June 14, 1951 was a happy occasion in Israel, then just barely 3 years old.
Many dignitaries, including Prime Minister David Ben-Gurion, Labor Minister Golda Meir and Chief of Staff Yigael Yadin had gathered at Kaiser-Frazer's auto plant in Israel in the industrial part of Haifa.
The event was held in honor of the production of the first-ever Israeli-assembled car: the Kaiser Manhattan
Ben Gurion and the businessman who made this plant possible, Efraim Ilin, were the ones to cut the ribbon.
According to a rumor that had spread at the time in Israel, and was later reinforced by the media, Ilin wanted to give the premier a car as a gift, but the latter refused and even offered to pay a symbolic sum of five Israeli pounds.
Follow Israel Hayom on Facebook and Twitter
Ilin agreed, but Paula Ben Gurion only had a 10-pound bill, and Ilin did not have change. So Paula reportedly said, "Why don't you just give him two cars?"
"That story is just an urban legend. The only true part is that Ben Gurion did get the first car that was assembled as a gift, which cost at the time $2,200, or $25,000 in today's dollars," Ilin's 86-year-old son, Arnon, told Israel Hayom.
Arnon, who is a father of three and a grandfather to six has followed his father into the world of business and holds a Master's degree from UCLA. He worked at his father's plant after returning from his studies in the US in 1963, first as the financial manager and later as the manager of the plant itself, until it was sold in 1969.
But at the inauguration ceremony, Arnon was only 15, and was away in England where he had been sent for his high-school studies. "If I recall correctly," he continues, "Ben Gurion gave this car to some relative, maybe to his daughter Renana. In any case, as far as I know, he never used it. No one at the time believed this was any form of bribery, and my father never thought of asking the prime minister to give him any preferential treatment in exchange.
Regardless of the circumstances, over the years the immersion of politicians with businesspeople and manufacturers has become part and parcel of the rise – and then fall – of the Israeli auto industry. That industry served as a crucial element of Israel's economy in the 1950s and 1960s. It had great promise at its outset, as it was supposed to make Israel into a powerhouse of car manufacturing – the Detroit of the Middle East – but several decades later it died in a whimper, tainted by accusations of corruption.
* * *
Efraim Ilin was one of the pioneering spirits behind this dream, and a key figure in the founding of the state. He was born in 1912, in Kharkov, which was then part of Russia. He and his parents arrived in British-controlled Palestine in 1924. His father, who was a successful food industrialist in Russia, settled in Ness Ziona, bought an orchard and continued growing citrus trees all his life. Efraim completed his high-school studies at the Herzliya Hebrew Gymnasium and was then sent to Belgium to pursue an economics degree. He returned to Palestine in the 1930s and in 1934 married his wife Tzefira Antin from Rehovot, the daughter of the Second Aliyah man Meir Antin. Efraim and Tzefira had two sons: Rami, who died several years ago, and Arnon.
In 1938 Ilin joined the Irgun paramilitary group fighting for Israel's independence and even rose to a leadership position in the organization. He was even accused of being behind handing over David Raziel, the fourth commander of the organization, to the British.
This accusation was made after Ilin flew on May 19, 1939 from Tel Aviv to Haifa with Raziel in order to meet Pinhas Rutenberg, a senior figure in the pre-state Israel. According to Ilin, an Arab police officer recognized Raziel and stopped him but others in the Irgun doubted Ilin's account.
This allegation has haunted Ilin for years, and in the 1960s he partnered with right-wing leader Menachem Begin (a future prime minister) to form a committee that would examine the affair. The committee, which eventually had only one member, ultimately cleared Ilin of any wrongdoing and even said that he was unfairly maligned.
In 1940, because of the divisions among the Irgun that created the breakaway faction Lehi over the war effort in Europe, Ilin decided to end his ties with the paramilitary groups and try to join the British military. But a road accident that year ruined those plans and he turned to the textile industry, setting up a large factory in southern Tel Aviv. Ironically, the factory's main line of business was to produce military uniforms for the British troops.
Ilin made his big fortune at the end of World War II by striking deals to import cotton from Egypt to Italy. In those years he also lived in Milan, where according to many (including Ben Gurion) he was behind a key effort that "saved the State of Israel": He secured the shipment of arms on the ship Nora that breached the British blockade as Israel was fighting for independence.
"The story of Nora began in 1947, just before the state was founded," his son Arnon says. "My father then lived in Italy, and as a businessman he had contacts. This led some in the Haganah paramilitary group to approach him so that he could help them in the war that was about to break. His big advantage was that he was not suspected of having ties to Jewish leaders in Palestine; he was a private citizen.
"He procured the Panama-flagged ship ostensibly for his businesses and then arranged to have an Italian crew. The ship left from Venice to a small port in Yugoslavia and there it was loaded with arms that were manufactured in Czechoslovakia and sold to the Haganah, and then sailed to Palestine. The arms arrived in the nick of time, on April 1, 1948 [a month before the state was declared] and it carried 4,500 German rifles of the kind that was produced by the Czechs at the time, 200 machine guns and 5 million rounds of ammo."
Q: The British Authorities did not conduct a search of the vessel?
"Yes, but my father had anticipated that and that's why he turned to a Jewish family of merchants that lived in northern Italy and asked them for a large supply of potatoes. The crates of arms that were on the ship were hidden using wooden planks and had hundreds of sacs of potatoes that had already begun to rot.
"When the British troops boarded the ship, just several miles off the coast, the smell just drove them away and the vessel arrived safely at the Tel Aviv Port. The arms were then taken to Kibbutz Negba and several days later were already used in a military campaign to breach a route to Jerusalem. This was the first arms shipment that had arrived via the sea and its success allowed the Jewish fighters to gain the upper hand."
This was not the only time that Ilin contributed to Israel's security. Throughout the war he continued to help by sending three additional arm shipments, helped buy the Israeli Air Force's first Spitfire aircraft (through transactions with Czech officials who had them delivered through Yugoslavia) and according to various accounts he also took part in the procurement of the Israeli Navy's commando ships that sunk the Egyptian ship El Amir Farouq off the Gazan coast in October 1948. He also played a major role in bringing Romanian Jews to Israel in 1948 and 1949, securing the release of some 150,000 Jews in exchange for oil pipes.
* * *
Ilin decided to come back to Israel in 1949. "It dawned on me that I had nothing of consequence to do in Europe anymore," he wrote in his autobiography. He came to the Jewish state to find his next challenge
The challenge was discovered when his lawyer arranged for him to meet an acquaintance of his: Hickman Price. Price was then the vice president and director of the Kaiser-Frazer Corporation in Willow Run, Michigan. The company had just been founded in the wake of World War II by Henry J. Kaiser and Joseph Frazer. The first was a well-known industrialist in the field of steel and iron, whose shipyards produced the Liberty ships during the war; the latter was a businessman with a long background in the auto industry.
"Price told dad that Kaiser-Frazer wanted to build a factory in Greece or somewhere else in the region to assemble cars so that they can make inroads in the European market and reduce the shipping costs," Arnon recalled. "At the time, assembly lines were the standard, and dad was very excited. This also neatly dovetailed with the government's plans during those years, after Ford pulled out of its initial decision to build a factory in Israel owing to the Arab boycott on the new state.
"In early 1950, my father flew to the United States to meet Kaiser and the signed a contract to build a factory in Israel. Some 18 months later, in June 1951, the first car came out of the assembly line," he continued.
The two first models assembled in the factory were the Manhattan and Henry J., both family cars. The Manhattan soon became the preferred vehicle for the prime minister, president, ministers and ambassadors in Israel.
"The construction of the factory cost some $2.5 million, of which $2 million were from my father and the remainder from the Americans," Arnon continues. "This was the first time a big corporation from abroad invested in Israel and the signing of the contract also allowed Israel to get a bigger credit line thanks to Kaiser-Frazer securing guarantees in two banks in the US," he said.
"Later that year, Frazer pulled out of the partnership and the company was rebranded as Kaiser Motors. As such, my father also changed the name of the company to Kaiser-Ilin Industries. Kaiser was left with a 20% stake."
Ilin would soon sign another contract with a US auto manufacturer Willys-Overland, and this resulted in having the company set up an assembly line for pick-up trucks and other vehicles, including the Willys Jeep Station Wagon, which was used by the Israel Defense Forces for many years, as well as in the Israel Police, the fire and rescue services and other government agencies. In 1953, Kaiser bought Willys-Overland, and his company was renamed Kaiser Willys
"The parts would arrive from the US and then we would put them together in the plant, which spanned some 350 square feet through an assembly line," Arnon said. Arnon, who returned from his studies in England in 1954 also worked briefly at the site before joining the IDF. "We had between 500 to 800 workers and at one point we would produce 100 cars a day. The factory's contribution to Israel was two-fold: we had foreign money enter the country's cash-strapped coffers due to exports and we also provided employment to many families."
Most of the output, some two thirds, would be exported, and until 1955 the Kaiser-Ilin plants accounted for almost 30% of Israel's industrial exports. According to figures published at the time, the plant produces more than 17,000 cars, of which more than 10,000 were exported at a total value of more than $20 million. In 1952, the plant was awarded a citation of merit from the government.
Q: Why did most of the cars get exported?
"In the 1950s you couldn't just buy a car in Israel," Arnon explained. "You had to get a special permit to buy a car from the government and this was no easy feat. People with important positions would get it, such as doctors, but ordinary people would not get it so easily. These conditions were lifted in 1958, so until that year we mainly focused on exports."
Q: Where did the exports go?
"We exported to France, Turkey, Norway, Sweden, Finland, South America (including Colombia and Argentina) and later to many African countries. My father dealt with the sales, and that's why he ultimately went back to live in Europe during those years and ran the company from Paris.
"Many of the transactions were through bilateral trade agreements at the state level. We sold cars to France and bought in exchange Chausson busses. We would get fish products from Norway, and from Finland we would buy a lot of wood. We would get food products from Turkey.
"The two countries would finalize two-year contracts according to a fixed valuation, say $10 million, which would result in bartering as well. We would be paid in Israeli pounds, and the country would get credit to buy various products from those countries at the value of cars."
There were also more complicated deals. "One of the contracts with Colombia was for coffee; we gave them 2,500 jeeps and in exchange, we got coffee that we would export to East Germany. So my dad essentially traded with the communists.
"Israel would get iron ores from East Germany, which would then be sold to the steel plants in Haifa. We would also buy malt from the East Germans for the production of beer. Boatloads of malt would arrive in Haifa. We also bought high-quality optical devices from them. All these things would never have arrived in Israel without those deals."
In the mid-1950s, Kaiser decided to end its production of family cars, and this also put an end to the assembly lines in Israel for these models, leaving only the Willys jeeps and pick-up truck for Israeli production. Ilin then began to look for new opportunities to expand and grow.
In 1954, he signed a deal with Renault to set up a production line for two family cars that became very popular in Israel and beyond: the Renault Dauphine and the Quatre Chevaux. "These were great models," he recalled. "We assembled them through 1958, but then the French became less friendly," he said.
"That year, Egypt issued a bid for an assembly line and Renault applied. It was then told it would get the contract if it pulled out of Israel and they ultimately did that unilaterally. Ironically, Egypt basically gave them the finger and they lost that bid to Fiat.
"Renault's CEO at the time was a Jew called Pierre Dreyfus, a descendant of Alfred Dreyfus. Renault eventually paid us compensation totaling some $1 million, which at the time was a big sum," he said.
Q: How did you cope with Renault's decision?
"We got the compensation, but in the 1950s and early 1960s the African market began to open up and we started selling a lot of vehicles to Kenya, Togo, Zair, Uganda and basically everyone. The rulers of those countries would visit the plant, including Ugandan leader Idi Amin.
"In fact, the factory was a source of Israeli pride; a landmark of its own. We would bring here foreign dignitaries as part of their tour of Israel. This included Marc Chagall and Elinor Roosevelt and various French generals. They all saw this up close."
Renault's decision to pull out did not demoralize Ilin and in 1960 he signed a contract with American manufacturer Studebaker for the assembly of its Lark. The compact car soon became very popular in Israel and at least 3,500 were sold in Israel to the general public and the Israel Defense Forces. According to a local report at the time, the Clark's asking price was 11,000 Israeli pounds in 1960, including taxes and duties.
Those years saw the plant also engage in the assembly of Piaggio's legendary Vespa scooter, as well as a contract to produce Japanese manufacturer Hino's Contessa model. This ultimately led to Japanese manufacturers becoming the most popular in Israel.
"We would assemble the Contessa 900 and the Contessa 1300, as well as the Hino Briska pick-up truck," Arnon recalled. "They would be sold at $10,000 Israeli pounds, which was a lot back then."
They also started producing their own line of cars at the factory. For example, the Willys car frame, after approval from the US, was used to build various military-purpose jeeps.
"We produced and assembled many vehicles for the troops," Arnon said. "From the jeep that carried a recoilless rifle or machine guns, to jeeps that had special reinforcements that were used to send it down with a parachute. The Defense Ministry would put in requests for anything it wanted, and a special department of engineers in our factory would put those designs into action."
"By the way, we developed cars for civilian purposes as well. We had a compact pick-up truck based on the big one produced by Willys. We just cut it in the middle and turned it into a vehicle that could carry small deliveries in urban areas. This came in very handy in Israel."
* * *
In 1965 Ilin built another plant, this time in Ashkelon, which was primarily used to provide for Israel's security needs. However, this plant marked the beginning of the end.
"This plant produced, among other things, cogwheels for tanks and lathes. The security establishment promised us many things," Arnon says in anger. For example, that there would not be any competition and that the state would not be importing our products from other countries, but these promises were divorced from reality. None of them were kept."
In the coming months, despite the relative success of Contessa, Ilin would be dealt one blow after another: In July 1965, a committee of inquiry that had been formed to examine the cost and benefit of producing cars in Israel concluded that the Israeli auto industry had to do some downsizing.
On August 17 that year, then-Finance Minister Pinhas Sapir said that the committee of ministers had concluded that Ilin should merge his plant with another car manufacturer's facility, Autocars.
A year later, with Israel hit by a recession, Studebaker shut down its production lines around the world, which also brought an end to the Lark's Israeli episode. In July, the plant in Haifa was shut down for a month, and in November 110 employees were fired.
That year in October, the Japanese manufacturer Toyota bought Hino Motors and later decided to stop producing the Contessa in Israel. Export of the car's parts to Israel stopped, dealing Ilin's businesses a major blow. Hino Motors pick-up trucks were rebranded as Toyota cars and this also meant that they would no longer be produced in Israel.
* * *
In May 1967, just weeks before the Six-Day War, Ilin was hit again when he was forced to sell his factory in Ashkelon to the Israeli defense industries for $3 million, half of what he had invested in building it. Today the factory produces various military-purpose components.
On top of that, starting from the 1950s, competition was on the rise from Autocars, which was then the manufacturer of various cars used in the Israeli market and soon partnered with other manufacturers to build trucks and buses. Autocars, owned at the time by Yitzhak Shovinsky, soon became a major conglomerate.
Ilin's troubles, and the immense pressure from the government, led to the sale of his plant in 1965 to his biggest competitor, Autocars. The price was $2.5 million (without the debts that were also paid). This was half the sum that had been invested by Ilin over the years.
Arnon believes that the government was not willing to help his company get out of the quagmire. "We had many plans with the Japanese. We struck a deal that we would produce cars such as the Contessa through total domestic production, with the Japanese giving us guidance and support on the know-how. They thought that Israel could be the gateway to the European market. But unfortunately, no one in Israel wanted to hear about these plans. The Transportation Ministry didn't want us to produce the Israeli car, so when we presented plans, they refused to give a green light.
"We also had plans with American Motors, who had at the time a market share of 8% in the US, but once again the government said no and we couldn't get the necessary permits. Their excuse was that 'there were too many car plants in Israel' and the Transportation Ministry simply decided that we had to sell our plant."
Q: They decided for you?
"They strangulated us. They wouldn't let us produce cars in Israel and we were left with Willys, which was not enough to keep a plant running. In the final two years, the plant would operate at a very slow place, and we had to cut down our staff, but we kept paying salaries to the workers until the final sale in 1969. The workers got nice salaries and we also opened pension funds for them, which was not very common at the time."
"After selling the plant I began looking for new things to do," Ilin wrote solemnly in his book. "Like a blinded horse that returns to the trough, I found myself day after day driving my car toward the plant. I would go out of the car, meet the guard, get shocked, and go home. I decided to leave Israel, so that the wounds would heal and so that I could get myself back together."
* * *
The relations between the two Israeli auto giants were bad, but Ilin was particularly angry over the treatment he got from Mapai, the dominant socialist party at the time, and its legendary finance minister, Pinhas Sapir.
"If I had to define in one word what the economic philosophy of Mapai was during the 1950s and 1960s I would use the word 'dependency.' In every economic aspect, the company would have to depend on the government and its decisions, on the minister, and director general, the senior bureaucrat and the customs official.
"Every bolt that you would bring here, every machine that you would assemble, every dollar that you would export or import – it was all at the mercy of the party officials, who could not care less about economic considerations."
In November 2008, two years before he died at 96, Ilin was even angrier. "Sapir was a primitive person," he told Globes. "He could crunch numbers and work 24/7, and had a phenomenal memory, but had no grand vision of how to promote manufacturing. Israel still lacks real foundries, everything was done by winging it, he hated the professionals he was out to get them."
"He hated me just as much as I hated him, because he couldn't control me. I stuck to my guns and for him, everything was about being in power. Prime Minister Levi Eshkol was frail and sick and worshipped him like a god. Sapir had underlings that kept sucking up to him. He was in charge of the purse strings and they gave him power over the party. The party controlled the country."
Illin accused members of Mapai of working to have "the factories that were related to the Transportation Ministry pay the party. Toward one of the election campaigns they asked that I pay 250,000 pounds, which was a lot of money at the time. I was appalled."
"This was exactly when the Arab boycott was causing some trouble, and I could not do without the government. But I told them, 'I don't have hidden money, I have a factory with US and Japanese partners and I am not going to do this on an ideological level.' When I said I could not give them money under the table, they said, 'We took this into account; instead, you can send us cement and iron.' The former head of the IDF intelligence, who was then part of my factory, told me, 'Let me hold negotiations with them and we will settle on 150,00 pounds. I told him – over my dead body will they receive a single pound."
Ilin may have been referring to his rival at Autocars who gave many donations to the party's apparatus at the time. These donations were scrutinized by various Knesset committees, as did the suspicions centering on alleged discounts to various state officials in exchange for favors.
* * *
Ultimately Autocars' owner Shovinsky was indicted over these allegations, but in 1974 the Haifa District Court found him not guilty in the 13 counts he was charged with, including bribery. The acquittal in most of the counts was due to a lack of proof, and in the other counts, because of reasonable doubt. The judge said that the discounts he gave to the public officials and others were within the bounds of legally accepted practices and under the known policy of the factory. But he also said that the size of the discount was influenced by the clout of the recipient and even wrote in his verdict that "some of the witnesses simply didn't tell the truth."
The judge then finished off the verdict with the following statement: "While it is not inherently wrong for a public official or any other citizen to buy something at a discount, as is normal practice, that public servant must not ask for or receive a discount that exceeds the norm, lest that be granted solely based on his or her public position. If that public servant has any official ties to the factory as part of their occupation, this could be unethical."
Shovinsky's businesses were dealt a blow even before he stood trial, when in the 1970s one of his major business partners in the company, Koor, pulled out. Shovinsky was left with a car company in northern Israel, but the rapid inflation Israel was experiencing led to a drop in demand and the freezing of credit lines by the banks. Autocars went under, and was liquidated in 1971 and then sold to other companies until the factory was shut down. In July that year, Shovinsky had a fatal car accident after suffering a cardiac arrest and crashing into a tree. He was 67.
Ilin lived many more years, but he left the car industry as well. My father was very disappointed and heartbroken," Arnon said. After leaving the industry he became an art collector and lived in France and Italy before ultimately coming back to Israel. He died on Yom Kippur Eve 2010. He was 98.
Subscribe to Israel Hayom's daily newsletter and never miss our top stories!
