Kitan Downsizing - Closes Beit Shean Finishing Plant in Return to Profitability

Tnuva's management today handed dismissal notices to 120 Off Yerushalayim workers and announced it intends to close the factory.

Kitan Consolidated announced today its decision to close its Beit Shean finishing plant. One hundred and ten workers will be laid off as a result of the closure. The company estimates the cost of closing and severance pay at some NIS 19 million. Kitan has offered jobs to 25 workers, should they be willing to relocate to Dimona, where finishing activity will be transferred.

At the same time, Tunva’s management this morning sent out dismissal notices to 120 employees of the Off Yerushalayim poultry slaughterhouse. Along with the notices, Tunva’s management informed workers it intends to shut down the Off Yerushalayim slaughterhouse.

In response, Off Yerushalayim workers held a demonstration in front of Tnuva headquarters in Tel Aviv this morning. At the end of the protest, representatives of the workers’ committee were invited to meet with Tnuva general manager Arik Reichman.

Reichman told workers he would not revoke the dismissal notice, unless they accepted a new management policy for Off Yerushalayim, so that losses could be stopped.

Kitan’s decision to close its’ Beit Shean factory stems from hard times in the textile sector. The company reports that market exposure to third world imports has made competition difficult and eroded profits. This, together with the revaluation in the real value of the shekel, brought about a decision to downsize, in an effort to cuts costs and reduce losses on unprofitable activities.

Kitan said that a real rise in salary rates, resulting from market development and a lack of trained personnel had also contributed to the decision. The company noted that environmental considerations also require larger and larger investments on the part of industry, and that this was especially true in the case of textile finishing. These investments, due to changes in the Encouragement of Investment Law, meant that "A" development area industries would not be subsidized at their former 33% level but only 20%. All Kitan factories are in "A" development areas, therefore the change in the law significantly raises the required investments.

Another primary consideration was the decision made by the Ministry of Defense, one of Kitan’s biggest and steadiest customers for IDF uniform material, to cancel orders, transferring them instead to factories in the US.

Company management estimates that the downsizing and streamlining activities will return Kitan to profitability. Kitan posted net losses of NIS 3.15 million for Q2 ’96, compared with net profits of NIS 14 million in Q2 ’95. Net profits for the first half of 1996 were NIS 4 million compared with NIS 28 million in the corresponding period last year.

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