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What a shame that just a week after Donald Trump gave us Jerusalem, Kare Schultz is taking away our Teva. At least that’s the impression you get from Israeli labor leaders, politicians and pundits. 

Schultz, a Dane who has been in the job of Teva CEO for just over a month and hasn’t even moved in to his luxury Jaffa apartment yet, has the temerity to fire thousands of Israeli workers while Teva enjoys big tax breaks from the Israeli government and preserves overseas jobs. Meanwhile, Schultz is collecting a big, fat paycheck for this heinous act, goes the narrative.

Earlier today, Teva announced 14,000 job cuts over two years, worldwide.  Early reports are that about 1,750 of these job cuts will be in Israel.

Turning Teva into a narrative of simple Zionist workers resisting the evils of global capitalism, versus high-living business executives, makes for compelling reading, but it amounts to fake news. Here are four fake facts in the Teva story,

1.Teva the Sabra: Teva is an Israeli company, and its rise to greatness was due to the entrepreneurial skills of its legendary CEO Eli Hurvitz, and to the brains of Michael Sela, Ruth Arnon and Dvora Teitelbaum at the Weizmann Institute of Science, who invented the multiple sclerosis treatment Copaxone that earned the company so many billions. So goes the narrative.

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The fact is that Teva hasn't been Israeli for a long time. It’s a multinational company that long ago outgrew its homeland. Only 12% of its workforce is Israeli, only about a tenth of its shares are held by Israelis, little more than half its board lives in Israel, and most of its top executives are foreigners.

None of that should be any surprise. Teva would strain to find 57,000 Israelis to employ. Its capital needs are far greater than what Israel could provide, so it needs to raise money on Wall Street and list its shares there. And there aren’t enough talented executives in a country as small as Israel to run a company the size of Teva, so you tap the best talent from around the world.

2. Israel squandered billions on tax breaks for Teva: It is true that Teva got about 22 billion shekels ($6 billion at current exchange rates) in tax breaks. The lion’s share of those tax breaks were awarded when the company was making giant profits. (The law that entitled it to the breaks has since been amended more sensibly).

In any case, many ask why the tax benefits didn't hinge on promises to maintain certain employment levels.

The answer is that Israel is in no position to impose such constraints.  Manufacturing in Israel is costly and we’re geographically distant from major markets. That’s why no multinational companies make anything here on a large scale, with the exception of Intel, which gets substantial subsidies from the Israeli government to do so.

Without the tax breaks, Teva would not have been able to justify producing drugs and medical devices in Israel at all, and there would have been no workers to lay off to begin with.

3. Workers weep while management parties on: Saying that the rank and file alone are being forced to pay the price for Teva's failures is a profound misrepresentation.

All the top managers and directors who were responsible for the disastrous decisions that brought Teva low are gone. Shareholders have lost a vast chunk of their investment as its value shrank and have been punished by a  having dividends cut to zero.

It is true that the executives who departed got generous severance packages, but so will ordinary workers, relative to their salaries.

In any case, by international standards, Teva has traditionally been frugal on compensating its top executives. Forcing them to take less wouldn’t save the company much money. It wouldn't save jobs. 

Take Erez Vigodman, the ex-Teva CEO who is being blamed for many of Teva’s current woes. His salary of about $5 million a year for each of his three years was the equivalent of about 100 average jobs. If he had worked for free, that would have saved less than 1% of the jobs Teva's about to ax.

4. The fired workers will starve on the streets: Labor leaders like the Histadrut's Avi Nissenkorn talk as if the thousands of Teva workers due to be axed will be tossed onto the streets and reduced to begging for food.

That is dishonest, to say the least. The Israeli economy is at full employment, or close to it, and in many job categories there is actually an acute labor shortage. On Thursday last week, a group of high-tech CEOs urged Teva employees, especially those with engineering and customer service skills, to apply for jobs with their companies. They portrayed it as an act of Zionist mercy, but the truth is the high-tech sector is especially desperate for skilled manpower.

True, not all the redundant Teva workers will land on their feet. Older ones and those living in development towns won’t have an easy time finding a job, but under the circumstances, they couldn’t have found a better time to be unemployed.  

Will the jobs ever come back? Possibly. Teva is now being written off for dead, but it is still the No. 1 company in the world for generics drugs. While that sector is in trouble right now, due to eroding prices, the long-term outlook is good. The company has to make it through a rough patch when its debt load is heavy and the cash flow it needs to repay it is shrinking. In another two or three years, things may be looking very different.

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>David Rosenberg

Haaretz Contributor

David Rosenberg

David Rosenberg

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Source : https://www.haaretz.com/opinion/.premium-1.829051

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