Downsizing Announced at MDA Robotics

Is it time to wind down the Canadarm?

According to Macdonald Dettwiler (MDA) President Daniel Friedmann "the company has commenced downsizing its Brampton based robotics group."

The MDA Brampton robotics group is responsible for the US space shuttle's Canadarm and the Mobile Servicing System for the International Space Station (ISS).

Business in this division was always expected to shrink as the space shuttles retire but the lack of a Canadian long-term space plan (which would allow companies to plan ahead for future programs) was also cited as a contributing factor in the decision.

Friedmann made the statement about eight minutes into the February 28th, 2011 Fourth Quarter and Year end results Conference call. The conference call podcast is available in a variety of formats on the CNW Group website.

According to Friedmann, the ramp down of the robotics division is almost irreversible:

We have given notice to people and we have a controlled ramp down of that business over the next 18 months. That is ongoing on as we speak... We do not see anywhere a Canadian long term space plan in the works and we are simply precluded from working in the United States (or anywhere else) in this field except for small bits in areas I report.

So we are on a ramp down and the only thing that can reverse that trend is our favorite on orbit servicing plan.

The proposed MDA on-orbit servicing plan was pitched to the federal government multiple times of the last several years as a method to repair and perform on-orbit servicing of satellites using technology developed through the Canadarm program. Although subject to heavy lobbying, the proposal so far remains unfunded by the Canadian government.

The poor health of the robotics division is common knowledge to the Canadian space industry and also came up in the 3rd quarter MDA conference call, as reported in my October 31st, 2010 blog post "Robot Wars II: MDA Attacks." According to Friedmann, the project requires "an anchor customer" for the robotics division to survive.

An MDA proposal for servicing the Hubble (2005).

Overall, the company reported a fourth-quarter net loss of C$54.2 million or C$1.32 per share, compared to net income of C$30.2 million or C$0.74 per share in the fourth quarter of the previous year.

Which really isn't all that bad, given the big jump in revenues (total operating earnings for the year increased to $148 million or $3.61 per share from $107 million or $2.64 per share), the recent sale of its property information business (which has left the company with substantial cash reserves for acquisitions) and the growth of subsidiary MDA Geospatial Services (which is focused around selling data collected from MDA satellites).

A subtext of annoyance at Canadian government procurement policies was apparent during the call. For example, in response to a question on the relocation of the MDA unmanned aerial vehicle (UAV) facility to Australia, Friedmann states:

In our experience and the experience of many companies, it is very hard to be a leading member in a defense type business when your own country is backing away. Our problem right now is that, at least on paper, Canada does not have any UAV plans for the next several years, which is mind boggling, quite frankly.

Almost every other developed and upcoming nation in the world does. So we're discussing that with the government. I can't image how the they're going to protect our soldiers (without UAV's) if they deploy again.

But, as a precaution, we are moving a significant portion of our (UAV) operations to Australia, and basically going to operate from there, where they are committed to grow.

According to the March 1st, 2011 article on the European Association of Remote Sensing Companies (EARSC) website titled, "Cash-flush MDA Looks Beyond Canada for Growth" the company is now "hunting for an acquisition target in the United States, setting up offices in Moscow to harvest satellite communications contracts in that region and relocating its unmanned aerial vehicle military service business to Australia."

The MDA "Heron," a medium altitude, long endurance UAV.

The article goes on to state that MDA is facing a downturn in two of its businesses (robotics and UAV's) because of decisions by the Canadian government plus the retirement of the U.S. space shuttle and presently "views telecommunications satellite opportunities in Central and South Asia as far more promising than in North America."