The Wertheimers are selling their controlling stake in turbine maker Blades Technology even though the aircraft-engine industry is poised for six or seven years of rapid growth, Eitan Wertheimer said.
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“There comes a time in every family business when you have to hand over the scepter to another,” Wertheimer said a few days after his family announced it was selling its 51% stake in Blades to U.S. aerospace giant Pratt & Whitney, a partner in the joint venture.
“The agreement hasn’t been signed, but it will happen. The company is in excellent shape with a big order backlog many years forward, and with excellent people on the factory floor and at the wheel,” Wertheimer told TheMarker in an interview.
Wertheimer – whose father Stef built Iscar Metalworking from scratch and sold it eight years ago to Warren Buffett – founded Blades Technology in 1969 after France imposed an embargo on arms sales to Israel. The defense minister at the time, Moshe Dayan, asked Stef Wertheimer to build a plant to make spare parts for Israel’s French-made Mirage jet fighters.
Today the company and its sister business Techjet develops and manufactures turbines for jet engines. Blades Technology’s products are sold to top aeronautics companies, among them P&W and the Rolls-Royce engine unit, a joint-venture partner in Techjet.
Blades employs 2,000 people in Israel working in several plants across the north. Another 400 are employed in the United States and 200 in China. The company was a major part of the industrial empire that Stef Wertheimer created in the Galilee.
Eitan Wertheimer said P&W’s becoming the sole owner of Blades doesn’t threaten the company’s future in Israel. “The workers will remain in Israel,” he said.”This is an industry that from a technical standpoint can’t be moved from here. In any case, there’s no business reason to do so.”
Blades Technology’s business looks secure for the coming years, Wertheimer said.
“We’re in a period of generational change in engines, a period with a lot of potential. The outlook for the next six or seven years is for rapid growth,” he said. “The challenge is to keep up with developments and meet demand for the years to come. The key is our ability to develop new products and supply them based on the required specifications and quality.”
Blades Technology has grown a lot in recent years, but with estimated annual sales of about 1 billion shekels ($345 million), it’s still tiny compared to Iscar.
“We experienced a slowdown after the [global financial] crisis in 2008, but those were years where we learned a lot,” said Wertheimer. “It entailed technical, financial and organizational learning. The goal was to continue with the same people, to make fewer mistakes and make a better product more efficiently.”
Why did P&W choose to become a joint-venture partner with Blades back in 1995?
“They had a company that made similar products. They saw that our company was a lot more efficient and agile. The partnership involved joining up the operations of the Nahariya factory with their plant in Georgia, and the business continued to grow. We wanted an ensured market and they wanted to go up a level technologically.
“Rolls-Royce joined several years later. We developed a lot of technology and they were interested. They wanted to join in our partnership with P&W and that’s what happened. We formed a joint venture in 1999, and since then it has grown and grown. One of the important things is that we invested everything back into the company.
“We didn’t spend money on high salaries, so the plant was equipped with the most advanced technology and equipment. We didn’t take profits out of the business. We didn’t pay dividends. Everything went back into the business. The idea was to increase sales, increase investment and spend more on customers and on developing products. This is industry, not finance.”
Are you implying that salaries in the private sector are too high, particularly in finance?
“No. The logic was that we wanted to continue to invest in technology — to reach a critical mass and ensure the company’s place for the years ahead. “
Why did Blades need a multinational partner? Why not grow on your own?
“My rule is ‘work with people who are more successful than yourself, otherwise you’ll be wasting your time.’ In my case that’s obvious. I’m primitive. Ask my wife or children and they’ll tell you I’m not so smart. Seeking a partner is a strategic calculation. A strategic partner will bring more market, the next technology or the next product or managerial capability that you haven’t got. If you have all this, you don’t need a partner.”
How do you divide the work between Israel and your plants overseas? Is Israel more engaged in research and development?
“Developing products is a long and complicated process and requires a lot of engineering. For example, a turbine factory requires various kinds of expertise from other manufacturing facilities in Israel, and there are different kinds of blades with differing production processes.”
If you were 40 years old today, would you build another industrial business in Israel?
“If I were 40 I would want to be 20. Regarding industry, if someone has a good product and a good customer, it doesn’t make a difference where you put the factory. If you have nothing to offer and you don’t have a customer, you have no industry at all. There are industries where we have a competitive advantage here in Israel.”