Since becoming chief executive two years ago, Itzhak Nissan has been shaking-up Israel's biggest aerospace company - streamlining costs while turning Israel Aerospace Industries into a more global business less hidebound by domestic politics.
With revenues of $2.4 billion in the first nine months of 2007 and the state-owned company now comfortably in the black, Nissan is well on the way to his "vision" of $4 billion revenues and $300 million net profits. Although more than four fifths of IAI's revenues come from exports, the former head of IAI's missiles division wants to tap further into US and Asian defence budgets, establish manufacturing bridgeheads overseas and build partnerships with the big names of the Western aerospace sector as well as emerging manufacturers in countries such as China and India.
Acquisition list
"We are making our international entry right now. We have plans to acquire more companies, especially in the US because of the size of the market," he says. Last year, IAI, which makes around 35% of its export revenues from North America, launched its first start-up there, unmanned air vehicle specialist Stark Aerospace (see next article) in Mississippi, and says it is a "launch pad" for further expansion. Europe, where IAI has a number of small subsidiaries, is also on the acquisition list, with an unidentified UK company the most likely target.
 Nissan: no benefits to being state-run |
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IAI has five roughly equal strands: unmanned air vehicles missiles and space electronic warfare systems maintenance, repair and overhaul and airframe manufacturing. Given its size relative to the giants of the USA and Europe, it could be argued that the company punches considerably above its weight. Along with rival Elbit, it is one of a handful of global players in UAVs (see P62), airborne weaponry and, through its Elta division, electronic systems. Its Bedek MRO arm is one of a very few specialists in Boeing passenger-to-cargo conversions (see P64) and the Commercial Aircraft Group is a partner on the Boeing 787 and builds Gulfstream's smaller business jets (see P66). "In most of our areas, we are sole source or one of two or three in the world," says Nissan.
Despite its market successes, overhauling the internal structures of what had been a rather lumbering, nationalised firm has been one of Nissan's priorities. When he assumed his position, IAI was "barely crossing the line in profit" and he began what he calls a "marathon" to identify cost savings. "We have started to implement what I did as group general manager of missiles and space, turning every stone to look for efficiencies," he says. Several divisional managers were let go and unprofitable units and sites were shut. Duplication of effort between divisions was tackled and managers were told that they "didn't need to compete on every proposal".
Challenges
A new format was introduced for reporting and managing projects. "We changed the way we build a price proposal. Now each team knows its commitment and obligation and how to deal with risk."
One of Nissan's hardest tasks was persuading employees, as well as powerful members of parliament who felt they had a stake in the nationalised company, that change was necessary after the long tenure of previous chief executive Moshe Keret, an iconic figure of Israeli aerospace. "We'd been run more or less the same way for 15 years," he says. "Convincing the unions was the most difficult. We told them that we must do it urgently or we would face the same problems as [state-owned defence company] Israel Military Industries."
The next challenge facing Nissan and his chairman Yair Shamir is convincing Israel's political establishment to let the company go fully private and allow a merger or consolidation to take place between the big three state-run companies: IAI, IMI and Rafael. Although Nissan says IAI is "running like a private business" and raised $250 million in a bond issue on the Tel Aviv stock exchange last year to fund expansion, privatisation is still not on the agenda, with unions and some members of parliament holding out strongly and government grappling with other pressing issues. "Most of our competitors have revenues of $15 billion and up," he says. "We cannot be the only one at this size. There are no benefits any longer to being state run. Only limitations."
The $250 million from the bond issue gives Nissan and his board some leeway to embark on acquisitions and new projects without further painful restructuring. For the moment, expansion rather than contraction is on the agenda, although Nissan is realistic about timescales. "We have many balls in the air right now," he says. "Some we will be able to accomplish in 2008. Some will have to be carried over to 2009."
Source: Flight International
