After many years of tranquil labor relations, the workers at Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1), Israel's largest defense company, are threatening sanctions and work disruptions at all of its plants throughout Israel, starting next week. The workers say they will call off their planned protest only if the company's unilateral cost-cutting plan, announced by company management a month ago, is immediately halted.
The streamlining plan includes a freeze in promotions, salary cuts, consolidation of jobs and positions, and more. IAI management explained the need for these measures by the absence of negotiations between it and the workers' organization in the company, citing its deteriorating financial situation and the drop in its orders backlog. The unilateral measures do not include layoffs, because under the company's labor agreements, this measure requires the consent of the workers' organization.
Since IAI management announced its intention of implementing unilateral cost-cutting measures, unrest has developed among the workers at the company plants. They have held explanatory meetings, and sporadic protests against management were held in recent weeks. The company workers yesterday raised the tone of their objections to management, calling on it to immediately desist from the measures, and to negotiate with them; otherwise, they said, they would begin sanctions and work disruptions early next week. The planned protest includes preventing the entry of senior IAI officials to its facilities, blocking the exit of goods for customers, etc.
IAI said in response, "The company must take measures to ensure its continued growth and ability to compete in competitive global markets. The company has a clear business vision and a strategy for global competition, and has made a considerable number of deals and taken substantial measures in this direction in recent years. The current streamlining effort is an essential element of this plan aimed at safeguarding the company's ability to continue expanding its business, which will guarantee employment stability for thousands of its workers and their families."
IAI added, "For many months, we have tried to reach understandings with the workers' organization, and we hope that a way will be found to do this in the near future. It is clear to everyone that cost cutting is necessary in the near future; postponing it will only increase its extent and consequences."
The workers' threats to impose sanctions after more than 20 years of peaceful labor relations at IAI's plants follow growing tension between company management and the Government Companies Authority, headed by director Ori Yogev. Yogev is trying to dismiss IAI chairman Rafi Maor, following the findings of an audit at the company initiated by the Government Companies Authority and IAI's financial decline.
Three weeks ago, Yogev notified Maor that he intended to give him a hearing before dismissing him, under the authority vested in him as director of the Government Companies Authority. The meeting is schedule for one week from now, but sources inform "Globes" that Maor is trying to delay it. In recent days, he contacted Yogev through his lawyer asking for additional documents pertaining to the complaints that will be made against him in the hearing for dismissing him from his position.
The Government Companies Authority rejected the request for the additional documents. At the same time, the Government Companies Authority is considering granting Maor's request for a postponement of the hearing by a few weeks in order to enable him to prepare for it. IAI refused to respond to questions on this matter. The planned economizing measures at IAI were conceived a long time ago, and the major recovery plan that the company wants to proceed with includes early retirement for 1,000 company workers, many of whom are in its civilian aerospace division and the Bedek Aviation Group. These two divisions are responsible for most of IAI's losses in recent years, and their activity features hidden unemployment, following a steep drop in orders caused by global market conditions and intensification of competition with other companies. IAI management recently asked the Ministry of Finance for assistance in carrying out widespread recovery measures and paying for early retirement for 1,000 workers, at a total cost of NIS 1 billion - NIS 1 million per employee. Government sources familiar with IAI's request showed no enthusiasm for it, noting that the company could raise this amount through an offering of minority shares in the company, which in any case is already planned for this year.
A source close to the company's situation expressed doubt concerning the feasibility of such an offering, asking, "How can a company convince anyone to buy its shares when it has no giant deals, its orders backlog is waning, it is losing money, its management is bickering with the regulator - the Government Companies Authority, and now its workers are threatening to disrupt peaceful labor relations and sabotage work?"
Published by Globes [online], Israel business news - www.globes-online.com - on February 4, 2016
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