’s full explanation on the best time to start saving


See the complete Lessons From Warren Buffett series

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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BYD

BYD Enters Japanese Market

(BRK.A), (BRK.B)

Berkshire Hathaway-backed BYD has announced its entry into the passenger vehicle market in Japan.

The Chinese EV manufacturer is debuting three models – BYD ATTO 3, BYD DOLPHIN and BYD SEAL.

BYD Chairman and President Wang Chuanfu acknowledged BYD’s long relationship with the Japanese market and said he greatly appreciates the opportunity to grow.

“Over the years, BYD has been deeply engaged in the Japanese market and has accumulated a good market and brand foundation through its pure electric buses, energy storage systems, pure electric forklifts and other businesses,” Wang said. “Today, with the support and expectation of consumers, BYD officially hits the new energy passenger vehicle market in Japan. The longest journey starts with a single step, and we greatly cherish this business opportunity. Full of respect and dedication, we are devoted to providing Japanese consumers with leading technologies, excellent products and high-quality services, aiming to deliver an exceptional travel experience.”

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares for $232 million. It’s an investment that has paid off handsomely. Berkshire’s original investment of $232 million had grown in value to $7.69 billion as of December 31, 2021.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway and BYD, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkshire Hathaway Specialty Insurance

Berkshire Hathaway Specialty Insurance Enters Swiss Market

(BRK.A), (BRK.B)

Berkshire Hathaway Specialty Insurance has opened a new office in Zurich, Switzerland, and appointed Leander Metzger as Country Manager.

“Establishing this new office in Zurich reflects our focus on expanding our presence and relationships throughout the DACH region. It is another important step in our strategy to steadily grow our capabilities, our team, and our local presence throughout Europe,” said Andreas Krause, Head of DACH, BHSI. “Leander has had great success building European relationships and we are excited to have him lead our expansion in Switzerland.”

BHSI is now underwriting property, casualty, and executive & professional lines in Switzerland and expects to launch several other product lines there in the coming months.

“We look forward to building our team in Zurich and bringing BHSI’s commitment to excellent technical underwriting and service and our CLAIMS IS OUR PRODUCT® philosophy to customers and brokers throughout Switzerland,” said Leander Metzger, Country Manager Switzerland. Leander has more than 25 years of industry experience. He joined BHSI in June 2016 as Head of Property, Engineering Lines and Risk Control, and will retain that position along with his new role. Before coming to BHSI, Leander held management positions with both insurance brokers and insurers.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Berkadia

Berkadia Adds Specialty Group, Medical & Life Sciences

(BRK.A), (BRK.B)

Berkadia, Berkshire Hathaway’s joint venture with Jefferies Financial Group, has added Senior Managing Director Sabrina Solomiany to lead Berkadia’s newest specialty group, Medical & Life Sciences.

Solomiany will sit in the Atlanta office and will report to SVP – Deputy Head of Investment Sales Mike Miner.

“We’re thrilled to add to Berkadia’s capabilities with this new specialty group, adding to our suite of expertise,” said Miner. “Sabrina brings extensive experience in the U.S. healthcare and life science sectors and will be pivotal in expanding our footprint in this highly specialized space.”

“I’m excited to join Berkadia and build a national platform focused on delivering investment sales, debt placement and JV equity solutions for healthcare and life sciences investors,” said Solomiany. “Despite current market uncertainty, significant amounts of capital continue to pour into healthcare real estate, a sector that has been historically resistant to economic downturns.”

The new Medical & Life Sciences specialty will provide a comprehensive solution for the various specialties of healthcare real estate including medical office buildings, life sciences, hospitals, surgery centers, post-acute care and behavioral health facilities.

With over 20 years of experience, Solomiany has closed $8.2 billion in total transaction volume, including $6.5 billion of healthcare and life sciences transactions that totaled more than 22 million square feet.
Solomiany joins Berkadia from CBRE where she served as First Vice President and led the Debt & Structured Finance platform for U.S. Healthcare & Life Sciences Capital Markets. Prior to that she was a Senior Director with CBRE’s U.S. Healthcare investment sales team. She specializes in providing healthcare and life sciences real estate investors with acquisition, disposition, debt placement and recapitalization strategies. Ms. Solomiany’s expertise spans various specialties of healthcare real estate including medical office buildings, life sciences, inpatient rehabilitation facilities, short- and long-term acute care hospitals, behavioral health, surgical hospitals, cancer centers, proton therapy, specialty hospitals, free-standing emergency departments, micro hospitals and urgent cares. Her clients include REITs, institutional investors, healthcare providers, developers and private capital investors.

Solomiany received her Bachelor of Science from the University of Florida.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation (now known as Jefferies Financial Group), Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Lessons From Warren Buffett

Lessons From Warren Buffett: What Aesop Got Right About Investing

Aesop, the legendary storyteller of antiquity, had one of the most important lessons for investors in his fables, according Warren Buffett.

“The first investment primer that I know of, and it was pretty good advice, was delivered in about 600 B.C. by Aesop. And Aesop, you’ll remember, said ‘A bird in the hand is worth two in the bush,’” Warren Buffett said at the 2000 Berkshire Hathaway Annual Meeting. “Now, Aesop was onto something, but he didn’t finish it, because there’s a couple of other questions that go along with that. But it is an investment equation, a bird in the hand is worth two in the bush. He forgot to say exactly when you were going to get the two in the — from the bush — and he forgot to say what interest rates were that you had to measure this against. But if he’d given those two factors, he would have defined investment for the next 2,600 years. Because a bird in the hand is, you know, you will trade a bird in the hand, which is investing. You lay out cash today. And then the question is, as an investment decision, you have to evaluate how many birds are in the bush. You may think there are two birds in the bush, or three birds in the bush, and you have to decide when they’re going to come out, and when you’re going to acquire them.

Now, if interest rates are five percent, and you’re going to get two birds from the bush in five years, we’ll say, versus one now, two birds in the bush are much better than a bird in the hand now. So you want to trade your bird in the hand and say ‘I’ll take two birds in the bush,’ because if you’re going to get them in five years, that’s roughly 14 percent compounded annually and interest rates are only five percent. But if interest rates were 20 percent, you would decline to take two birds in the bush five years from now. You would say ‘that’s not good enough,’ because at 20 percent, if I just keep this bird in my hand and compound it, I’ll have more birds than two birds in the bush in five years.

Now, what’s all that got to do with growth? Well, usually growth, people associate with a lot more birds in the bush, but you still have to decide when you’re going to get them. And you have to measure that against interest rates, and you have to measure it against other bushes, and other, you know, other equations.

And that’s all investing is. It’s a value decision based on, you know, what it is worth, how many birds are in that bush, when you’re going to get them, and what interest rates are.”

Buffett’s full explanation on Aesop and interest rates

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Pilot Flying J

Pilot Company and GM Partner on Network of EV Charging Stalls

(BRK.A), (BRK.B)

Berkshire Hathaway-backed Pilot Company and automaker General Motors are collaborating on a national DC fast charging network that will be installed, operated and maintained by EVgo through their eXtend offering.

The network of 2,000 charging stalls will be co-branded “Pilot Flying J” and “Ultium Charge 360”, and will be powered by EVgo eXtend and open to all EV brands at up to 500 Pilot and Flying J travel centers.

GM customers will receive special benefits like exclusive reservations, discounts on charging, a streamlined charging process through Plug and Charge and integration into GM’s vehicle brand apps providing real-time charger availability and help with route planning.

The Pilot and Flying J travel centers plan to feature numerous fast charging stalls provided by EVgo, including high power fast chargers capable of offering up to 350 kW1. EVgo, which is also working with GM to add more than 3,250 fast chargers in American cities and suburbs by the end of 2025, was chosen as a strategic collaborator due to its expertise in building, operating and maintaining DC fast charging infrastructure. Many of these sites will feature canopies to help protect customers from the elements while charging, as well as pull-through capability allowing convenient charging for electric pickup trucks and SUVs pulling trailers.

“We are committed to an all-electric, zero-emissions future, and ensuring that the right charging infrastructure is in place is a key piece of the puzzle,” said Mary Barra, GM Chair and Chief Executive Officer. “With travel centers across North America, Pilot Company is an ideal collaborator to reach a broad audience of EV drivers.”

“GM and Pilot Company designed this program to combine private investments alongside intended government grant and utility programs to help reduce range anxiety and significantly close the gap in long-distance EV charger demand,” said Shameek Konar, Pilot Company Chief Executive Officer. “Our travel centers are well-equipped to accommodate EV charging with 24/7 amenities and convenient proximity to major roadways across the country. We look forward to collaborating with GM and the U.S. Department of Transportation to make convenient coast-to-coast EV travel a reality through our national network of travel centers.”

Third-party research shows that widespread access to highway charging, particularly in underserved urban and rural areas, is a significant barrier to mass EV adoption.

“EVgo, GM and Pilot Company share a commitment to building an electric fueling network that increases access and makes the shift to electrification as frictionless as possible for all. We look forward to this collaboration and ensuring the EVgo network provides nationwide coverage, including critical corridors for road trips,” said Cathy Zoi, CEO at EVgo. “Through EVgo eXtend, we are demonstrating yet another innovative pathway to help America electrify — and showcasing why EVgo’s technology and industry leadership make us the partner of choice to site hosts, automakers and drivers alike as we work together to deliver a cleaner future of transportation.”

This collaboration is targeting the installation of charging stalls at 50-mile intervals across the U.S.

For GM, this development is one more step of its nearly $750 million investment in EV charging infrastructure, including:
• Enabling access to more than 100,000 charge points in the U.S. and Canada through its Ultium Charge 360 ecosystem
• Collaborating with EVgo to build out a network of 3,250 charging stalls in major metro areas by 2025
• Installing up to 40,000 chargers in local dealer communities through GM’s Dealer Community Charging Program, focusing on underserved rural and urban areas

This project builds on Pilot Company’s recently announced “New Horizons” initiative to invest $1 billion to fully upgrade its travel centers with more premium amenities and offerings that aren’t typically available at current EV charging locations. Guests will have access to free Wi-Fi at most locations, expanded seating and lounge areas, updated and modernized restrooms, on-site restaurants including Pilot’s signature fresh hot and cold deli, premium coffee, and shopping for travel essentials and souvenirs while their vehicles are charging. Pilot and Flying J travel centers are open 24/7, ensuring that team members are always onsite to provide consistently high service to guests.

Beyond this program, GM and Pilot Company will continue working with key stakeholders to use new and existing public-private programs to accelerate the development of more public EV charging infrastructure.

Berkshire Hathaway and Pilot

In 2017, Berkshire Hathaway made a $2.76 billion investment in Pilot, obtaining an initial 38.6 percent stake in the company, and Berkshire will become the majority owner in 2023.

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.