After Dov Baharav takes up his new post as chairman of Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), completes the handover from outgoing chairman Yair Shamir, receives a classified briefing by CEO Itzhak Nissan, and holds the necessary acquaintance meeting with workers committee chairman MK Haim Katz, he will have to lead this government company. The main issue on the agenda - the privatization of IAI - will become more pressing.
The privatization of a government company with 17,500 employees will not happen overnight, and Baharav will have to reach broad agreements with stubborn functionaries, including IAI's strong workers committee, the Government Companies Authority, the Ministry of Finance, the Ministry of Defense, and IAI's board of directors.
Until then, IAI must live, and businesses of its kind can only live by selling arms. IAI must have aggressive and tough competition against giant rivals such as Boeing Company (NYSE: BA) and Lockheed Martin Corporation (NYSE: LMT), deal with bureaucratic barriers that are a function of being a government company. These are neither happy nor healthy; there is no operational flexibility, and any action that seems natural in a private company turns into an exhausting saga of permits from the Ministry of Finance and Knesset Economic Affairs Committee in Jerusalem.
Baharav presumably knows that IAI is not Amdocs Ltd. (NYSE: DOX). He must now prepare himself mentally for the new reality: he will need good relations with the Ministry of Defense, he will have to knock on Minister of Defense Ehud Barak's door, make phone calls to Minister of Finance Yuval Steinitz, maneuver between raindrops, while simultaneously scrupulously handling the most sensitive organization of all - the IAI workers committee, which as any IAI executive knows, you do not annoy because it will make life very difficult.
Even before the historic privatization of IAI, if it ever happens, Baharav will have to find a way to soften, if only by a little, the current tight regulations, because there are no lack of markets in Asia and Latin America and breakthrough technologies to sell them. All it needs is for someone to let a lot of good people get on with the job.
Published by Globes [online], Israel business news - www.globes-online.com - on June 6, 2011
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