Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) is preparing to lay off 600 workers in all of the company's divisions and units, sources inform "Globes."
The measures for reducing IAI's staff are now being formulated. Company sources say that the main reasons for the step are its financial situation, efficiency problems, and its low profit margin. IAI finished 2018 with a $47 million loss.
Along with the planned layoffs, IAI's management is preparing cuts in its activity, while attempting to extend by a currently unclear period of time the duration of the agreement signed by the company and the workers' committee in August 2016, which is due to expire this August.
The agreement reached at that time, which was called a growth agreement, was signed by former IAI CEO Joseph Weiss and former workers' committee chairman Ehud Nof. The agreement contained a reduction in the company's staff, a reduction in wage costs, adaptation of its organizational structure to the current business environment, and more extensive investments in marketing and research and development. 800 employees left IAI under the agreement, and the workers' committee agreed to waive a long series of workers' benefits for the entire period of the agreement.
When the agreement was signed three years ago, IAI executives believed that it would benefit the company and make it more efficient, thereby also improving its competitiveness in the markets. The company's management has since changed; its CEO for the past year has been Maj. Gen. (res.) Nimrod Sheffer, and its chairman is Harel Locker.
A new agreement was signed with the workers' committee early this year, following a reform in which all of IAI's civilian divisions were consolidated. 200 more employees left the company under this agreement. Extending the agreement and laying off hundreds more of IAI's 15,000 workers requires agreements between management and the workers' committee, headed by Yair Katz. Sources in the company say that the workers' committee will strongly oppose these measures because the company's staff has already been reduced by 1,000 in the past three years.
IAI has undergone many upheavals in the past two years, featuring changes in management's personnel and structure. Most of the company's VPs and senior managers have been replaced in a large-scale measure portrayed by the company as designed to lead to a situation in which it will operate as a profit-making company for all intents and purposes, adapting itself to changes in the market and improving its efficiency.
Since the beginning of the year, when management and the workers' committee signed the agreement for the reform in IAI's civilian divisions, quiet has prevailed between the parties, and company sources described the relations between them as good and businesslike.
The same sources, however, predicted that if IAI management insists on going through with its plan to fire hundreds of workers, it would constitute a major test for the workers' committee, headed by Katz.
The IAI workers' committee told "Globes," "The workers organization does not intend to manage its affairs via the media. The organization will fight for the workers' rights and conditions, and do everything to prevent continued harm to IAI's workers, the company's most important asset. IAI workers are a partner in a Zionist enterprise, which daily redefines the concept of technological breakthrough. They will continue this tradition."
IAI said in response, "The company is competing in a global business world laden with risks, challenges, and difficulties. In order to fulfill its business and strategic plan quickly, we must make adjustments and changes. Some of these changes require a real and honest dialogue with the workers' organization, and we are indeed negotiating on this."
Published by Globes, Israel business news - en.globes.co.il - on July 21, 2019
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