Sonol fires 300 in response to fuel margin cut

Sonol CEO Galili: The current high price of gasoline has reduced gasoline consumption.

Fuel company Sonol Israel Ltd. CEO Nir Galili said that the company will reduce its workforce by 300 people in response to the fuel margin cut. This will be accomplished by a hiring freeze and by firing current employees. The company will succeed in becoming profitable despite fuel margin cuts if it successfully implements efficiency measures, such as offering only self service at gas stations, launching new products, and altering contract terms with gas station owners, customer clubs, as well as strategic partners, including Hever Career Soldiers Association and Israel Police, which is the company's largest customer.

Galili says that the current high price of gasoline has reduced gasoline consumption. Despite the increase in the number of cars on the road, the amount of gasoline consumed is unchanged. "More and more companies are restricting gas allowances to employees. There is a new phenomenon where people are ride sharing; they are leaving their car at home and splitting fuel expenses," Galili said.

Last month, Minister of Finance Yuval Steinitz and Minister of National Infrastructure Uzi Landau cut fuel margins for companies from NIS 0.710 per liter of self-service 95 octane gasoline to NIS 0.589 per liter. The significance of this is that the state is providing the public with an incentive to use self-service over full-service, which will bring about a reduction in the number of gas stations attendants, most of whom have just finished IDF service. Sonol, along with three other large fuel companies - Paz Oil Company Ltd. (TASE:PZOL), Delek Israel Fuel Corporation Ltd. (TASE: DLKIS), and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) - have petitioned the High Court of Justice against the fuel margins cut, but the court refused to cancel the directive. In response, Sonol cancelled all discounts to customer clubs and notified some station owners that they would have to renegotiate their contracts with it. Sonol has also cut the rent it pays gas station owners. The average rent is currently NIS 0.25 per liter and the new fuel margin caps rent at NIS 0.16 per liter.

Sonol launches green gas

Starting today, at 160 gas stations, Sonol will begin selling Gold 95 gasoline instead of 95 octane gasoline. Gold 95 is a mixture of regular gasoline with an additive produced by Lubrizol Corporation. Sonol presented data showing that the new gasoline saves 4% on average in gas consumption during intercity travel, reduces exhaust fumes by 20%, and reduces carbon dioxide emissions by 4%. These data are based on results from a study conducted for Sonol by Prof. Eran Sher, who directs a lab at Ben Gurion University studying internal combustion engines.

Galili said that Sonol hopes that the introduction of Gold 95 will boost sales by 5-10% within six months. He claims that families will be able to save NIS 400 - NIS 650 a year.

Published by Globes [online], Israel business news - www.globes-online.com - on October 4, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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