For MDA, the future is out there [with Israeli Aerospace Industries]
DAVID EBNER, September 2, 2008, THE GLOBE AND MAIL, VANCOUVER -- Early next year, 10,000 metres above Afghanistan, unmanned aerial vehicles carrying surveillance equipment designed by MacDonald Dettwiler and Associates Ltd. will become part of Canada's effort to defeat the Taliban in one of its strongholds, Kandahar province.
The flights are part of a two-year $95-million Department of National Defence contract won last month by MacDonald Dettwiler (MDA) and partner Israel Aerospace Industries Ltd. The deal will also see about 20 MDA employees stationed at Kandahar airfield, with duties including overseeing takeoff and landing of the aircraft.
For MDA, it is the first big breakthrough after five years of work in the burgeoning realm of unmanned aerial vehicles, or UAVs, which have been used primarily by militaries but are also now being marketed to fields as disparate as search and rescue, and the forestry and oil businesses.
The contract win is also significant because it comes as the company is grappling with the fallout of its failed effort to sell its space division to Alliant Techsystems Inc., the weapons and space firm based in Edina, Minn.
Print Edition - Section Front
Section B Front Enlarge Image
More Report on Business Stories
* From car wash to new home of the stars
* For MDA, the future is out there
* Flaherty won't budge on mortgage bonds
* THEY'RE FEELING LUCKY - GOOGLE HAS CALLED
* Financing by Big Six grows at record pace
* ET CETERA
* Go to the Report on Business section
The Globe and Mail
Ottawa spiked the $1.3-billion sale in May, saying the deal would not benefit Canada. The government had bankrolled MDA's new Radarsat-2 satellite and was concerned that the United States could cut off Canadian access to images from Radarsat-2 if a dispute were to arise over Arctic sovereignty.
The stymied deal created a dilemma for MDA, which had said the division needed U.S. ownership to win contracts and boost growth, but also put pressure on the government to step up its support for the Canadian aerospace industry.
Industry Minister Jim Prentice is scheduled to give a speech today outlining the future of the Canadian space program. Mr. Prentice will be addressing aerospace industry leaders at Cambridge, Ont.-based Com Dev International Ltd., maker of satellite and spacecraft technology.
MDA chief executive officer Daniel Friedmann in July bluntly said Canada has to start spending money on space technology if the country is to be a player - or be left behind.
"Hopefully Canada will do what they're saying verbally they'll do, which is to get back in the game. But Canada does not have a lot of time," Mr. Friedmann said on a conference call.
If Canada spends more money on space, it is good news for MDA.
But MDA hasn't been waiting for Mr. Prentice. The UAV deal, which is the culmination of several years of back-and-forth exchanges with National Defence, takes the company into a market that is "huge, in the U.S. and also worldwide," according to David Hargreaves, general manager of integrated information solutions at MDA, based in Richmond, B.C.
"Every country is investing in UAVs," Mr. Hargreaves said.
MDA - which is essentially two companies wrapped in one - tried to sell its space arm, which includes the UAVs, because it wanted to deploy cash to faster-growing markets. Revenues of the space division have grown at 5 per cent annually since 2003, much less than the 26-per-cent annual growth generated by the MDA arm that sells software for real estate transactions.
A sale could eventually be possible if Canada works out a new arrangement under rules in the United States called the International Traffic in Arms Regulations, but for now the company has to make the best of it.
MDA's work in UAVs began because it was looking to take its expertise in satellite surveillance into a new area and it identified percolating demand for unmanned aerial vehicles as having great potential.
Because its core strength was in surveillance equipment, MDA searched for a partner for the plane, eventually deciding on Israel Aerospace, whose Heron UAVs were a good fit. With a wingspan of 16.6 metres and a length of 8.5 metres, the Herons have a range of more than 200 kilometres and can carry a full payload of 250 kilograms of surveillance gear for more than 24 hours.
On Aug. 7, after it was discussed and debated by the federal cabinet, the MDA contract win was announced as part of a larger purchase of equipment for the war in Afghanistan.
While the contract isn't big money for a company that had revenue of $1.2-billion in 2007, analysts said every contract win counts.
"It is small but it is not insignificant," said analyst Steven Li of Raymond James.
MDA aims to replicate its success with the Canadian military in other countries.
"We can do it," Mr. Hargreaves said. "There are many issues to overcome but there's no overwhelming showstopper. In the U.S., there are U.S. suppliers. The biggest hurdle there would be overcoming those suppliers, to demonstrate you can add more value. We think we have a strong value proposition internationally, but it's case by case."