Within a month, electronics components maker Flextronics is likely dismiss about 600 of its production workers at its plant in Ofakim. This is because of the difficulty in obtaining a guarantee or credit insurance to cover its business with ECI, which produces telecommunications equipment, and for which most of the production at Ofakim is intended.
The latest order from ECI to Flextronics is for production of electronics components to the tune of no less than $85 million. However, Flextronics' attempts to obtain credit insurance of $50 million have been rejected out of concern that the risk is high.
Against this background, Flextronics recently approached government credit insurance company Ashra with a request for insurance of its deal with ECI. Sources close to the situation said that Accountant General Michal Abadi-Boiangiu vetoed the request, again on the grounds that the risk was high.
Lacking any means of solving this problem, within the next few days the company will inform its 600 workers at Ofakim that they will be dismissed. The company employs another 500 people in Arad, and about 100 in Sderot. Flextronics is one of the biggest companies in the world, employing nearly 160,000 people worldwide.
"Flextronics is in Ofakim only because of ECI, and if there is no production for them, it has no function there. It has activity in many places around the world. If something like this happens, it will be a severe blow to the electronics industry in Israel, and this comes just days after we were told that Micron had decided to pull its production activity from Israel by 2015, and the future of more than 1,000 people employed there is uncertain. The same applies to the Sanmina plant in Lod, which is about to shut down. If Flextronics closes down its activity in Ofakim, this is a mortal blow to this region, and of course there is the not inconsiderable fear that this will affect its activity elsewhere, such as in Sderot and Arad," a source close to the matter told "Globes".
In the past few days, Flextronics' management has made great efforts to involve government ministries and senior officials in finding a solution to the problem and to obtain approval for insuring at least part of the production activity for ECI. "Since there is no choice, Prime Minister Benjamin Netanyahu had better intervene in this crisis himself, to avoid a situation in which, two weeks before elections to the Knesset, one of the largest factories in southern Israel is on the point of closure," a source familiar with the situation said.
Flextronics Israel management declined to comment.
Published by Globes [online], Israel business news - www.globes-online.com - on December 20, 2012
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