A half-day nationwide strike protesting mass layoffs at Teva Pharmaceuticals brought large swathes of the economy to a standstill on Sunday as Israeli leaders vowed to mitigate the impact of the firings.
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The four-hour labor action shut down Ben-Gurion International Airport, government offices, insurance companies and banks, seaports and the Tel Aviv Stock Exchange, among others. Cellphone companies provided only minimal customer service.
Teva was at the epicenter. All its factories and headquarters offices were struck for part or all of the day. Teva workers blocked roads near the company’s Petah Tikva headquarters and the entrance of Jerusalem, burning tires. Others barricaded themselves inside the company’s Jerusalem plant, which is slated for closure as part of the layoffs.
Teva workers will continue their labor action on Monday, striking some facilities for all or part of the day while others hold union meetings during work hours.
The Histadrut labor federation has not issued any specific demand from Teva, which said on Thursday it planned to cut 14,000 jobs worldwide, including 1,700 in Israel, as it contends with a $35 billion debt load and eroding sales and profits.
Although the layoffs in Israel are far fewer than the 3,000 rumored before the official announcements, the news sent shockwaves through the country. Teva is one of Israel’s largest employers and has been the beneficiary of some 20 billion shekels ($5.7 billion) of tax benefits over the last decade.
“We’re fighting on behalf of Teva’s workers to save Israel’s industry...and to convey the message that layoffs are the last and not the first step in the public and private sectors,” Histadrut chairman Avi Nissenkorn said.
The strike and media coverage of the Teva layoffs prompted Prime Minister Benjamin Netanyahu to intervene. On Sunday, he told the cabinet that he and Finance Minister Moshe Kahlon would be meeting Teva CEO Kare Schultz later this week.
“I spoke with [Schultz] last week and I told him that our first goal is to minimize the blow to workers. This is the first thing. The second thing, of course, is to do everything possible to prevent the closure of plants in Jerusalem,” Netanyahu said.
“The third thing is to ensure that Teva remains in the State of Israel...It started as an Israeli company and we want it to remain as an Israeli company. We will use various means at our disposal to try and achieve these goals.”
Meanwhile, a host of lawmakers urged Teva to keep the Jerusalem plant open and reduce the number of layoffs. Knesset Finance Committee Chairman Moshe Gafni (United Torah Judaism) called a meeting of the panel for Monday, although it has no authority to involve itself in the matter, and to date no one has introduced legislation that would address the issue of benefits being awarded to big companies.
Avi Gabbay, the Zionist Union chairman, attacked the government for failing to address the Teva problem earlier. “Kahlon’s and Netanyahu’s behavior in the Teva crisis is like a man that starts to prepare for an earthquake after it’s happened – too little, too late. That’s not how to run a country,” he said in a Twitter post.
Kahlon and Economy and Industry Minister Eli Cohen will meet with Nissenkorn and Teva union leaders on Monday. One government source who asked not to be identified said no policy would be formulated until after that meeting and the one with Schultz.
Other sources speculated on Sunday that the government might use negotiations it is holding with Teva over tax assessments going back to 2014 as a lever.
Although Israel Tax Authority officials said any agreement on the final assessments would have to be based on tax law, treasury officials said the talks could be used to take a harder or softer stance, especially as there have been major reforms of the tax code during those years.
Meanwhile, the stock market largely – although by no means entirely – lauded Schultz’s plans, which aim to save Teva $1.5 billion next year and double that in 2019 to help it repay $9.1 billion in debt coming due over the next two years.
In New York, Teva shares climbed 18.5% on Thursday and Friday to $18.61, their highest in more than 10 weeks. On the Tel Aviv Stock Exchange, they rose a more modest 14.4% to 63.90 shekels over Thursday and Sunday.
“Teva has turned a corner,” Goldman Sachs analyst Jami Rubin said in a note, adding that the decision to cut about $3 billion in costs by 2019 was well ahead of her estimates of $1 billion to $2 billion by 2020.
Credit Suisse analyst Vamil Divan also expressed a positive view, albeit a tentative one. “We await more details on the plan and look for signs of successful execution before getting comfortable enough to fully recommend the stock, but we see things heading in the right direction,” he said.
But Moody’s Investors Service put its Baa3 rating of Teva under review for a possible downgrade. It said its final decision would hinge on the “timing and execution risk of achieving $3 billion in cost savings” as well as on the potential negative effects of cost reductions on research and development and cash flow.