Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) CEO Nir Sztern today announced the company's plan to lay off 250 employees, 5% of its workforce. Cellcom's announcement follows negotiations in recent months in which the company's management and employees failed to reach understandings about the necessary staff reductions. Cellcom issued no report to investors; it seems the decision is not final, and depends on the workers' committee's agreement to cut back employees benefits in order to save costs. Histadrut (General Federation of Labor in Israel) chairperson Avi Nissenkorn said that he planned to declare a labor dispute at Cellcom.
In a letter sent to employees, Sztern wrote, "As you are aware, we are working in a mobile phone market in a very competitive environment. In the second quarter of 2018, we reported a NIS 37 million loss. The results for the third quarter of 2018 also reflect continued erosion and negligible profit. Given projections of continued competition in 2019 and burdensome regulation, in recent months we have almost completely eliminated expenses in the company not classed as essential. Unfortunately, despite all of our efforts and the measures that we are taking, we must take additional cost-cutting measures.
"In recent months, we have conducted a dialogue with the chairperson of the workers' committee in a real effort to find solutions that would avoid layoffs, as part of the unavoidable measures for coping well with the dynamic business environment. Unfortunately, we failed to reach agreement on a streamlining plan that would not include layoffs. After failing to reach agreement with the workers' committee chairperson, I was left with no choice other than to act according to the mechanism set forth in the collective labor agreement and announce a streamlining plan for dismissing 5% of the company's workforce.
"As the company's CEO, I see the whole picture, and my primary concern is the company's benefit. I have the duty and the responsibility to take care of the livelihood of thousands of workers employed in the company. I still think that we should do everything possible to avoid layoffs. We must leave no stone unturned in searching for ways to cut costs before we embark on such an irregular measure. Cutting staff should be a last resort. In the past four years, despite the intensely competitive environment in every facet of the Cellcom group's activity, the group's workers have enjoyed large salary and welfare budgets in accordance with the collective agreement.
"In 2015-2018, the workers were paid, among other things, over NIS 80 million in a pay rise that averaged 3% (13% in a four-year period, while inflation was close to zero), and NIS 60 million for a joint welfare budget for welfare activities (including NIS 23 million for company vacations, over NIS 6 million for Purim parties, and over NIS 4 million for sports events). NIS 60 million went to budgets in the economic part of the collective agreement (entitlement and an increase in provisions for the advanced training fund, increased pension coverage, medical examinations, payments for kindergartens and summer camps, and clothing).
"It is important for me to stress that as long as the state of the company allowed it, we could go on vacations and enjoy enlarged welfare budgets, but we all realize that the times have changed. Unfortunately, what we were previously able to afford we can no longer allow. I believe, and you all must agree with me, that it is impossible to act differently at the present time. I am notifying you here that I have decided that my salary and those of my fellow managers will be substantially cut.
"Before even one worker loses his job, cutting part of the large welfare budgets is both possible and mandatory. Before even one worker loses his job, it is possible and mandatory to forego salary increases in the near future. This is necessary and proper before laying off workers, and that is how I prefer that we act. Both management and the workers' committee share a desire to avoid laying off workers, but unfortunately, we disagree about the question of which budgets should be discontinued this year. I want to make it clear that I intend to continue an open dialogue with the chairperson of the workers' committee in order to arrive at an agreed solution that will also take care of the welfare of the company's workers, and will also answer the need to cut the company's costs, and above all, will avoid layoffs.
"The chairperson of the workers' committee is making great efforts to find solutions, both in talks with me and through other instruments, and I greatly appreciate it. I am convinced that with shared responsibility, we will succeed in finding the right way to reach understandings for the company's benefit. As responsible group representing the workers, the workers' committee realizes, as we do, the importance of preserving the Cellcom group as a successful company. I can guarantee you that I am constantly and tirelessly acting to maintain Cellcom's standing as a leading communications group. No less important, however, I want Cellcom to be a rewarding workplace worthy of all of your trust and efforts. This is not an easy time for any of us, but I am confident that we will emerge from it strong and rejuvenated. I will continue to inform you of developments in this matter in the coming days."
Following the reports that Cellcom's management planned to lay off workers, Nissenkorn said a short time ago that he intended to declare a labor dispute at the company, adding that he found Sztern's behavior regrettable. "This action, and the unilateral way that management is taking it, undermine the relations of trust built between the parties in recent years, and are dragging the company into a deep crisis. Despite the many efforts of workers' committee chairperson Mia Yaniv and Histadrut cellular, Internet and high-tech association chairman Yaki Halutzi to find an appropriate and agreed solution on behalf of the workers and the company's future, management continues to act with an extreme lack of good faith, while severely damaging the fabric of labor relations at Cellcom."
Nissenkorn added, "The Histadrut fully backs the workers' committee, and will use all of the means at its disposal to protect the workers' status and job security."
Published by Globes, Israel business news - en.globes.co.il - on January 21, 2019
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