Defense industries in Israel warn of thousands of layoffs

TEL AVIV — Leading defense executives are warning that thousands of employees will be laid off as the military reduces procurement from Israeli contractors.

The executives said companies will close and weapons assembly lines will be shut down because of the continuous cut in the defense budget. They said the military is buying more from the United States at the expense of Israeli industry.

A victim of the defense cuts, the executives said, will be electronic warfare, anti-tank and air-to-air missile programs. The result, they said, is that the industry will lay off 13,000 workers over the next eight years as Israeli contractors transfer assembly lines to the United States.

"There will be damage in places that we will be unable to repair," said Giora Shalgi, director-general of Rafael, Israel Armament Development Authority. "We are going to develop with our competitors systems that we should be doing here."

Shalgi said the effect of the defense budget cuts will be felt by 2005, when current development programs end without being replaced by other projects.

Herzl Budinger, a former Israeli air force commander and president of Rada Electronic Industries, agreed. Budinger said Israeli defense industries cannot survive merely on exports abroad.

"We have arrived at the red line," he said. "We did all that was required. Seventy percent of our sales are in exports. There's no country in the world in which exports comprise 70 percent of sales."

Prime Minister Ehud Barak plans to cut 800 million shekels of the budget requested by the military. Military commanders said the decrease will suspend weapons development plans and stop procurement from Israeli contractors.

So far, executives said, Elbit Systems, Elisra Electronics Industries, Israel Aircraft Industries, Rafael, and Tadiran have opened assembly lines in the United States. They manufacture air-to-ground missiles, anti-tank missiles, air-to-air missiles, night vision systems, communications and other equipment.

The Knesset subcommittee on the defense budget held a hearing on the affect of the proposed cuts on the defense industry. Subcommittee chairman Avi Yehezkiel said on Wednesday that he cannot envision a majority of his panel supporting Barak's defense budget.

"It's a political issue," Yehezkiel said. "Whover allows himself to approve these cuts endangers himself politically."