Anxiety over federal budget cuts has big U.S. defense contractors slimming down, but an Israeli aerospace company is counting on expansion here.
Israel Aerospace Industries' new ELTA North America subsidiary officially opened its headquarters in Howard County on Monday with a plan to go from nine employees to 100 in the next four years. ELTA, which makes radar and other defense electronic systems, will manufacture products from a small Fulton location with room to grow.
The company's ribbon-cutting event drew both of Maryland's U.S. senators, Rep. C.A. Dutch Ruppersberger, the governor and the lieutenant governor, all eager to praise the company for picking Maryland after considering six states. Howard County Executive Ken Ulman joked that he "almost stalked" CEO Dave Machuga as part of his administration's efforts to land the headquarters.
"I called him once a week or [other county officials did], saying, 'OK, what can we do to make this happen? I'm going to call once a week until you tell me there's something we can do,'" Ulman said. "And finally there was."
The state gave ELTA a $300,000 low-interest-rate loan to make capital improvements. U.S. Sen. Barbara A. Mikulski said the state's congressional delegation helped ELTA get licenses it needed from the Federal Communications Commission. And Howard County offered temporary space in its business incubator — for free — in a no-strings-attached move while wooing the company.
"They have an office in Northern Virginia, and I didn't want them to get comfortable there," said Laura A. Neuman, the county's director of economic development. "Once they set foot in Howard County, we weren't letting them go."
It was a different outcome than the last time Maryland officials tried to land the main office of a company known for its radar systems. The battle over defense giant Northrop Grumman, which wanted to move its 300-person headquarters from California to the Washington area, ended with Maryland's losing to Virginia two years ago.
ELTA officials pointed to the enthusiastic welcome and the state's concentration of highly educated workers as reasons for its decision to locate here.
"We're happy to be here — this region has a lot to offer — and we're looking forward to being here a long time," said Machuga, ELTA North America's president and CEO.
The company is moving in at a fraught time for federal contractors. Budget cuts loom after years of ballooning spending on defense contracting. It's possible that Congress won't step in to stop the automatic "sequestration" reductions slated to start in January — about $109 billion per year through 2021, with half in defense.
Defense analyst Loren B. Thompson said budget contraction doesn't mean there's no room for some contractors to grow. ELTA's challenge, he said, is to make a space for itself in a radar market dominated by entrenched players such as Northrop Grumman.
"One of the largest radar facilities in the world is located off the Baltimore-Washington Parkway by the airport there — that's the Northrop Grumman facility," said Thompson, chief operating officer of the Arlington, Va.-based Lexington Institute. "If ELTA is planning to compete with Northrop Grumman, then they're dead. But if they're going to team with a big American company or if they're going to offer things that are not presently in the marketplace, they could find this a fairly congenial environment."
Machuga called Northrop an "outstanding company" — he worked there before joining ELTA a year ago — but said his new employer will seek to show that it has affordable products "battle-tested" in Israel. The country's Iron Dome mobile missile-defense system uses ELTA radar.
Gov. Martin O'Malley said Monday that he would lead a delegation of business and other leaders on an eight-day trade mission to Israel in November. Lt. Gov. Anthony G. Brown, who met ELTA leaders on a trade mission two years ago, told the ribbon-cutting crowd that these trips "sure do pay off, don't they?"
ELTA North America is starting off with 7,500 square feet in a "flex" building in the Maple Lawn development. It's part offices, part electronics lab and part manufacturing and assembly floor.
But on Monday, its manufacturing space had been cleared to make way for a stage, dozens of chairs and refreshment tables. Examples of its radar and other systems lined the walls. Between the U.S. and Maryland flags on stage was Israel's, and Israeli Ambassador Michael Oren — pointing to economic and academic ties — told the crowd that his country had "no greater friend than the state Maryland" within the United States.
The benefits run both ways, Oren said.
"Twenty Israeli companies have opened up plants in this state," he said. "Thousands of Marylanders are employed by Israeli companies."
After the event, workers hauled the ribbon-cutting setup out so ELTA can get back to work. Machuga expects the company will be making products there soon.
Its $300,000 loan from the state, like most incentives, comes with requirements for job creation and capital improvements. Neuman, Howard County's economic development director, said she's confident the plan to grow to 100 employees is conservative — even at a time of budget cutting.
"This is a contractor that has very compelling technology," she said. "I think they're in a strong position."Copyright © 2015, The Baltimore Sun