Government Companies Authority director general Doron Cohen today instructed Israel Military Industries Ltd. (IMI) chairman Avner Raz to formulate an emergency plan within seven days. The defense contractor is in dire straits after the failure of privatization negotiations.
IMI expects its cash flow deficit to reach NIS 360 million in 2010, after recording a cash flow deficit of NIS 200 million in 2009. The company has had a cash flow deficit for over a decade.
Since June 2009, the Ministry of Finance and Ministry of Defense have transferred NIS 60 million a month to IMI to cover salaries and pensions to more than 3,000 employees and pensioners. Officially, the transfers are loans, but it is highly doubtful if the company will ever repay the money, in view of past loans that it has never repaid.
Cohen's directive means that he is demanding that IMI's board must immediately reduce the company's deficit; in effect, he is treating the company as bankrupt.
Last week's meeting between IMI executives, Ministry of Finance officials, the Histadrut (General Federation of Labor in Israel) representatives, and IMI workers broke down, when the Ministry of Finance reiterated its demand that it will not meet IMI's demand for billion of shekels in financial commitments to employees as a condition for privatization of the company.
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2010
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