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MDA Corp is based in Canada and owns satellite builder Space Systems/Loral (SS/L) based in Palo Alto, California. However, the seemingly never-ending rise of the value of the US dollar compared with the decline of the Euro has meant a reduction in orders for new satellites from SS/L. Also not helping US satellite building is the winding down of the US Export-Import Bank which has long been a source of funding for satellite buyers.
This means that MDA is considering leaving California, and even the US, in an attempt to trim costs.
MDS CEO Daniel Friedman told analysts in a conference call last week that even though SS/L was applying maximum pressure on its suppliers to reduce costs for satellite components, in particular for those satellites being built for European customers.
He said that outside suppliers were responsible for about half of a satellite’s components in terms of value. The other 50 per cent of parts were built in-house.
Friedman warned that if this downward pressure on suppliers did not work then he would have to consider other multiple alternatives, such as moving assembly out of Silicon Valley, “or out of the USA”. He said he expected to see the results of the pricing cost-cutting drive this year.
SS/.L typically has production space to build 7 satellites a year. MDA’s own Canadian facility can handle another two. In total the company booked orders for 9 satellites last year. However, to date this year a total of 7 satellites have been ordered by operators this year. MDA-SS/L has only won one order.