12 MONTH
CERTIFICATE
Bridge Over
Troubled Waters
5.75%
INTEREST RATE
51870
Having led a remarkable post-socialist about-face,
Koor Industries CEO Benjamin Gaon now faces the
challenges of peace, globalization and
de-monopol ization.
A.P.Y./*
60 MONTH
CERTIFICATE
AMOTZ ASA EL SPECIAL TO THE JEWISH NEWS
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6*00%
INTEREST RATE
•
1 3%
A.P.Y./*
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Four-strand cultured pearl
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30400 Telegraph Rd. Suite 134, Bingham Farms • 642-5575
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-
hough 53 years have
elapsed since Israel's Koor
Industries was estab-
lished, much of the drama,
angst and vision which accom-
panied the company's inception
have yet to abate.
The difference is only that this
former leader of Israel's defense-
related efforts has transformed
into a peace-era path breaker, and
that the conglomerate, which un-
til recently epitomized the demise
of Israeli socialism, is now spear-
heading a capitalist revolution.
Established at the height of
World War II by Solel Boneh —
the Histadrut-owned company
which at the time was busy build-
ing for the British army every-
thing from airports to military
bases anywhere between Egypt
and Iran — Koor was originally
meant to build labor-intensive fac-
tories for Palestine's newly ar-
rived Jewish immigrants.
In a society dominated by a so-
cialist establishment, this meant
improved access to funds, real es-
tate and labor.
The company lost no time cap-
italizing on all these, and by the
mid-1950s emerged as a major
producer, exporter and employer
in the Israeli economy. Fittingly,
Koor's development in subse-
quent decades reflected much of
the trends that characterized Is-
raeli history, for better and for
worse.
In the early 1950s, eager to di-
versify and inspired by David
Ben-Gurion's determination to
develop a local arms industry,
Koor set up telecom specialist Tel-
rad and artillery supplier Soltam.
Politically, these subsidiaries,
along with Tadiran which was
founded in the early 1960s, made
a major contribution to the tech-
nological edge which helped Is-
rael win wars.
Financially, these companies
figured prominently in an export-
oriented defense industry which
by the 1980s would become Is-
rael's major source of foreign cur-
rency.
However, during those lengthy
decades — being owned by the
Histadrut's Hevrat Haovdim —
Koor was not expected to neces-
sarily generate growth and prof-
its. Rather, its major economic
purpose was to provide jobs. And
so, when Koor expanded into a
wide range of completely unre-
lated fields, from motoring and
food to chemistry and retailing, it
often lacked the comprehensive,
strategic broad view with which
to piece together its increasingly
disjointed activities.
And worst of all, Koor's losing
subsidiaries would seldom — if
ever — be faced with market ver-
dicts of cost-cutting, consolidation
or downright extinction, and in-
stead could always count on be-
ing bailed out by the holding
company's profitable arms. In
1983, in fact, the company bought
ailing tire producer Alliance after
its creditors threatened to de-
mand its liquidation. Moreover,
Koor's mid- and top-level man-
agement were often retired army
generals, many of whom lacked
the kind of business knowledge,
knack and experience that were
vital for the decent fulfillment of
the positions they assumed.
Ultimately these deformities
had to result in an explosion, and
when it came — in the second half
of the 1980s — Koor's agony
loomed ominously as the most
compelling manifestation of the
dead-end at,which socialist Israel
had arrived.
By 1988, with 32,000 employ-
ees in 130 companies, Koor had
at its disposal a mere four prof-
it-making subsidiaries and an
overall $369 million deficit.
Israel's economic leadership,
encouraged by the success of the
1985 austerity program — which
cut subsidies, stabilized the
shekel, slashed the budget,
trimmed wages and froze hiring
across the public sector — brave-
ly decided to leave Koor to its
own devices, and thus sent a re-
sounding message that the anti-
economic days of knee-jerk
bailouts were over.
The man who found himself in
the eye of this storm was Ben-
jamin D. Gaon, whose leadership
until then of the Co-Op retail
chain was among Koor's handful
of profitable activities. As Koor's
new leader, Mr. Gaon oversaw a
major debt restructuring plan,
which he designed with the help
of then-finance minister Yitzhak
Moda'i.
The major problem was cash
flow. Clearly, the company could
not repeat its 1986 exercise in fu-
tility, when it raised $105 million
by selling bonds on Wall Street
through the dubious auspices of
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