•Back In The Black or lAnticipating a profitable 1998, IAI President Moshe Keret faces the challenges of company restructuring. STEVE RODAN Special to The Jewish News I srael Aircraft Industries (IAI), the nation's largest defense contrac- tor, stands at a crossroad. After several losing years in the early 1990s, IAI has proved that it can sell its products virtually anywhere. Now the state-owned giant must prove it can be profitable. As far as company President Moshe Keret is concerned, there is no doubt that IAI is well on its way into the black "Based on the backlog of orders and other data, 1998 will definitely be prof- itable," he says, taking out a sheet of paper to illustrate his point. He draws two lines. In 1992-93, IAI sales were running ahead of its acklog of orders. That, he says, reflected a bleak future. Today, IAI's backlog is ahead of its sales — way ahead. The company expects to sell $1.6 billion in 1997 and register orders of $2 billion. The latter figure will set a company record. Profitability for IAI represents hard-won battle for Keret. Perhaps more than anybody else today, the 63- year-old technocrat embodies IAI, a company he has worked for since .1955. After the 1967 war, Keret head- ed the company's combat-aircraft assembly division. In 1974, he became vice-president of the Kfir jet-fighter program. His performance won him both the Defense and Kaplan awards. ■ The bad years came soon after Keret was appointed president of IAI in 1985. In August 1987, the government suspended the Lavi fighter-jet program. The decision rocked the military-indus- Okrial complex that had geared up for manufacturing the combat plane. Suddenly, thousands of engineers and technicians became redundant, and many assembly lines were abandoned. le The result was years of reorganiza- tion. IAI reduced its workforce from 22,000 to 16,500. It turned away from the Israel Defense Force and looked for export markets. Today, those markets are varied. Southeast Asia is strong. China is ordering the Phalcon early-warning air- borne system from IAI's Elta Electronics Industries subsidiary in a deal that could reach $1 billion. Korea is buying the Harpy unmanned air vehicle and is discussing joint produc- tion of the Barak anti-ship missile. IAI has made inroads in Europe as well, but Western Europe has always been a difficult market with a protec- tionist bent. "This effort to create a relationship • with Europe is not only based on sales, but on the creation of alliances with European companies to create opportu- nities to work together in Europe or together for third parties," Keret says. Then there is the U.S., where JAI has several projects going on — includ- ing the upgrade of the T- 38 combat trainer with McDonnell Douglas. "The U.S. is also a very impor- tant market for IAI," he says. "It has always been." Now for the hard part. Keret's challenge will be maintaining labor calm in the face of the company's powerful union. The union opposes IAI efforts to restructure the govern- ment company. Such a move requires government approval, but company executives are already trying. The leader of the effort is IAI Chairman Avigdor Ben-Gal, who is openly lob- bying for the government to privatize the defense contractor. He has orga- nized meetings with chairmen of other companies interested in buying a piece of IAI. Keret has taken smaller steps. He has been negotiating for the establish- ment of several joint ventures with companies both in Israel and abroad that would reduce inefficiency and competition. One of the efforts is a joint marketing company with Elbit Systems Ltd., Haifa, for unmanned air vehicles. The union, however, has so far stopped the efforts. In June, IAI work- ers held two days of violent demonstra- tions calling for Ben-Gal's ouster for talking to Lockheed Martin about the prospect of investing in JAI. Keret is careful not to upset the unions, but he is adamant that the company must restructure if it wants to survive. ❑ A defense giant has more demand. Steve Rodan writes for the Jerusalem Post. You PAID FOR THE BAT MITZVAH, THE ORTHODONTIST, COLLEGE AND A GOOD PART OF THE WEDDING. SO WHAT'S ANOTHER $46? You probably paid more for a new cummerbund. But then, when was money ever an object when it came to your kids? Especially if it was something beneficial to them. Now that they're married you can still do something good for them. And it won't cost you a whole lot of money. For $46.00 you can give your children a year's subscription to The Jewish News. Each issue provides important useful information about everything from our local community and Israel to modem ways to observe Jewish holidays. 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