Arie Egozi/TEL AVIV
ISRAEL MILITARY Industries' new president and chief executive Shlomo Milo is looking at new ways to slim the business after an often painful rationalisation programme failed to return the company to profit in 1995.
In the past five years, Israel Military Industries has downsized dramatically. From a workforce of 11,000 in 1990, the company now employs just over 4,000 people. Plants have been closed or merged and loss-making activities dropped.
The company is a major manufacturer of ammunition of all kinds, from small arms to heavy artillery. One of its latest innovations is the successful 155mm artillery cluster shell which has already been selected by some overseas armies, including the British Army. In addition it is also a major manufacturer of small arms, from pistols to Uzi sub-machine guns and the Galil assault rifle.
Despite capacity closures and redundancies, 1995 still ended with a loss of $90 million. As a result, Milo believes that the steps taken to date are not enough. In an effort to push on towards the break-even target, the new president wants to turn the company into a holding company. "The headquarters will be sized down to a minimum and we will seek partners for almost all our activities. We think foreign companies are potential partners for these activities," he says.
Contacts with possible partners have already begun. US companies Lockheed Martin and Olin are said to be possible suitors for a holding in the Israeli company's ammunition activities. McDonnell Douglas (MDC) and British Aerospace are mentioned as potential partners for the aerospace activity, mainly weapon systems.
MDC has already established a project office to evaluate a special version of the Delilah decoy, a platform the Israeli company believes can be used for the development of stand-off weapon systems.
The Delilah variant has been dubbed "Light Defender" in the USA and while the immediate potential client is the US Air Force, MDC is probably eyeing its prospects in foreign markets. Milo confirms that BAe is also considering a version, for development.
"Pinpoint accuracy is not always the main requirement from a stand-off weapon system. In such cases a low-cost system is the answer. We will offer powered and non-powered versions," says Milo.
The company also sees launcher motors as a potential basis for international co-operation. Israel Military Industries has already signed a co-operation agreement with ARC in the USA in a failed attempt to win a recent NASA competition for small expendable launchers.
"Our capability in developing motors for low-orbit launchers puts us in a niche that in our opinion will help us enter this growing market," he says. Israel Military Industries already manufactures the motors for the Shavit launcher which has put three Israeli Offeq satellites into orbit. US observers believe that the launcher is a civil version of Israel's Jericho long-range ballistic missile.
While trying to penetrate new markets, Israel Military Industries continues to manufacture the TALD and I-TALD decoys. Brunswick, the US partner in the powered and non-powered decoy production, has decided to leave the programme. If the US Navy reaches a decision to procure the I-TALD, the Israeli company will become the sole supplier.
Israel Military Industries is also hoping that the 2,275litre fuel tanks developed for Israeli air force Lockheed Martin F-16s will bolster sales. The tanks, which improve the fighter's range by around 50%, are now being tested by Lockheed Martin. The US company's approval would lead to a host of export opportunities.
While the forecast for 1996 is for a more than halving of 1995 losses, to around $39 million, the plan to seek foreign partners for each area of activity, including aerospace and an air-launched weapon system, is the only remedy Milo can see to rescue the company from its plight.
As a former fighter pilot in the Israeli air force, Milo has a natural tendency to talk about the aerospace products his defence company produces.
Leaving aside his air force memories, Milo talks positively about the company's potential in the aerospace sector - particularly stand-off weapon systems.
To prove the point, he says: "Aviation products constitute a large portion of sales. In 1995, we sold some $120 million of products in this sector, compared with total company sales of $450 million."
Israel Military Industries has often faced criticism for its work on stand-off weapons. The basis of these criticisms has been that a company in financial trouble should not be spending money on such weapons when Israel's vast experience in the sector is already shared by two other state-owned defence industries.
In its effort to survive, the company may find that its air-weapon capabilities may now serve as a vital life line.
Source: Flight International
