Netanyahu Bowed to Israel Chemicals Employees' Pressure

A company must make money. If it does not earn a proper return on equity, its owners (Israel Chemicals) will stop investing in it, and it will suffocate until it closes.

Eyal Toueg

Shelly Yacimovich did not surprise us. From the very first moment she claimed that the layoffs were not justified, and immoral too. Yair Lapid was not far behind: He said the layoffs were arbitrary and evil. Okay, so neither of them are guiding lights when it comes to economic theory.

But then came Prime Minister Benjamin Netanyahu and upset everything. He passed them at high speed on the left side and announced that the firing of 140 workers at Israel Chemicals’ bromine factory must be stopped immediately. It is well known that Netanyahu is incapable of withstanding pressure. But why so fast? So harsh? So transparent? It was enough for a few of the workers to appear on television, scream “Bibi go home” and demonstratively tear up a few Likud Central Committee membership cards in order for the man who presents himself as a steady rock to fold and deny his economic beliefs.

The facts are rather sad. The bromine company, which is a subsidiary of Israel Chemicals, has lost money for eight years, and the cumulative losses have reached the huge sum of 1 billion shekels ($250 million). Over the past four years, the company has invested 1.5 billion shekels in machinery and equipment, but the bleeding has not stopped. In fact, there is no economic feasibility for keeping the plant in its present situation. It is not competitive, inefficient and unprofitable.

The reason is clear: An excessive number of workers and bloated salary costs. The wages in the plant are the highest in the bromine industry in the entire world. These are average wage costs of 40,000 shekels a month per employee, not including unusual fringe benefits such as paying for two flights a year abroad for every worker, to exotic destinations. In other words: In bromine they make more money than even in the Israel Electric Corporation, in the ports and the banks.

The chairman of the plant’s union, Avner Ben-Senior, enjoys a salary that costs the company 76,000 shekels a month, even while he does not work and is kept busy with only union business; for example, during trips overseas, in order to examine whether the hotels on the planned trips are good enough for the employees.

So now, at a far too late stage, has the management decided to try and save the factory. To do so, they want to lay off 140 employees who cost the company more than the value of their labor. The ABC of management. After all, the bromine plant needs to sell its goods at international prices, while it is facing factories from all over the word that do not have 140 surplus workers, don’t have excessive wages and an aggressive union. A company must make money. If it does not earn a proper return on equity, its owners (Israel Chemicals) will stop investing in it, and it will suffocate until it closes.

Lapid once said that he would roll out a red carpet for Intel if it would agree to invest in Israel. But if he would have informed the CEO of Intel Israel that she could not fire employees during a crisis, she would have told him: We’re not coming – we’ll build the plant in Ireland.

When investors examine investing in various countries, they look at the macroeconomic stability, the legal system, the level of corruption and the ability to manage the workforce. They will not come to a place where they cannot fire when necessary. Therefore, an inability to fire means a drop in investments and damage to economic growth, which lead to unemployment and poverty. Does Lapid remember that in 2014, the year in which he served as finance minister, there was a drop in investment?

The management of the bromine plant had no choice. They must become more efficient and fire people. Otherwise all the company’s 850 employees will be sent home too. The state needs to offer a plan for professional training for those fired. This is its responsibility.

Yacimovich and Lapid do not understand this. Netanyahu knows it very well. But what importance is the economy and what does he care about economics, compared to the key principle: his job.