Israel Military Industries Ltd. (IMI) has renewed its threat of making urgent streamlining measures, centered on the laying off of hundreds of employees and closing unprofitable munitions production lines. The measures that IMI's board of directors wants government approval for include the restructuring of operations and foregoing land that it holds at sites in Ramat Hasharon and Haifa.
Yesterday afternoon, IMI's board decided that there was no choice but to undertake these measures because of the stalemate in the plan formulated by the Histadrut (General Federation of Labor in Israel), the Ministry of Finance, and the Ministry of Defense for IMI's merger with another government defense company, Rafael Advanced Defense Systems Ltd. Ongoing disagreements between Rafael and the Ministry of Finance over the merger terms is delaying implementation of the plan, which replaced plans to privatize IMI.
IMI's board wants government permission to fire 950 employees, including the firing of 500 employees in the near term. The board also wants to close production lines that the defense establishment classifies as "strategic", and which IMI operates at the insistence of the Ministry of Defense, even though they are not economically viable.
IMI's board believes that the measures are necessary under every scenario for a future solution for the company, either merger, privatization, or IPO, because keeping unprofitable production lines, which employ hundreds of largely redundant employees, costs IMI NIS 400 million a year.
For months, IMI has struggled to pay employees from its own resources, and receives a monthly advance from the Ministry of Defense to do so. The money comes at the expense of future payments.
A Ministry of Finance source told "Globes" today that there was considerable doubt whether IMI could pay salaries next week, on the eve of Independence Day. "Every month, the Ministry of Defense says that this is the last time that it will transfer the advance to IMI, and apparently this is really the last time. The situation requires us to rethink everything."
IMI workers committee, headed by Itzik Yehuda, called the board's decision to renew its layoff threat as "media spin" directed by the Ministry of Finance. "The board has called for layoffs in order to pressure the workers and the Histadrut to forego their rights. This is an economic mistake, and irresponsibility towards national defense. We won't allow even one worker to be fired."
The workers committee talks about confusion. "In view of the company's condition, its workers agreed to privatization, which is within reach, but the Ministry of Finance withdrew and decided on the merger with Rafael. Even though we agreed to this too, nothing happened," said Yehuda.
Published by Globes [online], Israel business news - www.globes-online.com - on May 4, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011