Koor Industries Ltd.

Koor Industries Ltd.

8 Shaul Hamelech Boulevard
P. O. Box 33333
61232 Tel Aviv
Israel
(03) 250-421

Labor-Union Owned
Incorporated: 1944
Employees: 31,640
Sales: US$2.5 billion

Koor Industries is the largest industrial enterprise in Israel, accounting for 10% of that nation’s GNP by itself. Koor derives more than 40% of its income from electronics; the remainder of its income is divided almost evenly among chemicals and rubber, ferrous and non-ferrous metals, and food and consumer products. The company is a major Israeli exporter, providing an often financially chaotic country with an important source of income and industrial growth.

Koor’s predecessor is Solel Boneh Construction, founded in British Palestine in 1924 by the Histadrut (the General Federation of Labor) to construct roads and buildings. Through Solel Boneh, the Histadrut provided a livelihood for settlers in an attempt to found a Jewish state in Palestine.

Solel Boneh began planning for independence as early as 1944, when it created an industrial arm called Koor Industries. Koor employed 500 workers at its two plants, Phoenicia Glass and Vulcan Foundries, both in Haifa. Many of Koor’s early employees were immigrants who had escaped Europe. After World War II Koor employed many concentration-camp survivors and refugees from Arab nations, providing much-needed job training and employment for these immigrants not just in cities but also in remote villages.

Koor formed Nesher Cement in 1945 as a joint venture with private investors. Koor’s first exports, Vulcan car batteries, were sold to Syria in 1947. In 1951, Koor entered the telecommunications field through another joint venture called Telrad, which was located in the town of Lod, near Tel Aviv. From this facility and another built at Ma’alot in 1965, Telrad manufactured telephones, PABX switching terminals, and a variety of other electronic devices.

Shortly after Israeli independence was declared in 1948, the state was attacked by Arab nations. In repelling the attack, Israel took additional land and doubled in size. The war however, left Koor economically isolated within the Middle Eastern region. Without local export markets, the company instead concentrated its sales efforts in Europe, North America, and Africa. But with continuing tensions between Israel and its Arab neighbors came the need for Israel to develop a domestic arms industry. In 1952 Koor, in conjunction with the Finnish company Tampella, established the Soltam artillery-manufacturing plant. Koor’s arms manufacturing grew over the years as Israel’s Arab neighbors acquired increasingly sophisticated weaponry.

Koor opened the Harsah Ceramics plant in Haifa in 1953, and the following year built a steel-processing complex in partnership with German interests. In conjunction with American interests, Koor established the Alliance Tire and Rubber Company in 1955. Through these ventures, Koor not only contributed significantly to Israeli import-substitution efforts, but generated valuable foreign exchange, too.

By 1958, Koor had grown to 25 plants with 6,000 employees and overshadowed its parent company, Solel Boneh. That year Hevrat Ha’Ovdim, the economic arm of the Histadrut, decided to make Koor a separate entity specializing in industrial products, management and financial services, and foreign trade.

In 1962 Koor created an electronics company called Tadiran, jointly owned by Koor and the Israeli Defense Ministry until 1969. A year after creating Tadiran Koor entered the chemical industry by purchasing Makhteshim. Israel’s largest manufacturer of herbicides, pesticides, and insecticides, Makhteshim became an important exporter and source of foreign exchange.

Because it was so closely tied to the Histadrut labor organization, Koor often made business decisions according to workers’ welfare rather than profit potential. One of the company’s innovations in industrial relations was a joint labor-management committee to discuss production problems. This committee, introduced in 1964 at the Phoenicia Glass plant, raised productivity and minimized labor disputes, and was later copied at other plants.

Israeli borders were expanded again in 1967 after another war with its Arab neighbors. The West Bank, formerly a part of Jordan, the Syrian Golan Heights, and Egypt’s vast Sinai Peninsula came under Israeli control. Israeli economic influence spread into these occupied territories with the establishment of communal settlements. The development of these largely agrarian frontier regions represented an expansion of the domestic economy and increased demand for many of Koor’s industrial and commercial products.

The Israeli Defense Ministry sold its 50% interest in Tadiran to America’s General Telephone and Electronics Corporation (GTE) in 1969. The new ownership gave Koor access to superior technologies developed by GTE and helped Tadiran to become Israel’s largest electronics manufacturer and one of its largest employers. In 1970 Koor purchased Hamashbir Lata’ asiya, an integrated food manufacturer that produces edible oils and processed, canned, and frozen foods under the Telma brand name. In consumer goods, the company began manufacturing footware, and later added cosmetics, toiletries, cleaning products, and paper goods.

In 1971 Koor took over the government-owned Elda Trading company and renamed it Koortrade. This new subsidiary promoted Koor products in export markets and represented other manufacturers who could not afford to establish their own trade-promotion groups.

Koor also built its international reputation through turnkey projects in developing countries. The first of these was a cotton farm established in Ethiopia in 1972. Additional Koor projects in Nigeria, Togo, and other African nations improved Israeli relations in Africa and elsewhere in the Third World—especially important in light of continued Arab hostility toward Israel.

In 1973, when Israel was attacked by its Arab neighbors, it severely damaged its enemies’ air forces in defending itself. Koor now was a more important strategic resource than ever before. The company was called upon to develop new weapons, help increase armament stockpiles, and raise military preparedness. In 1974, as part of an effort to promote more even geographical industrialization, Koor established the Agan Chemical plant in the Negev Desert in southern Israel.

Through peace and war, the company remained highly supportive of its workers, establishing a profit-sharing plan in 1973 and a worker-discount center in 1978. Recognizing the importance of skilled managers, the company also opened a management training school in 1981.

Koor’s Telrad subsidiary was awarded the Industrial Development Prize in 1983 for a multiline telephone system it had developed. The award generated greater interest in the system and bolstered both domestic and international sales for the company. Telrad devoted a disproportionately high percentage of earnings to research and development, which led to more sophisticated battle-management systems and communication devices, and “smarter” weapons. In another defense-related project that year, Koor formed a partnership with Pratt & Whitney to build jet-engine parts at Carmel Forge in northern Israel.

Despite a lasting peace agreement with Egypt in 1979, Israel has endured numerous financial crises that have often resulted in a high inflation rate. This in turn has compromised the ability of Israeli exporters to remain competitive in world markets. Indeed, because it is in large part an instrument of Israeli labor, Koor has devoted much of its excess capital to job creation, leaving it few resources to draw upon in times of economic hardship. Worse yet, a 1986 attempt to attract capital in American markets failed, resulting in losses of $253 million during 1987.

A new management team, headed by Benny Gaon, took over in May, 1988 when Gaon’s predecessor resigned in protest over interference from the Histadrut. Gaon’s first task was to reorganize the company. Several factories were closed and others were combined. Koor’s operations were reorganized into five groups, plus one division for international trade. Each group became an individual profit center, placing the burden of performance on individual group heads, while deep cuts were made in management staff. The time had passed when Koor was simply a source of jobs; its survival now depends on its ability to remain competitive and profitable.

But like the economy Koor is so much a part of, the company’s difficulties cannot be sorted out overnight. As of 1988, it was saddled with a $1.2 billion debt, a third of which was owed to foreign banks. Many have blamed the government’s harsh anti-inflationary policies for Koor’s reverses. While these policies brought inflation down from 500% in 1985 to only 20% in 1988, they also cut subsidies and government purchases from Koor.

Others have argued that the company’s real problem lies in its inability to be more pragmatic. Hard business decisions, particularly those that involve laying off workers or closing factories, must, they say, be dealt with in purely economic terms. Political interference and meddling by the Histadrut only serve to obscure the company’s solutions.

Principal Subsidiaries:

Tadiran Ltd.; Telrad Telecommunications & Electronics Industries Ltd.; Telkoor Ltd.; Keren Electronics Ltd.; Koor Communications & Security Ltd.; Clarity Ltd. (71%); Markhteshim Chemical Works Ltd.; Agan Chemical Manufacturers Ltd. (70%); Tambour Ltd. (50%); Rotoplas Ltd.; Caesaria Polymers Ltd. (88%); Gamid Rubber Products & Plastics Ltd. (72%); T.G.L Ltd. (72%); Vulcan Batteries Ltd.; Sefen Ltd.; Shalon Chemicals (50%); 3-H Ltd.; Seffolam Ltd.; Kerem Optronics Ltd. (50%); Unicoor (50%); Alliance Tire & Rubber Co. Ltd. (85%); Nesher Israel Cement Enterprises Ltd. (51%); The Israel Glass Co.; Phoenicia Containers Ltd.; Koor Ceramic Works Ltd.; Barbour; Lapid; Negev Hasin-Esh’; Harsa; Naaman; Rami Refractory; Rami-Tech; Shemen Industries Ltd. (87%); Elz-Hazayith Ltd.; Helene Curtis Enterprises Ltd.; Israel Food Products Ltd. (50%); Mata Food Industries Ltd. (50%); H.L.S. Ltd. (74%); Beer-Sheva Flour Mill Ltd. (50%); Rosa of the Galilee Chocolate & Candy Ind. Ltd. (50%); Noon Canning Factory Ltd.; Yona Fishing & Industry Ltd.; Galilee Fruits Ltd.; Jaffa Mor Ltd. (50%); Goldfrost Ltd. (62%); Mega Shoe Ind. Ltd.; Alexander Shoes (51%); Jerusaleum Paper Products Ltd. (74%); Phantom Ltd. (74%); Carmel Plaro Containers-Industries Ltd. (50%); Tri-Wall Containers, Ltd. (50%); Koor Metals Ltd.; Hamat Sanitary Fittings; Hamat Engineering; Vulcan Engineering; Agan Engineering; Simat; Gilmat; Ham-Oz (50%); Ramim Ltd.; Merkavim Metal Works Ltd.; Yuval Gad Ltd.; Project Center; Israel Steel Mills Ltd.; Halom Scrap Metal Center Ltd.; Ma’as Steel Construction Ltd.; Raphael Mitzpe Ramon Ltd.; Kim Manufacturing Ltd. (50%); Alkoor Alloys Ltd. (50%); I. Shinitzky & Co. Ltd.; M.T.L.M. Carmiel Mechanics Ltd.; Hadaikan Metal Works for Spare Parts Ltd.; Hanita Metals Ltd. (50%); Habonim Pipe Products Ltd. (50%); Carmel Forge Ltd. (58%): Explosives Industries Ltd. (74%); Soltam Ltd. (74%); Koortrade Ltd.; Koor Inter-Trade (America) Ltd.; Koor Inter-Trade (Asia) Ltd. (90%); Koor Inter-Trade (Europe) Ltd. (90%); Koor Inter-Trade (Africa) Ltd. (90%); Koor Inter-Trade (Amat) Ltd. (90%); Solcoor Marketing & Purchasing Ltd.; American Near East Corp. (Israel) Ltd.; Solor Agencies Ltd.; Isra-Tel Telecommunications Systems Ltd.; Hossen Electrical Appliances Co. Ltd.; Ziklag Trade Ltd.; Trade & Maritime Services Ltd. (50%); Middle East Tube Co. Ltd. (92%).