A military contractor makes postwar plans

The Cabbage Patch doll fad of the 1980s is on the mind of John A. LaFemina, president of military contractor Alloy Surfaces Co. Inc. in Chester Township.

The kitschy dolls blazed to business glory, but just as quickly crashed when their popularity with children waned. Alloy Surfaces is seeking to avoid the same one-hit-wonder fate.

From about 80 employees in the late 1990s, Alloy Surfaces has beefed up to 616 workers at three plants in Delaware County, where it manufactures expendable antimissile decoys.

The reason: the wars in Iraq and Afghanistan. When they were launched by President Bush after the Sept. 11, 2001, terrorist attacks, the military went into "surge requirements" for Alloy Surfaces' antimissile countermeasures. Hiring boomed.

Now, just about every aircraft in the war zones is equipped with Alloy Surface's decoys. They use infrared energy to trick shoulder-fired missiles into chasing them instead of a helicopter, a jet fighter or a cargo plane, company officials say.

Considered the next-generation countermeasures, the Alloy Surfaces decoys sometimes complement older technology decoys also on aircraft, the officials said.

But the gravy train of a full-blown war on terror won't likely last forever, particularly with the Democrats' now controlling Congress. In fact, the antiwar tide that washed many Republicans out of Congress in November claimed one of Alloy Surface's biggest boosters, former Rep. Curt Weldon of Delaware County.

Knowing that government spending is uncertain, LaFemina and his management team are upgrading the existing product line, researching new products, and restructuring military contracts to keep the company's plants operating. "We've seen the Cabbage Patch dolls," LaFemina joked in a recent interview at the company's headquarters.

There's no immediate worry, he said. Alloy Surfaces' order backlog has swollen to $160 million, which should keep its plants humming through late 2008. The company's revenue this year will be about $120 million. Prices for the decoys vary by size and order volume, but many cost about $100 each.

Company executives recently negotiated multiyear contracts with the U.S. military, which will stabilize the business, said Lawrence M. D'Andrea, Alloy Surfaces' executive vice president and chief financial officer. In the past, the military signed one-year contracts, which left the company lurching from year to year in its planning.

Military services in Britain, Canada, Australia, Japan, and several other nations have ordered more than two million decoys, diversifying the company's customer base. One major contract was announced May 18, when Alloy Surfaces said it won a $20 million contract to supply Britain's Royal Air Force with the countermeasures decoys through 2012.

Even so, the company has scaled back its growth outlook. Alloy Surfaces' revenue increased at a 25 percent compound annual rate in the last five years, LaFemina said. It expects to grow at a 10 percent rate in the next five.

The big project is developing new products, LaFemina said, and the company has about 27 researchers devoted to that task. Alloy Surfaces' core technology is a patented process to treat metal strips so that, when they are exposed to oxygen in the air, they radiate infrared energy.

Chemring Group P.L.C., Alloy Surfaces' British parent company, has insisted that the U.S. subsidiary focus research on its defense business.

"We're doing a road map of the technology to see where we have to go," LaFemina said. "We are trying to expand the product base."

The company has pitched what it calls a "friendly marker" to the U.S. military. This handheld and hand-thrown device gives off a shower of infrared energy that can be detected by jet fighters and others during the day or night. The goal is to protect soldiers from friendly fire.

"We're waiting to see who wants it and how many," said Michael D. Shoemaker, vice president of sales and marketing.

The business "moved so fast after 9/11," LaFemina said. "The question is, where do you go in the next five years?"

Founded: Mid-1950s.

Headquarters: Chester Township, Delaware County.

Employment

in 2001: 215.

Current employment: 616.

Main product: Infrared antimissile decoys.

2007 revenue*: $120 million.

Order backlog: $160 million.

Parent: Chemring Group P.L.C. of Britain.

*Estimated.

SOURCE: Alloy Surfaces Co. Inc.EndText