Q&A | MDA Corp. CEO Friedmann steps down, saying company needs a U.S. citizen to grow

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KOUROU, French Guiana – MDA Corp. Chief Executive Daniel E. Friedmann’s decision to leave his job after 20 years at first blush looks like an injustice:

He carries the wrong passport (Canadian) for a company whose growth is in part tied to U.S. government contracts, and he lives in the wrong place – British Columbia, not Palo Alto, California, where MDA’s growth engine, satellite builder SSL, is located.

Friedmann rejected that analysis, saying the multinational, multibillion-dollar ambition of MDA is a strategy he crafted with his board of directors. That strategy has now led Friedmann and MDA to name Howard L. Lance, a former chief executive of Harris Corp., to MDA’s top job starting in mid-May. Lance will be based in Palo Alto.

Here’s a snapshot of MDA’s performance under Friedmann. While impressive, the numbers don’t adequately demonstrate the fact that today’s MDA would be unrecognizable to the company in 1995.

MDA performance 1995-2015:

  • Market capitalization: 35X, plus issuer bids/dividends equivalent to 8 times 1995’s market cap.
  • Revenue: 19X
  • Export revenue: 41X
  • Employees: 5X.

In an interview, Friedmann discussed why he thought he had to leave to remove obstacles that might hinder the company’s growth. He also talked about the still-undelivered Ukrainian telecommunications satellite, and MDA’s attempt to commercialize satellite in-orbit servicing.

Did you get bored, or did the company’s board want a change?

None of the above! We have a strategy at MDA to build a multinational company. In particular to expand into the United States. As we worked through that process with our management team we came to the conclusion that the company, and the plan, was significantly better off with a CEO located in Palo Alto and being an American citizen. And so we wanted to imiplement that plan.

But there are many companies with substantial U.S. operations whose CEOs are not American and do not live in the United States.

Well, we tried some of that. We have a proxy company and we had our special security arrangements company before for our U.S. operations. But you have to realize that MDA today generates a little over two-thirds of its revenue in the United States. Well over half our employees are in the United States.

The Palo Alto facility is around three times bigger than any other facility we have. That’s the place to be to grow the company. I personally considered moving there myself. It is the place to be; the company has grown over time and that’s what we need to do.

You didn’t want to move to Palo Alto?

I have my own personal reasons why I don’t want to move there, and that’s part of it. But we also need a U.S. citizen there. We want [security] clearances for our facility and for our people. Our customers want to meet with the head of the company. We don’t sell $1 things, we sell $100 million things, and even bigger than that. You have to meet with the customers. In the commercial market, we meet with all our customers.

Why can’t you meet with your U.S. government customers?

There are lots of issues for a foreigner to go and meet many of the prospects that we have, and certainly to discuss some of the key aspects of those programs.

Something about that doesn’t ring right. You’ve given 20 years to the company…

Thirty-six, actually.

Twenty years as CEO and 16 before that – a long time. Are you looking for new horizons?

This has nothing to do with me. It has to do with the strategy of the company. The strategy was put together by our team, and I went to recruit my successor.

So this was your idea?

It’s the management team’s idea, but yes, I share the strategy on the way ahead. I’m not sure it’s 100 percent my idea, but I certainly worked hard on it.

Airbus and startup satellite constellation operator OneWeb announced a new Florida satellite production plant. Airbus has lots of work in the United States. Does Airbus CEO Tom Enders need a U.S. passport?

You’ll have to ask him. But I don’t think Airbus has two-thirds of its activity in the United States. When I had 15 percent of my activity in the United States, it was fine.

What should the take-away from this be in the eyes of the Canadian government?

This is good news for Canada. Here we have a Canadian company that’s trying to become a multinational and is growing nicely. We’re growing our Canadian operations today, and we’re going to grow some more by this move, if our strategy is correct, and that will be good for the whole company.

It certainly won’t have any negative impact on Canada. The Canadian operation is completely unaffected.

I think you have mentioned that some work in Canada had been moved to California, for specific program reasons.

I’m not sure what you’re referring to there. We are trying to win work in the United States. We’re trying to win work in Brazil, in the U.K. All that work has to be executed in those countries. But that’s not a negative for Canada.

I was thinking about robotics, where MDA’s skillset is more from Canada than from the United States, but the contract opportunities are in the U.S.

Our robotics business is growing well. We bought a robotics company in the United States and it is being integrated with SSL. It cooperates with our Canadian operation and we have grown our robotics business in the U.S. and in Canada in the last year. Of course we are pursuing a lot of U.S. opportunities. But it’s the whole company that’s grown, including the Canadian operation.

In particular, Montreal is doing more work for SSL today than it did before and continues to do business with many other people around the world. It has been a positive for Montreal.

You’ve expressed frustration that the Canadian government’s space budget isn’t keeping up with MDA’s growth and you speculated that a move to the U.S. might be an option.

Is this the first chapter in MDA’s becoming a U.S. company?

No. We are trying to grow a multinational company. The old days of being in one country – France, the U.S., Canada – and exporting to the rest of the world just doesn’t work anymore. There are too many countries that want real activity in their own country – whether it’s Brazil, or Germany, the United States or Canada.

So we announced to our shareholders a couple of years back a multinational strategy. Of course, the U.S., being the largest one and the closest one and where we made the SSL acquisition, has been our primary focus, but not our only focus. We’re trying to grow those multinational operations. We’re also trying to grow our Canadian operations.

MDA built a telecommunications satellite for Ukraine that has been in storage since Russia’s invasion of Crimea. What is its status?

The satellite has been completed. There are certain contractual and political issues that we are trying to resolve to get it launched. I hope those get resolved and that it is launched, but it’s not that easy.

Is it just a matter of money owed? Ukraine’s economy hasn’t been flourishing.

There are lots of issues. They began with the fact that the whole ground control network was in Crimea. That’s what the customer wanted, and of course that got taken over by the Russians, and we lost all that. So we couldn’t launch without a ground segment.

We’ve since been reworking all that into Kiev, but there are other issues. The launcher is Russian, and so on. Somebody has to work through all these issues. We are doing our best, but we’re not a government.

It’s a good satellite and I hope it gets launched. But we still have a few hurdles to clear, that’s for sure. We have serious political issues and disputes and we may or may not get through them.

Some years back MDA appeared close to developing a satellite in-orbit servicing technology, with Intelsat as inaugural customer. That fell apart, and recently Intelsat said it would be the inaugural customer for a competing technology from Orbital ATK of the U.S. Do you still like this as a business?

Yes, we are still working on the technology and talking to customers. At the time we were concerned about not tripping over government programs, and those government programs are basically happening as we speak. One tipping point was a contract [withi the U.S. Defense Advanced Research Projects Agency] for robotic satellite self-assembly a few months ago. We understand that both NASA and DARPA are going to come up with their RFPs this year. We have a commercial idea. We now have a completely U.S. solution with SSL, which is much easier to deal with than our previous solution.

We’ve continued to work it and I think as this year goes by and the government decides what they’re going to do and who they’re going to do it with, the program will move forward. Our solution is different from, and somewhat complementary to, Orbital’s.

Any idea of what you want to do after leaving MDA?

No I have been completely focused on making this a very smooth transition, and I just haven’t had the time to figure out what’s next. I’m sure I’ll have some time after May 16, so there’s no point in rushing into it.