A dispute between the Ministry of Defense and the Ministry of Finance has persuaded the former to approve a plan for Israel Military Industries Ltd. to lay off 500 employees.
The latest crisis has been caused by the failure of IMI employees to receive their June salary today. Sources in the Ministry of Defense have blamed the Ministry of Finance for allegedly breaching previous inter-ministerial agreements, under which the Ministry of Finance and Rafael Advanced Defense Systems Ltd. would pay the June salaries of IMI's 3,000 employees as part of the plan formulated at the start of 2011 to merge IMI and Rafael.
For the past two years, the Ministry of Defense has been paying the IMI employees salaries, while a solution has been sought for the troubled government owned company. At the start of 2011, it was decided to shelve plans to privatize IMI, and rather merge it with another government owned company with both Rafael and Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) expressing interest as well as some privately owned companies including Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) and Plasson Industries Ltd. (TASE: PLSN) from Kibbutz Sasa.
After much debate, it was decided that IMI would merge with Rafael because of the synergy between the two companies.
As part of this merger, IMI's board of directors asked to fire 500 employees that cost the company $200 million per year. Minister of Defense Ehud Barak and ministry of defense director general Udi Shani asked IMI to hold back with the cuts, until a permanent solution to the company's problems was found.
But today, in the wake of the Ministry of Finance and Rafael's refusal to pay IMI's salaries, Shani wrote to IMI's board of directors giving them the green light to lay off 500 employees.
Over the past two months talks for the sought after merger between IMI and Rafael have stalled. Sources close to the talks says that it has not been possible to reach financial understandings that would make it possible for the companies to merge.
IMI said that the ministries of finance and defense are working to find a solution for the company's past problems, through changing the ownership structure, and finding a solution to salary payments for employees.
IMI's workers committee said that it is working with Histadrut chief Ofer Eini to solve the problem of the unpaid salaries and hopes salaries would have been paid by Monday morning.
The Ministry of Finance said in response that payment of its workers' salaries was IMI's sole responsibility, but that, since it had delayed the implementation of a recovery plan at IMI, the Ministry of Defense had recently assisted in this respect, and that in the light of this it was strange that the Ministry of Finance was being blamed.
Published by Globes, Israel business news - www.globes-online.com - on July 10, 2011
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