The More You Fire, the More You Hire at Israel Aircraft

Sources: Hidden unemployment of 2,000.

The streamlining program for Israel Aircraft Industries is based not on cutting its enormous workforce, but rather on getting rid of some workers and hiring new ones for a net gain of 1,000, according to statements made yesterday by sources close to the company. The increase would bring IAI's payroll up to at least 16,000 by the slated completion date, 2010.

According to the sources, the program, currently in the early, theoretical stage, calls for absorbing 2,500 new employees, most of them young and low on the pay scale, and dismissing or offering early retirement to 1,500 workers at higher pay grades.

"The IAI management knows that these workers have nothing to do after clocking in," the sources said, citing hidden unemployment among more than 2,000 workers. They said that to achieve genuine corporate recovery these people will have to go.

The severance pay and early retirement packages for the five-year rationalization plan are expected to cost between $300 million and $500 million. The sources believe the government will not contribute to the undertaking, and that it will involve losses that may be intolerable to the IAI's new management. The sources say the high cost may be a deal-breaker that will keep the program from getting off the ground.

IAI's sales in 2005 reached $2.34 billion, and net profit totaled $25 million, the latter coming exclusively from the company's Elta subsidiary and missiles division. All other divisions of the corporation recorded losses. In the first half of 2006 sales were $1.3 billion, and net profit was $48 million.

The company has already put forth a plan involving the early retirement of about 250 employees at a cost of approximately $50 million. The cabinet previously approved the early retirement of about 400 employees aged 55 and over with seniority of at least 35 years, but IAI management was unable to persuade any of this group to leave.