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Despite threats, Beretta plans to stay in Maryland for now

Maryland's largest gun manufacturer has decided not to leave the state just yet.

Beretta USA threatened to abandon its home on the Potomac if Maryland passed a strict new gun-control law, but after the law was signed the company announced that its operations would remain in Prince George's County for now. However, Beretta added, it would look elsewhere for future expansions.

Beretta and another Maryland gun maker have taken a wait-and-see approach to leaving the state, balancing the risk of a customer backlash against the cost and difficulty of a possible move, while keeping up with unprecedented demand for guns of all kinds.

Many Americans, afraid that the government is poised to restrict the purchase of firearms, have been snapping them up. In Maryland, applications for gun purchases are rolling in three times faster than last year, according to state police.

"The average guy is thinking, 'Oh, wow, if I want a Bushmaster assault rifle, I better get one now,'" said James Bryant, an analyst for First Research. "A lot of people don't know the ins and outs of the rules. They're rushing out to buy something because they don't know if they can tomorrow."

Even before the December mass shooting at a Connecticut elementary school that sparked nationwide debate on gun control, firearm sales nationwide had grown by 5.7 percent between 2007 and 2011, according to a October 2012 report by IBISWorld.

"We're now seeing sales that are unlike anything we've seen before," said Nima Samadi, a gun industry analyst for IBISWorld.

Maryland's new law bans the sale of 45 types of assault weapons and their copy-cats, and limits magazines for all guns to 10 bullets, among many other new provisions. As the debate progressed in Annapolis, leaders in at least seven other states courted Maryland companies with promises of a better business climate and possible tax breaks. And a state senator for an eighth — Utah — last week filed a bill aimed at soliciting Beretta to move there.

Those states' leaders not only make a political statement but position their states for a piece of a surging industry fueled by fear of new gun control laws.

Analysts estimate that Beretta, a 500-year-old, family-owned Italian company, has about $220 million in U.S. sales annually, including $150 million a year under a contract to supply the standard-issue M9 pistol to the military. About 300 people work at the company's Accokeek plant, where the pistols have been manufactured since the 1980s.

Under Maryland's new law, the civilian version of the M9, which uses a 15-round magazine, along with the assault-style rifles the company makes elsewhere, could not be sold in Maryland gun shops.

In a statement sent to The Baltimore Sun last week, Jeffrey K. Reh, Beretta USA board member and general counsel, said the company would not let the new law interrupt production for its military contract.

Although there are no plans to halt operations in Maryland, Reh said the company still is evaluating whether to expand three other operations here.

"The idea now of investing additional funds in Maryland and thus rewarding a government that has insulted our customers and our products is offensive to us so we will take steps to evaluate such investments in other states," the statement read.

Reh declined to answer questions or elaborate on the prepared statement.

LWRC International, a Cambridge-based maker of semiautomatic rifles considered assault weapons under the new law, also has decided to delay any major decisions until after they see how Maryland's law impacts their business — and whether customers will support them if they stay.

"Every day we get letters and offers," said Darren Mellors, LWRC's executive vice president. So far, he's received "nothing that would overshadow the fact that we would lose our best asset, our skilled and trained employees."

Mellors acknowledged that his gun company and others could face a customer backlash if they choose to stay put. He's seen it on his company's Facebook page.

In the past, gun buyers have boycotted manufacturers that appeared to back gun control policies. Smith & Wesson faced a backlash in 2000 after it signed an agreement with the Clinton administration to put certain safety features on its handguns.

The pressure isn't being felt only in Maryland. Gun companies from Colorado, Connecticut and New York — states that also passed new gun laws this year — also have been courted to move operations elsewhere.

In a March op-ed in the Hartford (Conn.) Courant, Colt president and CEO Dennis Veilleux, wrote that the proposed assault weapon ban there "will irreparably damage — if not destroy — the brand of any Connecticut firearms manufacturer."

Like many gun companies, Colt manufactures a version of the AR-15, a semiautomatic rifle police said was used in the Newtown, Conn., shooting that killed 20 children and six educators. Colt has not announced plans to leave Connecticut, but other companies have.

On April 9, PTR Industries, a small Bristol, Conn.-based firearms manufacturer, announced it would leave, even though it had not yet identified a place to go. A statement on the company's website said that it hopes to complete the move by the end of 2013.

"We are making a call to all involved in our industry to leave this state, close your doors and show our politicians the true consequences of their hasty and uninformed actions," the statement read.

Several analysts said Beretta's military contract suggests that the company likely will maintain a presence near Washington, D.C. But even if the company ultimately chooses to expand in Maryland, it may have insulated itself from potential customer backlash.

"They're publicly putting out the perception that they don't agree with the legislation and they're on the side of the customer," said Samadi, the IBISWorld analyst.

Gun demand is so strong that Wedbush Securities gun analyst Rommel Dionisio doubts there will be market consequences for companies that stay in states that ban their products.

"That's silly," he said. "Stores can't even keep assault weapons on the shelf right now. Consumers have been flooding into stores to buy these. Consumer demand for technical rifles is stronger today than it's ever been."

Uprooting a company for political reasons — even with tax incentives in a new home — primarily hurts the business that moves, Dionisio said.

"They've got a skilled labor force that's building these products," he explained. "They're losing [them], plus the cost of moving an entire manufacturing plant."

Like Beretta, New York-based Remington also threatened to leave its home state, but on May 7 issued a statement saying it would not move for now; it is, however leaving its options open.

"While we are unhappy with the misguided acts of our elected politicians, Remington will not run or abandon its loyal and hard working 1,300 employees without considerable thought and deliberation," the company said.

Larry Pratt, executive director of Gun Owners of America, helped publicize the offer of a Missouri man to give free land near a railroad to any gun manufacturer who wants to move from a state with new gun control laws. The man's gesture, Pratt said, reveals a common sentiment among gun owners: They would offer support to gun manufacturers who choose to move, but not shun those who don't.

"I don't think the companies are going to have a backlash from the customer base," he said. "If anything, they'll have our sympathy."

ecox@baltsun.com

Copyright © 2014, The Baltimore Sun
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