"The government will find it difficult to help Phoenicia America-Israel (Flat Glass) Ltd. and save the plant from its crisis. It's impossible to allot NIS 10-15 million in the case and solve the problem. Phoenicia needs an injection of at least NIS 6 million a month. This is aid on a scale that the government cannot commit to," a top government official told "Globes" today, about the attempt to draw up a government rescue plan for the Upper Nazareth-based company and prevent the firing of its hundreds of employees.
Over the past few days, Ministry of Industry, Trade and Labor director general Sharon Kedmi has headed a team of top officials from the ministry and Ministry of Finance to try and formulate a proposal for government aid for the company, which suffers from cash flow troubles. Phoenicia Flat Glass's debts exceed NIS 320 million, which its management says is due to much higher fuel prices and the natural gas shortage, which reduced the company's competitive edge against foreign rivals whose flat glass production lines use natural gas.
Phoenicia Flat Glass will only receive access to natural gas in two and a half years, and its factory is not even hooked up to the natural gas pipeline network. "The need to provide specific aid for a troubled enterprise exposes the government's weakness," said the source. He added, "As the economy becomes more strained, more and more enterprises will rise up and ask for aid, if you say yes to one, it will be very hard to tell someone else no a few weeks later. Regrettably, it seems that Phoenicia Flat Glass is not a one-off case, and more enterprises will find themselves in a crisis of one kind or another."
Some Ministry of Industry officials have been speaking strongly in favor of saving Phoenicia Flat Glass. "There is a need to find a creative solution to rescue it," said one top official. He said that the government cannot allow an increase of unemployment in the north by firing the company's 400 employees, not to mention hundreds of indirect employees, such as service providers, drivers, and suppliers. There is a difference of opinion between the Ministry of Industry and the Ministry of Finance's Budget Department on this point. The latter believe that the government should not intervene in the Phoenicia Flat Glass crisis by injecting government money, partly out of fear that this would set a precedent, which would force the government to inject capital into other companies liable to face similar crises in the future.
Yesterday, Kedmi and Phoenicia Flat Glass CEO Eran Chaimovich met to discuss possible ways to rescue the company from its severe financial crisis. Sources at the meeting believe that Kedmi will submit his recommendations to Minister of Industry, Trade and Labor Shalom Simhon in three days.
Published by Globes [online], Israel business news - www.globes-online.com - on August 27, 2012
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