"Space, Surveillance Aircraft, Cyber & Missile Defense Systems"

In a fascinating first interview, Yossi Weiss, CEO of Israel Aerospace Industries, reveals the development trends of the company and the complex challenges the defense industries will face in 2014. An Israel Defense Exclusive!

IAI CEO Yossi Weiss (Photo: IAI)

When Yossi Weiss completed 27 years of service with the IDF Navy and joined IAI in 1998, he could not have expected that in 15 years he would find himself heading the defense industry with the country's highest number of employees: 17,000.

Reality has led him to head a company that has a backlog of orders of more than US$ 10 billion. Now, after nearly a year and a half as CEO, with substantial cuts in defense budgets expected worldwide in 2014, Weiss speaks, in his first interview, about the direction in which he is steering the company: "The challenges are not simple, but we have excellent growth engines."

Yossi Weiss, 63, is a mechanical engineer, the son of Holocaust survivor parents from Haifa. He has 7 children and 19 grandchildren, the offspring of two wives (he remarried after his first wife had passed away). In the last few positions he had filled in the IDF Navy, he was involved in numerous force build-up weapon system projects, serving as the leader of the "Dolphin" submarine project until his discharge at the rank of Captain (colonel). Among the various positions he had filled in the Navy, he was on loan to the IMOD Weapon System & Technological Infrastructure Research & Development Administration (MAFAT) for four years; there, he was involved in future naval and anti-aircraft technologies.

Yossi Weiss' career is a significant example of the close connections between the IDF and IMOD on the one hand and the Israeli defense industries on the other hand: immediately following his discharge from the military he "coasted" into the position of Head of the Attack System Administration at IAI's MABAT Division. Following that he headed the Naval & Anti-Aircraft Administration at the same division. In 2002 he was appointed as GM of IAI's HALAL (Space) Division. During his reign as GM of the HALAL Division, the Amos and Ofek surveillance and communication satellites, including a satellite carrying a synthetic aperture radar system, were launched into orbit and work began on Project Venus - the joint French-Israeli satellite project. In April 2006, Weiss was appointed as GM of IAI's Missile & Space Division and Corporate Vice President of IAI. In July 2012 he was appointed as CEO, following the retirement of IAI's previous CEO, Yitzhak Nissan.

"Today, having been in this position for almost a year and a half, my days of grace are over," says Weiss in his first interview.

Were you surprised by what your new position had in store for you?

"The range of activities in which IAI is involved is so extensive, geographically and technologically, that what you see from an individual division is not the same as what you see from the CEO's office. Here, you are suddenly introduced to fields of activity you never knew about. The challenges are completely different, even compared to the military activities in which I had been involved. For example, the civil operations of IAI are challenging in a manner I could never have anticipated."

Around the world, companies with a workforce of 17,000 employees are not normally involved in space, in the manufacture of civilian aircraft and in countless other activities… Isn't it a bit over the top?

"I would say that worldwide there are possibly three or four other companies that are involved in such an extensive range of activities as we are."

"I would say that worldwide there are possibly three or four other companies that are involved in such an extensive range of activities as we are."

"I would say that worldwide there are possibly three or four other companies that are involved in such an extensive range of activities as we are."

"I would say that worldwide there are possibly three or four other companies that are involved in such an extensive range of activities as we are."

Is such diversity appropriate from a management point of view?

"Generally, it is appropriate from a management point of view. A high degree of synergy exists between systems developed in the civilian and military sectors. One example is the field of aeronautics. The fact that IAI ranks so highly in the field of UAVs is because of our longstanding capabilities and very sound human and technological infrastructure in the manufacture of civilian aircraft. It is difficult to deal with UAVs without possessing heritage in that field.

"If I were to build the company from the ground up, then I might have focused on just a few specific activities, but once you already have such a diversified company – then, quite naturally, there is a balance between things. The military element balances the civilian element and vice versa."

"A Challenging Year"

As in previous years, in 2013 export sales accounted for more than 80% of IAI's sales turnover. The company's sales data are fully transparent: although IAI is fully owned by the Israeli government, its financial reports are publicized, owing to the fact that it had issued debentures on the Tel-Aviv Stock Exchange in the previous decade.

Was 2013 a good year, on the whole?

"The year has not been concluded yet and we do not have the final figures, but generally, the first three quarters, which have been summed up, were not easy. They demanded professional as well as economic creativity on our part. We are more or less about to conclude the year face-to-face with the goals we had set for ourselves, namely – the year was OK, but we encountered quite a few challenges which began with the low exchange rate of the US Dollar opposite the Israeli Shekel, which has been very damaging for us.

"As we are export-oriented and receive most of our payments in US Dollars, when the exchange rate drops, we have a problem."

How do you envision the global market in 2014? There have been budget cuts in Europe and in the USA, too

"We all read the papers and 2014 will definitely be challenging. Wars are gradually becoming a thing of the past. Conflicts around the globe are declining. Defense budgets are decreasing everywhere, from the USA through Europe. At the same time, governments provide much stronger backing to the export sales of their own industries. You can see it, for example, in the USA, Germany and France. The foreign ministers and heads of state are involved over there, and that involvement includes actual visits of government ministers in the purchasing countries.

"We do not benefit from as much support by the political echelon as industries in other countries, and have to utilize the very best of the Jewish genius so as to make the client understand that operatively, I am giving him something that is superior to what my competitor offers. If we fail to highlight our advantages – we will not sell. The challenging statistics of 2013 and definitely those of 2014 notwithstanding, our R&D budgets will not be curtailed. On the contrary – they will increase. The over-all R&D activity at IAI, including R&D budgets originating from overseas, amounts to not less than 30% of our total budget. We are a high-tech industry to all intents and purposes."

According to Yossi Weiss, IAI continues to spot numerous opportunities in Asia (in India, 2014 will be an election year, so sales will be limited, but in other Asian countries, IAI is competing for numerous projects), in South America (particularly in Brazil) and in countries that were once a part of the great Soviet Union.

What are the company's growth engines, in terms of products?

"We have several growth engines. First of all – air defense; this field is evolving worldwide, and we have a substantial share in it. We offer unique solutions that are tiebreakers with regard to their interception capabilities as well as their detection capabilities. It is a well-known fact that all of the radar systems of the 'Iron Dome' system, the 'David's Sling' system and naturally the 'Arrow' system are made by IAI. We know how to make radars for all ranges and all conditions. It is a growth engine that will remain strong in the coming years.

"For example, in the context of Project Arrow-III that we are leading we conducted another successful trial in early January. It is a very extensive program which strictly adheres to its timetable. I hope that no (budget) cuts will be imposed on this program. I have no doubt that the decision makers will know that this program should be differentiated and set aside.

"Let's get back to the growth engines," says Yossi Weiss. "Space is another engine. We lead this field since its early days in Israel to this day. In the last year we had a significant event with the launching of the Amos-4 satellite – it is a fully operational communication satellite that already provides service to clients. As far as we are concerned, it involves a significant breakthrough. It is much larger than the previous communication satellites we launched, it carries much more electronics and it provides very good solutions to all our expectations. We are running forward in the field of optical (payload) satellites and SAR (payload) satellites. We are currently building the Amos-6 satellite, and although it will be built on the same platform as the Amos-4, it would possess different capabilities. This satellite should be launched in late 2015.

"Naturally, we continue to support the defense system and its needs in the field of satellites."

What about micro-satellites?

"We invest in micro-satellites as well as in nano-satellites, but that field has not registered a breakthrough and has not yet reached any reasonable threshold level that would indicate a real business potential. It has not yet proven itself as a growth engine."

Other fields of activity Weiss points out as significant growth engines are UAVs, quite naturally, and the surveillance aircraft IAI supplies, such as the Falcon aircraft sold to India and currently being manufactured for Italy and for other countries that Weiss would not name.

"If until now we had aircraft applications for the benefit of an aerial status picture, like the AWACS, or the Hawkeye electronic warfare aircraft, we added an application associated with the status picture of ground area cells, based on airborne sensors and ground-based sensors," says Weiss.

According to Yossi Weiss, IAI is making an effort to convert technologies it possesses into HLS applications, and according to him "the last thing I will count as a growth engine is the realm of cyber, which has evolved into the fifth dimension of warfare, and you cannot avoid being a part of it. Firstly, you must ensure that the systems you provide are cyber protected. Beyond that, we established an administration that handles both the defensive and the intelligence aspects of cyber warfare.

"We possess dedicated and unique solutions for making the cyber dimension accessible, early warning, intelligence – cyber C3 centers. We have already made some sales, and there are investments, too. We even have 'White Hat' hackers, and we allow them to run forward in a start-up mode. As soon as I have the infrastructure to give them, then they can go into action, run forward and go wild. We are currently negotiating with several countries regarding the establishment of cyber activity centers, and these projects involve the investment of substantial amounts on the part of those countries so as to implement diversified IAI technologies, and indeed, different IAI divisions are associated with this activity."

Over the last few years, IAI made some moves toward development in the land systems field, and established a land systems HQ. Has this move proven itself?

"Indeed, we had established a land systems HQ a few years ago. Consequently, we managed to position ourselves entirely differently within the realm of land systems. Today, when you approach all of the relevant elements within the defense establishment and speak about land systems – they all realize that we are a significant player in that field. We offer solutions in the field of land C3, land systems, land fire systems, comprehensive solutions that reflect the added value of IAI, and we intend to step up our efforts in the realm of land systems."

IAI intends to compete on the supply of a new self-propelled gun system to the IDF Land Arm, in cooperation with KMW of Germany and Lockheed-Martin of the USA. What about ground robotics?

"Look, back when they started out with UAVs, everyone was saying 'who needs it?' and today we are at the cutting edge of this field. I do not think that the same thing exactly would happen with regard to sea and land systems, but we are active in both arenas. I believe that naval robotic platforms will evolve relatively quickly. As far as ground robotic systems are concerned – it will take a while longer."

Will it be accurate to say that your collaboration with Elbit Systems in the production of the Unmanned Ground Vehicle designated Guardium, through the joint venture G-Nius, has not proven itself?

"Let me say this: I would have liked to see better figures from G-Nius. Generally speaking, the field of land systems is much more difficult and challenging. In the short term, G-Nius has not proven itself as far as the investment is concerned, but in the long run I think that ground robotics is a field of activity we should be involved in. How G-Nius will fit into it – that is something we will know in the future."

Cooperation with Foreign Elements

According to Yossi Weiss, "The USA was and has remained, as far as IAI is concerned, a major 'anchor' in our operations. Among other things, we are working intimately with both Lockheed-Martin and Boeing.

"For Boeing, we serve as important sub-contractors, especially in the field of composite materials. We manufacture wing parts, doors and other elements for them. We are currently hard at work finalizing a plan for expanding our operations vis-à-vis Boeing. It is very challenging because you prepare, you submit a quote and only reap the rewards somewhere in the future. According to our estimates, the number of aircraft in the civilian market will double, worldwide, by 2032. If there are about 16,000-17,000 passenger aircraft in the world today, in the future there will be 30,000 aircraft, and consequently this is a very important market for us.

"With Lockheed we have several close cooperative efforts in the field of military aircraft. For example, we are their exclusive supplier of several elements for the F-16 fighter aircraft, including fuel tanks and other accessories we manufacture. In preparation for the (introduction of the) JSF future fighter aircraft, we have an initial blanket order for more than 800 kits for that aircraft, and for this purpose we are currently building a new production line that conforms to all the global standards, at our expense."

Is the executive jet market recovering?

"A little, but we have not yet returned to the days of 2008, when we exported 75 aircraft. The figures for 2013 are not yet final, but the potential of our production line is more than 30 systems per year. We can adapt our production line to the actual demand."

What about the competition between the Israeli industries? Is it not excessively fierce sometimes?

"I think that cooperative alliances constitute a very important element in IAI's strategy. I said that everywhere. Sometimes you need a bone marrow transplant in order to go on. In my opinion, cooperation is essential in order to accomplish common goals."

The President & CEO of Elbit Systems, Bezhalel Machlis, also spoke about the need for cooperation between the Israeli defense industries in an elaborate interview published in the last issue of IsraelDefense, but in effect there were reports recently of fierce competition between the companies in the field of UAVs – in Poland…

"I do not want to talk about Poland. I only want to say that on the subject of Poland, IAI did everything the Polish Government had demanded of it."

Does IMOD endeavor to achieve cooperative alliances between the various Israeli industries?

"I have no doubt that IMOD would have been pleased if there had been more cooperative alliances. I think that the present management of the Ministry will do everything in their power to promote cooperation. But the most important thing is balance – between cooperation and competitiveness. I think that cooperation is not a bad word but an essential one. We constantly seek technologically creative ideas. In some countries around the world we even cooperate with foreign companies in the context of tenders."

There is a gap between the global image of IAI as a company positioned at the top or at the cutting edge of technology, and the way you are perceived in Israel, where you are regarded as a government corporation with employee committees…

"Admittedly there is a huge gap between the global image of IAI (and our local image), even within the defense establishment. Our local image calls for improvement because of the reports in the media about the employee committees, industrial disputes, and all the other stories you read in the papers. When I entered my present position, I considered it my personal mission to change the local image of IAI and take it to where it should be. We took some active steps toward this end, we identified the problem through in-depth studies, and now we are preparing solutions. We will do everything we can to improve our image – even launch publicity campaigns.

"We regard ourselves as a high-tech industry to all intents and purposes. Almost 70% of our operations have high-tech characteristics. Each year, we invest about one billion US Dollars in development. Our present backlog of orders amounts to more than 10 billion US Dollars. In order to fill all of these orders, we are changing the company's human capital in a very substantial manner, basing it on technological and scientific personnel that would lead us to additional accomplishments in the future." 

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