Dov Lautman, Founder of Delta, Takes a Bow

"My dream has always been for Delta to be a global company with its headquarters in Israel," said Dan Lautman, the company's founder, in an interview with TheMarker. "I firmly believe that in another 20 years Delta will still be a global company with its headquarters in Israel."

Lautman has built Delta Galil Industries into the leading Israeli manufacturer of socks and underwear and one of the five leading companies in this field worldwide.

This week, Lautman, who is battling amyotrophic lateral sclerosis (Lou Gehrig's disease), says that it is too hard for him to continue to manage the company.

"After leading Delta for 32 years since its foundation," said Lautman, "I have decided, in view of my health condition and my responsibility for Delta, its employees and future prosperity, to sell control of the company to Isaac Dabah, my partner in leading Delta for the past two years. I consider Delta to be my life's work. I reached my decision after thorough reflection and with the intention to ensure continuity in leadership. Isaac has vast experience in the textile industry and I trust that he, together with the company's CEO, Aviram Lahav and the rest of the company's management and employees, will lead Delta to growth and profitability."

No other option

Lautman believes the company's new owner and board chair will continue his path of innovation and globalization. Despite criticism from social commentators regarding Lautman's transfer of manufacturing operations from Israel to neighboring countries, he was never ashamed of this, even though it meant laying off employees, particularly seamstresses.

"From an economic perspective," says Lautman, "I had no other option. This is the only way to maintain a textile company in the Western world - by transferring manufacturing to countries with less expensive human resources. This is also what made it possible to continue employing some 800 workers in Israel."

Delta's growth was not always a given. Even though Lautman realized the importance of manufacturing abroad before others did, the company hit a crisis three years ago due to mounting global competition. Despite his illness, Lautman reassumed management of the company, sidelining the CEO.

About a year ago the company seemed to be back on a growth track, but the first quarter results in 2007 indicated that Delta has still not solved its problems and the new chairman has his work cut out for him.

Next step: streamlinging

Delta, which this year announced plans to dismiss 600 workers in Israel, recorded a $10.8 million streamlining expense for severance pay.

This increased the company's net losses to $13.2 million. Lower revenues in the first quarter of 2007 compared to the same period in 2006, mainly from a decline in sales in the United States and Europe, also contributed to the negative bottom line.

Lautman's new chairman will move forward with the company's streamlining plans, which include the dismissal of some 400 workers in the socks and knitwear factories. That will leave Delta with about 850 employees at its headquarters in Carmiel and several hundred workers at the company's 84 Delta Plus stores throughout Israel.

Education and co-existence

"I feel I have made the right move in transferring Delta to professional hands," says Lautman, adding that he considers Dabah a strategic controlling shareholder in light of his experience managing textile plants in other countries.

"I do not think there is an Israeli company that can exist without a strategic controlling shareholder," continued Lautman.

"Dabah invests here as a Jew and a textile maven. It is his profession. He made his fortune in his family's textile plant. Then he founded his own plant and sold to big clothing companies in the U.S. Two and a half years ago he acquired Sara Lee's stake in Delta. He had five million shares before the current deal."

With the announcement of the change in controlling shareholders, Delta's share price surged by 11 percent. Lautman believes this spike is connected to the high price paid by Dabah, which reflects future potential growth.

"I sold at a high price, with a premium of 30-50 percent," explains Lautman. "This is a sign that Dabah believes in Delta. I retained over 2 million shares, indicating that I also believe in the company. People apparently believe this is a good move and that Delta will grow. The public believes in the company."

An active future

As for Lautman's future plans, he said he will not be spending even one minute sitting at home.

"I am sure many organizations will be happy to have me come and volunteer my time, money and experience in promoting social issues. I will focus my energies on the things that are important to me - education, academic advancement and co-existence."

"I do not plan to leave the money [from the sale of my Delta shares] in the bank. I will invest it. And when I do, you will hear about it," concluded Lautman.