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Delta Galil Industries is to lay off 500 workers at its manufacturing plant in Carmiel, in an agreement reached between company management and the Histadrut labor federation.

According to the accord signed yesterday between the parties, the intimate apparel maker will downsize the 500 - constituting 20 percent of its total workforce in Carmiel - gradually over the next 12 months.

A senior source in the company said the layoffs were part of Delta's efficiency drive being conducted in the company's plants throughout the world, designed to reduce costs and improve the group's competitiveness. This was necessary, he added, due to the increased intense competition in the sector, which put pressure on prices.

Delta Galil, which is controlled by Dov Lautman (25 percent) and the U.S. company, Sara Lee Corporation, is traded both locally and on the Nasdaq exchange and its shares gained 1.1 percent in Tel Aviv yesterday.

The company produces intimate apparel, mens underwear and clothing for private labels and for large retail chains. Delta ended the first quarter with sales of $173 million, a growth of 14 percent on the parallel, however it posted a net loss of $3 million, compared to profits of $4.1 million in the parallel.

The labor federation originally objected to any layoffs at the plant, but finally agreed as the accord set out improved compensation payments for the dismissed workers, at higher than the legal minimum.

For example, a worker with five years' employment at Delta will receive one and a half months' salary in addition to the legally required severance pay. A worker with 19 years seniority, will receive eight and a half months' pay together with their severance compensation.

The Histadrut's representative in the Carmiel-Galil region, Shula Cohen, said yesterday, "As a representative of the workers, I recognize that the layoffs are inevitable. Delta cannot survive if it does not compete in the global textile sector. At least we have guaranteed suitable compensation and safeguards for the workers remaining, who have also had to waive various benefits, and all was done in order to continue the company's activities in Carmiel. I hope these layoffs will be the last at Delta, though we must take into account the tough competition."

Only 8 percent of Delta Galil's activities are in Israel. Most of the company's operations are in Egypt, Jordan, Turkey, East Europe and Thailand, and it is currently building a new plant in China.