Ackerman. 'Defense spending will continue to grow'

Elbit CEO: Israeli defense firms must consolidate

Joseph Ackerman says Jewish state's 1,000 defense-related companies 'need to unify powers' to remain competitive. 'We need two companies, each with $3-$4 billion in revenue'

Reuters|Published: 01.09.11 , 15:03

Israel's 1,000 defense-related companies, most of which are very small, need to consolidate to remain competitive, the chief executive of defense electronics firm Elbit Systems said on Tuesday.

"We need to unify powers and not be split," Joseph Ackerman told a conference of Israel's electronics industry association. "We need two companies, each with $3-$4 billion in revenue."

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Elbit, which had nearly $3 billion in revenue in 2009, is Israel's biggest publicly traded defense company. The largest is state-owned Israel Aerospace Industries.

Ackerman said the world's spending on defense, currently around $1.5 trillion annually, had traditionally grown by 4-5% a year.

"Looking ahead, defense spending will continue to grow, but at smaller rates," he said.

Governments spend only about 3-4% on defense imports with the rest bought locally. To be able to export when countries are not prepared to import, Elbit has set up local companies in all its target markets, Ackerman said.

5th biggest defense sector in world

Israel's defense sector has annual turnover of about $8.5 billion, making it fifth in size in the world, Ackerman said.

The government owns about 50% of Israel's defense industry, compared with about 10% in Europe and zero in the United States.

"If the government wants a strong defense industry it must reduce its holdings to 20% and invest in research and development," Ackerman said.

Eran Gorev, CEO of wireless broadband equipment maker Alvarion, said the government must invest more in education and in the high-tech industry or the country will not be able withstand growing competition from Asia, especially China.

He said the government declined to help Alvarion with credit guarantees when it won a $75 million contract in Canada last year.

"If we don't wake up ... in five years we will sit here and my prophecy of wrath will come true. We will sell not only MA Industries to China but also technology companies."

Gorev was referring to China National Chemical Corp's plans announced last week to buy 60% of MA, the world's biggest maker of generic crop protection chemicals.