IAI to set up US electronic defense systems co

ELTA North America is to be located in Maryland and will produce radar and combat communications systems.

The board of directors of Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) has decided to set up a new company in the US to be called ELTA North America to market electronic defense products in the western hemisphere, IAI North America president Uzi Rosen has told "Globes."

Rosen stressed that planned production in the US will not result in layoffs at IAI unit ELTA's plant in Israel. The new company, which will be located in Maryland, will be part of IAI North America. ELTA Systems Ltd., based in Ashdod, is one of the world's leading electronic defense systems companies, which develops, designs and manufactures radar and electronic combat communications systems.

Rosen said, "This is an important strategic decision, which will deepen IAI's penetration into the US and other markets."

He added that the decision was based on the positive experience gained by IAI's first subsidiary in the US, Stark Aerospace in Mississippi, which was established five years ago to manufacture and market Unmanned Aerial Vehicles (UAVs) and electro-optic payloads to North American customers.

Rosen said, "Stark is growing at a satisfactory rate and we are planning to add new production lines for other avionics and payloads."

According to Rosen, ELTA North America will be virtually a mirror image of Stark Aerospace from the organizational structure point of view but will specialize in products developed by ELTA. Stark is a US company in every sense. It is managed by Americans, and does not employ any Israelis. This will be the organizational format of ELTA North America. The company is expected to begin the final assembly of products, inspect quality and deliver products to clients before the end of 2011.

IAI decided to locate the new company in Maryland because of the availability of appropriate skilled labor. Rosen said, "Following the economic crisis there are fantastic human resources here looking for work. I've been in the US for five years and I've interviewed many prospective employees but I've never before encountered workers of this level. Today, it is very easy task to hire quality people in the US."

He added that IAI is preparing to put ELTA's technology onto the US market with an emphasis on ground radar to detect people and equipment. The company is focusing marketing efforts on two types of customers: the US military and all its arms, which have for years been developing infrastructures to defend mainly its overseas bases and installations, and internal security agencies engaged in defending the country's lengthy borders with Mexico and Canada.

Rosen said, "IAI already provides ground radar to the US market because its quality is far better than that being offered by the local market."

He was very much in favor of opening a US plant but he stresses that the final decision was reached by IAI's board of directors in Israel, which understood the potential of such a large market for the venture. Rosen expects a major rise in orders for ELTA's products once ELTA-North America begins to provide customers with local support.

Questioned on whether production in the US will lead to layoffs in Israel, Rosen said, "The very opposite. We are not moving production lines from Israel to the US. We are duplicating production lines. IAI management understands that if it does not open US production lines then it will not get more orders from the American market. The way I see it every extra order from the US market will in the end require more production of sub-systems in Israel and only the final assembly will be implemented in the US. Every new order in the US will add 100% - 50% going to Israel and 50% to the US."

He insists that ELTA's workforce understands this new decision and that the works committee realizes that more orders in the US means more work in Israel.

Rosen expects that within five years ELTA North America will record annual profit of $200 million.

Published by Globes, Israel business news - www.globes-online.com - on October 25, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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