Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) CEO Itzhak Nissan has ordered all the company's divisions to suspend plans for the hiring of scores of new employees, in order to prepare for restructuring, which will involve internal transfers of employees. He explained that the move was due to a sharp drop in orders for executive jets.
The crisis in IAI's executive jets division began two years ago. The company attributes the slump in executive jets orders to the global financial crisis, which hit the segment hard. Before the crisis, IAI sold 60-70 executive jets a year, manufactured at a company facility at Ben Gurion Airport. Sales in the past two years have been 15-20 per year. IAI produces the Galaxy 150 and Galaxy 250 executive jets under a cooperation agreement with Gulfstream. IAI manufactures the planes, which Gulfstream markets.
IAI sources told "Globes" that the crisis in the company's executive jets division forced the company to halt hiring by the unit, as well as other measures. The halt in hiring spread to other IAI units, including the manufacturing of unmanned aerial vehicles (UAV) and electronic warfare systems unit Elta Group.
IAI currently has 16,700 employees. 1,600 employees have retired since 2006 under a plan Nissan initiated when he took up his post. The retirement plan has cost IAI $300 million.
IAI confirmed the report, saying that the hiring freeze was temporary, and that it was intended to make possible "internal balancing of manpower between the company's units."
The Ministry of Finance has initiated measures for a possible IPO by IAI, at the request of IAI chairman Yair Shamir and CEO Nissan. The plan aims at dealing with IAI's problem in facing competition because it is a government company. The ministry restricts IAI's ability to pay employees and managers high salaries, set up subsidiaries, limiting the company's ability to expand its business in the competitive global defense industry environment.
Published by Globes [online], Israel business news - www.globes-online.com - on May 17, 2011
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