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Bethel Finance news:
The heads of IMI, the Histadrut (General Federation of Labor in Israel), and the Ministry of Finance today informed the Knesset Finance Committee that they had made progress in privatizing the government defense company. The breakthrough came after weeks of intensive negotiations, led by a Finance Committee subcommittee chaired by MK Shai Hermesh (Kadima). Finance Committee chairman MK Moshe Gafni (United Torah Judaism) ordered the subcommittee to begin work a month ago.
In a briefing to the Finance Committee, Hermesh said, "We are on the verge of a historic deal that will enable the recovery of the company after years of crisis. This settlement will enable hundreds of dedicated employees to retire from the company with dignity, and those who remain will be cable to continue working with security after the privatization."
A key part of the deal involves the government writing off IMI's estimated NIS 1.1 billion debt to it. The debt is partly due to government loans to IMI to finance its regular operations, such as the purchase of raw materials and the payment of salaries. Under the proposed structure, this money will be considered as an owner's investment.
The write-off will come in exchange for pensions that IMI has paid since 1998 to retired employees, even though they were not government employees. This is a huge sum, which burdened the company's cash flow every month.
It should be noted that the Finance Committee today authorized the Ministry of Finance to transfer NIS 52 million to IMI to pay November salaries. These transferes have become routine in the past year.
Still no agreement
The debt write-off is only part of the structure being formulation, which includes agreement by the parties on the retirement of 950 IMI employees who are not needed for the company's regular operations, and whose annual cost is estimated at NIS 220 million. In addition, employees will receive pay hikes in accordance with the pay hikes made in recent years, and a safety net to guarantee the rights of the 1,000-1,400 employees who will remain after the privatization.
Although the Histadrut is demanding a NIS 850 million safety net, no agreement has been reached on its size. The issue will be clarified in talks between Histadrut chairman Ofer Eini, Minister of Defense Ehud Barak, and Minister of Finance Yuval Steinitz.
In addition to the issue of the safety net, there is still no agreement on another critical point, which would affect the fate of the historic deal: IMI's heavy munitions production line, which is considered not worthwhile for the company, but which the Ministry of Defense is insisting stay open in order to guarantee the production of critical munitions for the IDF in an emergency.
Hermesh's subcommittee proposes that the Ministry of Defense increase its munitions orders by NIS 500 million, and bear responsibility of the production line. Given the current budget realities, the Ministry of Defense is unwilling to commit, nor is it interested in endless procurements of munitions when the bunkers are full.
There appears to be agreement by the parties to reach a deal. Budget Director Gal Hershkowitz said, "The defense establishment should not have to subsidize IMI, and IMI have to subsidize the defense establishment."
Eini said, "Any agreement depends on a Ministry of Defense commitment to procure heavy munitions."
Gafni said, "The Ministry of Defense should commit to making fixed procurements from the heavy munitions production line."
A worthwhile asset
IMI chairwoman Nitza Posner represented the company in today's Finance Committee meeting together with CEO Avi Felder. She said, "The proposed structure will enable the optimal operation of the company in a way that the buyer will see it as a worthwhile asset with growth engines that offer a business horizon. The state, too, as the shareholder, will be able to optimize proceeds."
The Ministry of Defense said in response, "Throughout the crisis at IMI, Minister of Defense Ehud Barak and Ministry director general Udi Shani have stood firm, showed responsibility, and transferred to the company hundreds of millions of shekels at the expense of future orders. The Ministry of Defense is currently preparing a multiyear work plan, and until the budget structure clarifies, it cannot commit to placing the orders demanded by the Ministry of Finance. The Ministries of Finance and Defense are holding intensive talks and are making every effort to reach an agreement that will put IMI on a new road."
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