The state-owned defense contractor Israel Military Industries plans to fire up to 1,000 people and close down several plants.

IMI chairman Arieh Mizrahi divulged the news in a meeting with labor representatives, headed by Histadrut labor federation chairman MK Amir Peretz.

IMI currently employs 3,700 people.

Mizrahi and the company's CEO, Udi Ganani, met with Peretz on Thursday. Some 400 people will be fired frim plants that IMI is closing down altogether, Mizrahi said. At least 400 more will be laid off from plants that will stay open.

Discussions will be held regarding the fate of 200 additional employees who faced either pay cuts or dismissals, Mizrahi said.

The austerity measures are based on the recommendations of an interministerial committee that examined the state of the company. The panel submitted its recommendations to the Finance and Defense ministries in November 2001.

The committee recommended closing five plants and merging portions of the remaining factories. The report projected that IMI's cash flow deficit would increase by $30-40 million in 2002.

The committee determined that the most realistic option for rehabilitating IMI was through privatization

Last month, IMI postponed the early retirement payments to hundreds of former employees who left the company in the 1990s due to a cash crunch. Company management recently asked the treasury to provide state guarantees for $30 million.

Peretz said in the meeting that the labor union opposed any lay-off plan at IMI and suggested management enter negotiations with the union. Peretz warned against unilateral measures such as dismissals, an early retirement plan or privatization without a prior agreement with the workers union.

"Management errs in convening separate employee meetings using the divide and conquer method," he said.

Peretz expressed opposition to the privatization plan, saying the Histadrut and company employees would act to prevent it. "IMI is one of Israel's most glorious industries and there is no reason to hand it over to tycoons when it can still be rehabilitated," he added. He called on the treasury to finance IMI's past debts - the company's primary burden. The debts are primarily to retirees, banks and suppliers.

IMI's spokeswoman said last night in response that in management's meeting with Peretz no mention had been made of 800-1,000 dismissals. "Any irresponsible figure tossed around regarding firings only damages IMI and its employees," she said.

According to the spokeswoman, management and the employees union are currently negotiating a new wage agreement, after the previous agreement had not been renewed for two years. She stated that there was an optimistic atmosphere at IMI due to the fact that the Israel Defense Forces had decided to acquire Tabor rifles and the company had $800 million in orders for upgrading tanks.

The spokeswoman added that in Thursday's meeting with Peretz, Mizrahi had presented "IMI's capabilities and strategic goals." Concerning separate meetings between management and groups of employees, the spokeswoman said that employees were asked in the meetings to aid the company's marketing efforts and there had been no need to invite a labor representative to the meetings.

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