Government, Aircraft Company Talking Compromise over Beleaguered Lavi Jet

A rescue effort has been mounted for the beleaguered Lavi fighter-plane project. Although the Cabinet is evenly divided on the issue, ministers are trying to arrange a compromise package with Israel Aircraft Industries (IAI) which would include cutbacks, lay-offs and eventually fewer Lavis coming off the assembly line than originally planned.

Defense Minister Yitzhak Rabin, who spent most of last week in Washington consulting with top officials of the Reagan Administration and members of Congress on the future of the Lavi, returned home Friday confirming U.S. opposition to the project on grounds of excessive costs.

He reported that the U.S. was prepared to assist Israel with the shut-down costs, within limits. Details were not made public, but apparently Rabin favors the American approach.

He warned the Cabinet Sunday that the Lavi would put severe strains on Israel’s budgetary capacity and that the defense budget certainly cannot sustain the costs.

Nevertheless, IAI executives said they could have a workable compromise proposal by next week’s Cabinet meeting.

COST-CUTTING REPORTED

According to newspaper reports Sunday, IAI has embarked on drastic cost-cutting measures. The company’s managing director, Moshe Keret, was quoted as saying there would be a 10 percent reduction in salaries at all management levels, a reduction of employees’ wages and the dismissal of 660 aircraft workers by September. IAI has discharged 1,400 employees over the last 15 months.

The press reported a compromise deal worked out between Premier Yitzhak Shamir, Foreign Minister Shimon Peres and the IAI whereby the defense establishment and the Finance Ministry will each contribute $50 million to the Israel Defense Force special projects fund to keep the Lavi alive.

The IAI’s contribution would be the wage cutbacks and firings, the reports said. Nevertheless, senior IDF officers are said to be urging abandonment of Israel’s second-generation jet fighter on grounds that it has already diverted urgently needed funds from other advanced weapons systems needed to maintain Israel’s qualitative edge in a future war.

One of the principal arguments in favor of the Lavi has been that abandonment would cause widespread unemployment and affect the morale of engineers and others in defense and high technology industries. Moshe Cohen, chairman of the Association of Science-based Industries, was quoted in the press Sunday as telling Immigration Minister Yaakov Tsur that more than 200 senior scientists, professors and Ph.D.’s, emigrated from Israel in the past year.

Tsur reportedly said that his ministry’s figures indicate that about 8,000 Israeli engineers presently live in the U.S.