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Two large companies announced heavy layoffs yesterday, compounding the levels of unemployment in the economy. Housing and Construction (Shikun U'Binui) announced it would be laying off 430 workers out of its 3,000-person staff, while the Blue Square Israel food retail marketing chain said it would be downsizing some 250 employees and closing 10 loss-making stores.

Most of Housing and Construction's layoffs are to be among management and engineers, with 230 of them from its subsidiary Solel Boneh (81.7 percent held) and 200 from another construction subsidiary Herut. The remaining employers are to take a pay cut of between 5-15 percent, the company announced.

Housing and Construction CEO and chairman of Solel Boneh Uzi Vardy-Zer said yesterday, "I expect that this plan of reorganization and efficiency will bring a revolution in the company's results. In my estimation, following the implementation of the program, there will be a significant improvement in results in 2004 and a return to profitability in 2005."

Housing and Construction will set aside NIS 60 million for the reorganization program for itself and its subsidiaries, which will push the company into the red for the third quarter. Housing and Construction is controlled by Arison Investments, and is the second company in the group to downsize in such numbers, after Bank Hapoalim laid off 793 employees at the beginning of the year.

The housing market has suffered severely from the long-running recession. Solel Boneh, a construction contracting company in the hotels, commercial, housing and infrastructure markets, lost NIS 115 million in the past 18 months.

Investors were clearly delighted with the sharp decision to restructure the group, and Housing and Construction's share leaped 4.5 percent yesterday on the Tel Aviv stock exchange.

Chief financial officer Ailon Michaely says the job cuts are a painful step, but they are the last possible recourse for the company. The government's practice of hounding foreign workers and the instability inherent in hiring Palestinian laborers have reduced the company to defaulting on projects it undertook to complete, due to lack of manpower. The shortfall cannot be made up by Israeli workers, who are reluctant to take construction jobs, he says.

Supermarkets suffer

Supermarket retailer Blue Square is similarly downsizing to improve its bottom line. The company has 164 stores in all, including Co-Op, Mega, Super Center City, Super Center, King Center and Shefa Shuk. Among the stores that may be contenders for the chop are the Co-Ops in Hadera mall, in Kiryat Ata, in Kfar Sava's Arim mall, in Tiberias and in Beit Eliezer in the Hadera region.

In the past three years, Blue Square has closed 30 of its stores, though it plans to open seven new branches in 2004. CEO Yoram Dar has explained in the past that often the opening of a new Mega store (the company's giant regional discount chain) is accompanied by the closure of a smaller company store in the same neighborhood.

Dar said yesterday that "this significant process will enable the company to lead the food retail chain market in modernity and efficiency and to return to sizable profits."

Hertzel Laks contributed to this report.