In July 1996, the Macpell textile firm, controlled by the brothers Eliezer and Nahum Peleg, acquired control in printed circuits manufacturer Motiv, located in Yahud. The main idea, the brothers explained at the time, was to spread Macpell’s textile sector risk by investing also in the electronics sector. Macpell paid altogether $800,000 for control in the company, the investment being divided between shares and convertible debentures.
Motiv, which in 1995 lost some NIS 4 million, was already suffering business difficulties at the time it was acquired. Once source of its problems was the fierce competition in the printed circuits sector in Israel. The Peleg brothers argued, at the time, that the experience they had gained in successfully rehabilitating the Tefron textile company, would suffice to enable them to turn Motiv around too.
Eighteen months after making the acquisition, Macpell decided to divest. In the third quarter of 1997 the company wrote off NIS 6.7 million and resolved not to inject any further capital into the company.
Eliezer Peleg, chairman of Macpell’s board, sounded very angry today when asked to answer questions about Motiv. This was in stark contrast to his air of calm satisfaction following the issuance of Tefron in the United States four months ago. Peleg’s arrows are directed at the government bureaucracy and the Bank of Israel, to which he ascribes most of the blame for the fall of Motiv, along with other companies in the textile sector so dear to his heart.
"Macpell’s decision is to stop investing in Israel. Under today’s business conditions, with the dollar exchange rate frozen and the minimum wage rising all the time, it is simply not worthwhile manufacturing in Israel. We prefer to invest abroad. Costs in Israel are so high, that it is cheaper to manufacture even in England. Is it any wonder investors are running away?
"The Ministry of Finance and the Bank of Israel think of nothing but high-tech, high-tech and high-tech. They think all Israel’s citizens are able to work at high-tech and have forgotten all the other industries. At this rate, we will be reaching even as much as 20% unemployment".
"Globes": What have you got against high-tech? Is it so bad that ECI comes along and absorbs new workers in Ofakim?
"So ECI comes along and absorbs a few dozen workers and gets great headlines. Macpell, which took on 200 employees, doesn’t even get a mention".
Why do you say investors are not coming? Foreign investment in Israel hit record highs in 1997.
"These are all left-overs from the previous period, when everybody thought there would be peace here. Don’t be dazzled, There comes a new government and puts at the head of the Ministry of Industry and Trade a space cadet who never had anything to do with industry and understands nothing about it. Government officials who never signed a balance sheet and don’t have to pay employees wages, are running our lives".
Published by Israel's Business Arena February 3, 1998