Iscar-Comments from Berkshire Meeting

At today’s meeting, Warren Buffet was effusive in his praise of Iscar. This is a company that started from very modest beginnings .The purchase is significant, not only in terms of the amount of capital deployed $4 billion) but also the fact that this was the first business that Buffett has purchased outside the U.S.

Jacob Wertheimer, the owner of this family enterprise had an opportunity to address the crowd of 24,000 people at the meeting and to present a video that provided a sense of the geographic breadth of the business and its diverse customer base. Iscar is the second largest cutting tool company in the world, but as Charlie Munger described it, it is the best in the world. Interestingly, it is the main supplier of cutting tools in the Far East and consequently has an important role as a supplier to Asian based automotive companies as well as otrher global automotive producers. In addition, Iscar is a supplier to heavy industry, to the aerospace industry, and to general engineering. The importance of innovation was stressed...when the world demands better solutions, that's why we are in business.

As described, “the average quality of management is not only extraordinary, it is off the chart.” “It is a real quality enterprise.” Finally, “These people know how to do things we don’t know how to do.”

The importance of the intangible asset of people was stressed in Mr. Wertheimer’s discussion. “There are many companies with lots of buildings and real estate, but in the end, it’s only people that make a difference.”

Buffett added, as he generally has, that Berkshire has never participated in an auction process where a company was being sold to the highest bidder. He indicated that he is interested in businesses that are too important to auction. Management must care enough about the business that they do not want to put it up “like a piece of meat” at auction.

He added that a hallmark of businesses that would be considered have owners that are “concerned about the people who are here... the customers who are here are also so important...the owners care about the ultimate home in which the business will reside.”