The inter-ministerial committee set up to solve the crisis in the Israel Military Industries recommends fully privatizing IMI subsidiary (87.5%) Ashot Ashkelon Industries, which suffers liquidity difficulties.
The panel is headed by Defense Ministry financial advisor David Vaish.
Ashot Ashkelon trades on the Tel Aviv Stock exchange at a market cap of $20 million. IMI chairman and CFO Nehemia Hasid estimates that Ashot is worth $40 million.
The company has been operating since the 1950s. It became an IMI subsidiary in 1990. In 1993, Ashot Ashkelon listed 12.5% of its shares for trade on the Tel Aviv Stock Exchange.
The Vaish panel supports privatizing IMI altogether. It reveals that despite the company's financial troubles, employees were given pay rises of about 7% in 1999 and 2000. Furthermore, it still owes its employees $150 million in retirement compensation.
IMI, which employs 400 people, makes power systems and gearboxes for Israel-manufactured Merkava tanks. It also supplies products to the American jet engine manufacturer Ellison, and to Rolls Royce.
According to IMI president and CEO Shmuel Keren, IMI sales in 2001 will total $472 million, as opposed to $416 million in 2000. He expects an operating profit of $6.4 million, and a net profit of $700,000.