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June 9, 2005

Securities and Exchange Commission

Attn: Rufus Decker, Branch Chief

Washington, DC 20549-0510

    RE:

    The Allied Defense Group, Inc. — Form 10-K for the Year Ended December 31, 2004

    Form 10-Q for the period ended March 31, 2005

    File No. 1-11376

Dear Mr. Decker:

In response to the Commission’s letter dated May 25, 2005, The Allied Defense Group, Inc. (the
“Company”) is providing the following responses to the Commission’s request for additional
information regarding our Form 10-K filing for the year ended December 31, 2004 and our Form 10-Q
for the period ended March 31, 2005.

Enclosed are the Commission’s inquiries and the Company’s responses which have been numbered to
correspond to the paragraph numbers contained in the May 25, 2005 letter.

The Company also acknowledges that:

    •
    the Company is responsible for the adequacy and accuracy of the disclosure in its
filings;

    •
    Staff comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the filing; and

    •
    the Company may not assert Staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.

I would appreciate the opportunity to discuss any remaining issues with the Staff before it makes
any additional written comments. You may contact me (703) 847-5268.

Sincerely,

    Charles A. Hasper

    Chief Financial Officer & Treasurer

Response to the SEC Comment Letter

Comment Applicable To Your Overall Filing

    1.
    SEC Comment

    Where a comment below requests additional disclosures or other revisions to be made, please
show us in your supplemental response what the revisions will look like. These revisions
should be included in your future filings.

    Allied

    We agree with the SEC that all revised disclosures should be handled on a prospective basis.
Our proposed revisions will be set forth under the caption “Revised Disclosure in Future
Filings.” New language proposed to address the Staff’s comments will be underlined or shown
in RED to highlight the relevant language. Any related explanations or comments will be set
forth under the caption “Allied.”

Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 23

    2.
    SEC Comment

    In circumstances where more than one factor contributed to a fluctuation being discussed, you
should quantify the incremental impact of each individual factor if practicable. Please refer
to Item 303(a)(3) of Regulation S-K and Financial Reporting Codification 501.04.

    Allied

    We will quantify the incremental impact of individual factors where practicable. The
following Revised Disclosure from our recent Form 10-K highlights a few examples of such
future expanded disclosures.

    Revised Disclosure in Future Filings

    MD&A — 2004 compared to 2003 compared to 2002 (amounts in ‘000s)

    Revenues. Electronic Security segment revenue increased in 2004 over 2003 levels. The
increase at the VSK Group ($2,592) is principally the result of continued expansion of
its export sales via its European distribution network. NS Microwave’s business has improved
by $10,078 due to receipt of some additional U.S. government orders in 2004, including
two large contracts.

       Electronic Security segment revenue also increased in 2003, although the mix was
substantially different. The VSK Group increased $6,178 over 2002, largely due to
increased sales to non-Belgian customers. In contrast, NS Microwave decreased $4,178
from 2002. Many of NS Microwave’s traditional U.S. Government agency customers were
reorganized into the Department of Homeland Security. The organization and startup of the
Department of Homeland Security was marked by a delay in award of contracts by these agencies.
While NS Microwave began to receive some orders in the fourth quarter of 2003, it was too
late to realize meaningful revenues from some of these orders in 2003.

    Cost of Sales. Cost of sales as a percentage of revenue for 2004 was approximately 72%
compared with 74% in 2003. The decrease during 2004 was driven by lower costs within the
Ordnance & Manufacturing and Environmental Safety & Security Segments of $16,525 and $914,
respectively. Ordnance & Manufacturing cost of sales decreased from 2003 primarily from
the FMS contract. Electronic Security segment cost of sales decreased from 2003 primarily due
to the VSK Group’s production efficiencies realized as it expanded its distribution channel
throughout Europe.

       Cost of sales as a percentage of revenue for 2003 was approximately 74% compared with 62%
for 2002. The majority of the increase during 2003 ($22,544) was driven by currency
derivative impacts and the balance is attributable to other factors, including higher costs
within the Ordnance & Manufacturing Segment. The costs were primarily related to the FMS
contract which dominated the production process in that year. Additionally, MECAR incurred higher than anticipated
labor costs due to production delays surrounding a 90MM production order.

1

    Selling and Administrative Expenses. Selling and administrative expenses as a percentage of
sales for 2004 was higher than 2003. The Ordnance & Manufacturing segment incurred higher
administrative compensation costs of $1,337. The Electronic Security segment
incurred higher costs of $442, which results from higher costs at the VSK Group ($1,071)
offset by lower costs at NS Microwave ($629). SeaSpace incurred higher costs of
$1,897 which primarily resulted from substantial legal expenses associated with a dispute
with a former distributor. The dispute was settled in March 2005. Selling and administrative
costs at Corporate and Other increased by $1,522 due to Sarbanes Oxley compliance
costs. Titan Dynamics incurred a nominal decrease of $23 in selling and administrative
costs.

       Selling and administrative expenses in 2003 increased by $7,490 over the prior year. The
increase was due primarily to the additions of NS Microwave, Titan Dynamics and SeaSpace. NS
Microwave was consolidated on a full-year basis in 2002 while Titan Dynamics and SeaSpace were
second and third quarter 2002 additions.

    Research and Development. Research and Development costs increased steadily between 2002 and
2004. The 2004 increase was attributed to increased research conducted at
SeaSpace ($1,386), VSK Group ($423), MECAR ($349), and Titan Dynamics ($140), offset by
lower research at NS Microwave ($135). The 2003 increase was attributed to increased research
conducted at SeaSpace ($988), VSK Group ($862), MECAR ($783), NS Microwave ($261), and Titan
Dynamics ($9). This trend is expected to continue.

Contractual Obligations and Commercial Commitments, page 30

    3.
    SEC Comment

    Please consider revising your table of contractual cash obligations to include the following:

    •
    Estimated interest payments on your debt; and

    •
    Estimated payments under your foreign exchange contracts.

Because the table is aimed at increasing transparency of cash flow, we believe these payments
should be included in the table. Please also disclose any assumptions you made to derive
these amounts. At a minimum interest payments should be disclosed in a note to the table.
Please refer to note 46 of SEC Release 33-8350.

Allied

    •
    Regarding interest payments, we will include estimated interest payments in a note to
the table.

    •
    Regarding the foreign exchange contracts, we believe the cash position is neutral when
all such contracts have expired and cash is received from the sales contract. The
example below illustrates this point. As a result, we do not believe that disclosure of
estimated payments under foreign exchange contracts is warranted. However, we will
include a footnote to the table of contractual cash obligations clarifying the fact that
we have a cash neutral position.

Example of cash neutral position from foreign exchange contracts

    -
    MECAR receives a sales contract for $1.0M that will be completed in 24 months.

    -
    MECAR’s functional currency is the euro and seeks to protect itself from FX fluctuations.

    -
    MECAR obtains a 12-month forward contract from the bank for
€1.0M
(assuming the FX rate is 1 to 1). No cash impact.

2

    -
    Since the forward contract is only for 12 months, MECAR rolls over to
another 12-month contract when the first forward contract expires (thereby creating a
24-month hedge which matches the 24-month sales contract).

    -
    After the first hedge expires, MECAR obtains its second 12-month forward
contract for €1.2M (assuming the FX rate is now 1.2 to 1). MECAR pays €0.2M,
which represents the difference between the initial hedge amount of €1.0M and the
new hedge amount of €1.2M.

    -
    When the second forward contract expires (and the sales contract is
complete), MECAR receives €1.2M from the bank, which is offset by the €0.2M
that was paid when the second hedge was entered into. This results in a net cash
position to MECAR of €1.0M.

    -
    MECAR achieves its objective of hedging its sales contract for $1.0M. Any
cash paid (or received) from hedge rollovers is offset by the final cash payment
received when the hedges expire.

    -
    Based on the above, the cash position is neutral when all foreign exchange
contracts have expired and cash is received from the sales contract.

    -
    Note that it is not determinable in advance if cash will be received or
paid when the forward contracts expire during interim periods. As such, MECAR does
not have firm estimated payments that must be disclosed

Revised Disclosure in Future Filings

    Payments due by period (amount in 000s)

    More

    Less than

    2 – 3

    4 – 5

    than

    Total

    1 year

    years

    years

    5 years

    Contractual Obligations

    Long-Term Debt Obligations (1)

    $
    1,971

    $
    204

    $
    358

    $
    89

    $
    1,320

    Capital Lease Obligations

    7,202

    2,529

    3,842

    831

    —

    Convertible Debenture (2)

    2,231

    2,231

    —

    —

    —

    Operating Leases

    1,954

    394

    824

    736

    —

    Foreign exchange contracts (3)

    —

    —

    —

    —

    —

    Purchase Obligations

    —

    —

    —

    —

    —

    Total Contractual Obligations

    $
    13,358

    $
    5,358

    $
    5,024

    $
    1,656

    $
    1,320

    Commercial Commitments

    Bank guarantees

    $
    26,781

    $
    26,781

    —

    —

    —

    (1)

     Interest payments on long-term debt (which are excluded above) are estimated to be
$233, $467, $465 and $230 for the above periods, assuming interest rates of 11.5% and
5.5%.

    (2)

     Interest payments on the convertible debenture are estimated to be $30 for the above
period.

    (3)

     The Company’s cash position is neutral over the term of the foreign exchange contracts
and, as such, has been excluded from this table.

Financial Statements

Consolidated Balance Sheets, page F-7

    4.
    SEC Comment

    Please provide us with additional information to help us understand the appropriateness of
your classification of restricted cash as a current asset. Please refer to paragraph 6(a) of
Chapter 3A of ARB 43.

    Allied

    The majority of the restricted cash balance relates to requirements under our sales contracts
to provide performance bonds and advance payment guarantees. These performance bonds and
advance payment guarantees typically expire within one year or operating cycle and the
restriction on the cash is released. As such, the restricted cash is classified as current for the
periods

3

    presented. At December 31, 2004, $2 million of the restricted cash balance is
required under the senior loan facility. Based on our assessment, this $2 million portion
should be classified as non-current and will be updated in future filings, as set forth below.
Note that the reclassification has no impact on the senior loan facility or any of its or
other covenants.

    Revised Disclosure in Future Filings

    2004

    2003

    Restated

    ASSETS

    Current Assets

    Cash

    $
    27,940

    $
    43,377

    Restricted cash

    9,757

    15,937

    Accounts receivable, net

    31,946

    33,404

    Costs and accrued earnings on uncompleted contracts

    52,745

    60,516

    Inventories, net

    17,161

    12,068

    Deferred tax asset

    1,058

    1,016

    Fair value of foreign exchange contracts

    1,195

    6,900

    Prepaid and other current assets

    4,123

    4,880

    Total current assets

    145,925

    178,098

    Property, Plant and Equipment, net

    30,294

    24,615

    Other Assets

    Restricted cash

    2,000

    —

    Intangible assets, net

    3,723

    4,135

    Goodwill

    14,401

    13,718

    Deferred tax asset, non-current

    485

    —

    Other assets

    528

    378

    21,137

    18,231

    $
    197,356

    $
    220,944

    Restricted Cash Footnote

    Restricted Cash at December 31 is comprised as follows:

    2004

    2003

    Collateralized performance bonds and advance payment
guarantees

    $
    9,745

    $
    15,812

    Senior secured facility deposit

    2,000

    —

    Other

    12

    125

    $
    11,757

    $
    15,937

    MECAR is generally required under the terms of its contracts with foreign governments and its
distributor to provide performance bonds and advance payment guarantees. The credit facility
agreements used to provide these financial guarantees place restrictions on certain cash
deposits and other liens on MECAR’s assets. Restricted cash of $9,745 and $15,812 at
December 31, 2004 and 2003, respectively, was restricted or pledged as collateral for these
agreements.

    The Company made a security deposit in connection with the senior secured facility as further
described in Note K. This balance is classified as a non-current asset.

4

Consolidated Statements of Earnings, page F-9

    5.
    SEC Comment

    Where service revenues exceed 10% of consolidated revenues please separately disclose service
revenues and the related cost of goods sold. Refer to Rule 5-03(b) of Regulation S-X. Please
provide us with a breakdown of product and service revenues for the periods presented.

    Allied

    Service revenues do not exceed 10% of consolidated revenues. The table below outlines the
breakdown of product and service revenues for the periods presented.

    Revenues

    2004

    2003

    2002

    Product revenues

    $
    145,902

    $
    153,269

    $
    144,243

    Service revenues

    998

    966

    1,031

    Total

    $
    146,900

    $
    154,235

    $
    145,274

Based on the fact that service revenues do not exceed 10% of consolidated revenues, no
additional disclosure of the service revenues and related cost of goods sold are warranted.

Consolidated Statements of Stockholders’ Equity, page F-10

    6.
    SEC Comment

    Please disclose the accumulated balances for each classification of accumulated other
comprehensive income (loss) on the face of the balance sheet or in a footnote to the financial
statements as required by paragraph 26 of SFAS 130.

    Allied

    Through 2004, the amounts set forth on our balance sheets under AOCI consisted solely of
currency translation adjustments. The year to year changes are highlighted as currency
translation adjustments in the Consolidated Statements of Stockholders’ Equity included in the
2004 Form 10-K. Commencing in early 2005, we began to enter into cash flow hedges, which
require periodic adjustments to the AOCI account. Note 13 to our financial statements
included in our March 2005 Form 10-Q highlights the components of the changes in the AOCI
account related to the