US entrepreneur transfers ownership of textile business to avoid closure.
By AVI KRAWITZPeter Weintraub 88 298(photo credit: Courtesy Photo)
Faced with continued losses after its relocation to Sderot from the Erez Industrial Zone in Gaza, shareholders of textile factory OK Line last week transferred ownership of the business to a non-profit organization, making the somewhat unconventional move rather than closing shop altogether.
"We had very clear choices when Erez closed just before disengagement," says Peter Weintraub, CEO of New York-based Bristol Associates, who owns a 50 percent share in the factory. "We could have abandoned the project altogether, or set up in another work zone in Israel with cheaper Arab labor, or set up in a Jewish city with Jewish Israeli labor and try to make a go of it."
Weintraub and his Israeli partner, Offis Textile Ltd., run by Ramzi Gabbay and Eliezer Fishman, chose the latter, more idealistic and somewhat less financially viable option, setting up in Sderot while employing 50 workers from the town and the surrounding areas.
A few months later, the move proved costly as the factory ran at a loss and once again faced closure - an inevitability which was not an option for Weintraub, an American Zionist who had strong emotional ties to the project, given that it was his only business in Israel.
"We were determined to make this work and came up with the idea of turning the factory into a non-profit organization, which would in effect be a project of Sderot, Weintraub explains. "If there were losses, they could be covered by donations."
He subsequently met with Sderot Mayor Eli Moyal to get the city on board and, with his blessings, set up the American Friends of Sderot Foundation, which after last week's dedication ceremony, effectively took ownership of OK Line.
A corresponding foundation is being set up in Israel, Friends of Sderot, through which local donors can contribute funds.
Not a charity case
Weintraub insists, however, that the idea is not to turn the factory into a "charity case" reliant on funds from donors around the world.
"The goal is that OK Line becomes self sufficient or profitable," he says. "The profits, of course, can never be used as profits, but any money the factory makes will be turned to the benefit of either the workers, or to the benefit of Sderot, which has helped us develop this project."
Weintraub was confident the factory would turn profitable and says he has spoken with people in the US who hope to provide support to keep it going and active.
OK Lines was established as a producer of bed linen products for the export market after Weintraub's US textile operation ran into difficulties doing business with its Indian fabric processor. This led him to Azur-based Offis Textile, and Ramzi Gabbay, as an alternative source.
Weintraub had tried unsuccessfully to merge business with Zionism since starting his own operation in 1992, and so jumped at the opportunity to finally do business with Gabbay.
"I met with Ramzi and started buying fabrics from Offis Textile and outsourcing the production of the bed sets for the US market" Weintraub recalls. "We subsequently discussed the possibility of setting up our own factory."
That resulted in an OK Line set up in the Erez Industrial Zone in July 2004, a year before Israel's disengagement from Gaza. When the zone closed, the factory and approximately others were forced to move. The factory began operations in Sderot in February 2005.
Tough market
While the OK Line story is unique in that it has managed to stay open and keep its 50 workers employed, the fate of other textile factories in Erez was not as positive.
Udi Sheintal, deputy director general at the Ministry of Industry, Trade and Labor, notes that there were approximately 200 companies in Erez, of which 100 were Israeli owned. Only 30 of those, he says, have relocated and are operating in Israel today.
"Most textile factories went bankrupt when Erez closed," adds Zvi Liberman, director of the textile department at the Manufacturers Association of Israel (IMA). "In the textile sector as a whole, many companies, particularly sewing operations, have been moving abroad to Jordan, Egypt, the Palestinian Authority areas and even to the Far East, where labor is cheaper."
He explained that the average wage in Egypt is approximately one-third of that in Israel, where factories have to pay a minimum wage of around $1,000. The Ministry's Sheintal added that in Erez, which was governed by Gazan standards, the average wage was even lower than in Egypt.
As a result, Liberman says it is becoming very difficult for Israel to compete with the likes of India and China, "which have flooded the market in the last few years."
Job cuts continue
The Manufacturers Association reported earlier this month that the textile sector has lost about 60% of its work force, or around 29,000 workers, in the last 11 years. Some 1,500 jobs were cut in 2005 and the group forecasts a further decrease of 1,700 workers this year.
Despite these numbers, the industry has maintained significant sales figures on an annual basis, but with little growth.
The IMA said textile sales grew by 1.5% to $2 billion in 2005 boosted by an 8% rise in sales to the local market of $969 million. Exports were $1b. for the year, showing little movement from 2004. The IMA expects sales to grow 6% in 2006.
Office Textile's Gabbay, in his capacity as Chairman of the IMA's textile department, accuses the government of mishandling the textile factories affected by the Erez closure.
"In one day, the government closed 50 textile factories in the area," he says. "During the year, approximately 12 large Israeli textile companies moved a part of their operations overseas."
Sheintal notes that while there was no program in place specifically designed to help the textile sector, the government has an incentive program, through the Ministry's investment center, to assist industrial and service companies located in Israeli industrial zones. The center has a budget of NIS 150m. for the project, run on a tender basis, allocating NIS 1,000 per worker per month for recipient companies.
American Zionist dream
For Weintraub, however, the slump in the industry just added to his emotional drive to contribute and keep the business running.
"[The rededication of the factory] marks the commitment of American Jews - still filled with the love of Israel and the love of the Zionist dream - to support and encourage the success of OK Line despite increasing economic pressures faced by Israeli businesses on a daily basis," he said at the dedication ceremony.
As part of his personal obligation, Weintraub signed a commitment with the government to guarantee the existence of this factory for a minimum of five years and took out a bond to ensure his involvement in the project.
In addition, the 55-year-old Rabbi turned businessman and his family have put all the money from an inheritance from his late father, into a family trust to be used for charitable endeavors - which will include the American Friends of Sderot.
Weintraub says his determination to keep OK line open was influenced by a visit from his father shortly before his passing last year and the subsequent visit of his 91-year-old father in-law who, as a native of Belarus, had an immediate connection to the Russian workers at the factory.
Weintraub's main business is his textile import-export business, named Bristol Associates, which has offices in New York, Pakistan, India and China. He also has a manufacturing company and a wine business in Argentina.
While he doesn't dismiss the idea of expanding into the Israeli wine industry, he says he has entered a different phase in his life.
"It's a very exciting period of my life. I have five children and six grandchildren, and I feel that I want to take the next years of my life and help the world that has been very good to me and my family," he says. "I' m trying to disabuse the notion that you can't do business in Israel. It is hard to do but I am committed to it because I consider myself a Zionist. I live a beautiful sheltered suburban life in America and I want to give back.
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