Military Industries Postpones Firing 500 Employees

Massive layoff put on ice at behest of defense minister, but only until October 31, says company.

The board of directors of Israel Military Industries informed the government yesterday that it is putting on hold firing 500 employees. The massive layoff had been agreed upon as a step in the company's reorganization plan. The move appears to be aimed at pressuring the government to make critical decisions required to advance its privatization plan.

"IMI's board of directors asked the ministers of defense and finance to promptly make the decisions necessary to advance the company's privatization," the company said in a statement yesterday.

IMI plant Oct. 7, 2010 Alon Ron
Alon Ron

"The board informed the ministers that, in compliance with the request of the defense minister, it has decided once again to postpone carrying out the decision to terminate 500 company employees until October 31, 2010, in order to give the privatization process another chance. These are 500 of the 950 employees who, all parties concurred, would leave the company in the framework of the reorganization plan and in preparation for the company's privatization."

In addressing the ministers, IMI said that its board is confident that the few issues remaining in contention will be decided by the defense and finance ministers and that the process will be extricated from its current deadlock.

The government decided to privatize the financially troubled company over a decade ago. IMI claims that its difficulties did not result from its operations, but from the manner in which it became a government corporation 20 years ago. It maintains that its fundamental problems are deficits structured into its working capital and pension payments to company retirees.

As a government corporation, IMI has been obliged over the past four years to finance approximately NIS 1 billion in expenses which have no bearing on its day-to-day operations. These include about NIS 200 million per year in maintaining strategic lines of heavy ammunition and NIS 60 million per year in payments to company retirees.

IMI management initiated the company's privatization plan, which would involve two stages: an initial public share issue of up to 49% of the government's ownership in the company, with the rest of the shares and control remaining in the hands of the government. At a later time the remaining government shares would be sold off.

To prepare the IPO, several changes must be made, including to the company's capital structure, employees' rights, environmental issues and ensuring the protection of the country's vital security interests.

The Government Companies Authority opposes the public issue of shares. In response, the employees and the Defense Ministry have stopped implementing the company's reorganization program and attempts to arrive at an agreement on the company's privatization have reached an impasse.