Cry Me a Rivulet for IMI

"The State of Israel has decided to sell the Israel Military Industries for a mess of pottage. It is creating an oligarchy of the rich."

That is a quote from Itzik Yehuda, chairman of the IMI union, who's spearheading the battle against the government resolution from a year ago to privatize the company.

Yehuda stands a good chance of winning his battle, for two reasons. One is that the government never did execute its resolution because the balky workers frustrated it. Now the workers have recruited a weighty ally: none other than Defense Minister Amir Peretz, who thinks IMI should be merged with Rafael, not privatized.

The second reason is that Yehuda is right. The government's proposal, to privatize three of IMI's five outfits, does boil down to a mess of pottage. The price at which this public asset is to be sold to private hands - "a small number of families that spend all day wondering who will get what from the state", as Yehuda memorably puts it - will apparently be very low.  As low as, about, minus a billion shekels.

No, I'm not getting the math backwards. The state will have to invest about a billion shekels, if not more, until it finds, if it does, people willing to assume the ownership of IMI.

Whip out your handkerchief

No question about it, IMI is a sad story. It is the story of a brilliant defense company that has been deteriorating for 20 years. The number of workers has plunged from 13,000 in the mid-1980s to 2,700 today, yet IMI has to fire 25% more at least in the name of efficiency.

During the last 10 years the state has infused seven billion shekels, yes, read that again, and that doesn't count NIS 3 billion in state guarantees, to try to stabilize IMI, not that it's worked.

IMI makes basic ammunition with low added value, and has trouble competing in world markets. Without real added value, and with the inefficient management of government, the company runs a cash flow deficit of about NIS 150-200 million a year. Nor is there any reason to think that the company's bleeding is about to stop.

So one can understand why the state would merrily invest a billion shekels to get somebody to take the beast off its hands.  A billion shekels is a lot of money, but it would barely touch the bottomless pit that is IMI. If the company is sold, the state can sum up this chapter in its life by saying it threw away NIS 8 billion in vain efforts to cure the company's ills, in vain, but it's done. If IMI is merged with Rafael, on the other hand, the bottomless pit is there to stay.

What about Rafael? The state has invested another NIS 4 billion in curing that armaments manufacturing body, but this time, the state wound up with a body rich in R&D, at the forefront of the military knowhow, and therefore, able to compete.

Even after NIS 7 billion, IMI is nowhere near solving its problems. It has no R&D and severe problems with its inefficient governmental management. Merging it with Rafael is merely to pass the hot potato into other government hands.

The management problems at IMI will not be solved as long as the company remains in government hands: its merger could well just make its troubles worse.

The workers lend a hand

In fact the workers themselves recently demonstrated how the government's management threatens to destroy IMI outright. Despite the company's dreadful condition, the workers demanded, and received, a 10% raise.

A privately held company not yet able to stand on its feet, that had received NIS 7 billion in bail-outs, would have sent them packing.

In its struggle against privatization, IMI has managed to recruit the Defense minister. And, while about it, the Lebanon II war. "We worked around the clock. We barely ate, anything to have shells in inventory," Yehuda relates. "A private company would have doubled the price of the shells."

It is a strong argument, but it won't wash. The reality is that the privately held defense industries, such as Elbit Systems, worked at full capacity during the war, to supply the Israeli army with sensitive security requirements that matter much more than shells.

Actually, the army's civilian suppliers also burned the midnight oil. During war, experience shows, everybody's a soldier, whether with gun in hand, microscope or pen, or industrial production.

No. IMI's real war is not on the border with Lebanon, it's in Jerusalem.

"We have 2,700 IMI workers, 400 from Ashot Ashkelon and 10,000 pensioners," Yehuda does some counting. "We have dozens of people working in Knesset in gain support for us. Not everything boils down to Amir, Amir" - Peretz, he means. "There're also Ami Ayalon, Ephraim Sneh, Matan Vilnai and others. We will give a hand to anybody who helps us."

With forces like that, no wonder the efforts to thwart IMI's privatization have worked so far, even though NIS 7 billion have been tossed down the toilet, and counting.