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THE ALLIED DEFENSE GROUP, INC. HAS CLAIMED CONFIDENTIAL TREATMENT OF PORTIONS OF THIS LETTER
AND ITS EXHIBITS PURSUANT TO 17 C.F.R. § 200.83. THIS FILING OMITS CONFIDENTIAL INFORMATION
(DENOTED BY ASTERISKS) INCLUDED IN AN UNREDACTED VERSION WITH EXHIBITS SUBMITTED TO THE DIVISION OF
CORPORATE FINANCE

September 16, 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 periods ended March 31, 2005 and June 30, 2005

File No. 1-11376

Dear Mr. Decker:

In response to the Commission’s letter dated September 8, 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 periods ended March 31, 2005 and June 30, 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 September 8, 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.

You may contact me (703) 847-5268 should there be any further questions.

Sincerely,

    Robert P. Dowski

Chief Financial Officer & Treasurer

Note H
— Goodwill, page F-23

    1.

    SEC Comment

    We have read your response to comment four from our letter dated August 16, 2005. The
projections in your goodwill analysis assume that Seascape (SeaSpace) will generate revenues
in 2005 that represent a significant increase over 2004. Give that this segment has only
generated $2.6M in revenues for the first six months of 2005, a 9% decrease from the same
period in the prior year, and has approximately $2.3M in backlog, please tell us whether you
are still on schedule to achieve your projections as of the most recent date for which you
have revenue information. If you believe that you will not meet the revenue projections,
please tell us how this affects your goodwill analysis. Please provide additional
information as necessary to support your conclusions.

As of August 2005 we are on track to slightly over achieve the 2005 results forecasted in our
goodwill analysis. Our revenue is heavily skewed into late 3Q and 4Q based on the forecasted
sales cycle and time required to spin up the new antenna division. See the table below for a
complete summary of full year and July/Aug performance.

    Goodwill

    Full Year 2005

    Projection

    FY Otlk *

    Delta

    Revenue

    $
    9,690

    $
    10,331

    $
    641

    COGS

    $
    5,349

    $
    4,991

    (
    $
    358
    )

    Gross

    Margin

    $
    4,341

    $
    5,339

    $
    998

    Op Exp

    $
    4,200

    $
    4,260

    $
    60

    Op Profit

    $
    141

    $
    1,079

    $
    938

    Net Income

    (
    $
    124
    )

    $
    568

    $
    692

    Cash Flow

    (
    $
    685
    )
    (
    $
    430
    )

    $
    255

    Goodwill

    July & Aug

    Projection

    Actual *

    Delta

    Revenue

    $
    1,062

    $
    1,330

    $
    268

    COGS

    $
    588

    $
    704

    $
    116

    Gross

    Margin

    $
    475

    $
    627

    $
    152

    Op Exp

    $
    809

    $
    635

    (
    $
    174
    )

    Op Profit

    (
    $
    335
    )
    (
    $
    9
    )

    $
    326

    Net Income

    (
    $
    218
    )
    (
    $
    7
    )

    $
    211

    Cash Flow

    (
    $
    481
    )
    (
    $
    385
    )

    $
    96

    (* unaudited numbers)

We are expecting continued strong results (which were anticipated in our projections used
to evaluate goodwill) during the September to December period. For example- August revenue
was almost $900K – more than double July’s revenue, and during the two months July and August
we generated 51% of the total revenue that was generated during the entire first 6 months of
2005.

1

Management expects this revenue acceleration trend to continue through year end and into
future years.

We have also attached a briefing paper on the SeaSpace business unit that outlines their
products, markets and plans for new product and service introductions. Portions of that
exhibit have been redacted in the public record to shield competitively sensitive information
on future product and service plans and their targeted market segments. In our August 1, 2005
response letter, page 3, question 3 it states that “SeaSpaces revenue growth is based on the
sales activity with two lines of business: 1) the core business that has existed since
inception of this unit, and 2) the new business estimated to be generated from a new product
line of antenna’s and other products manufactured or developed internally”.

In
reality — the revenue numbers for only antennas was included in the goodwill analysis.
Market sizings were underway for the new products and scope and features were not finalized.
Management omitted the revenue from these new and potentially significant sources in order to
ensure their estimates were conservative. The briefing paper will give you an insight into
these new areas of products and services that will supplement the core and antenna segments.
Those new products and services have the potential to increase revenue projections in the
second half of 2006, 2007 and 2008 by 25% to 50%. There would be commensurate improvements in
net income and cash flow. We will consider the impact of these emerging products and markets
in our goodwill evaluation done annually as of September 30.

Overall, management believes that the revenue and cash flow projections that were completed to
support the valuation of goodwill were appropriate. As can be seen from the above
quantitative analysis — SeaSpace is exceeding expectations so far in 2005 and its products are
being accepted in the marketplace either as expected or at a better than expected pace. As
the briefing paper shows — new sales opportunities continue to present themselves to the
Company and management is confident that cash flows will exceed 2005 expectations and that
this trend will continue in the future.

2.  SEC Comment

We note in your June 30th, 2005 Form 10-Q that Seascape’s (SeaSpace’s) new
antenna product line became available late in the second quarter. Please tell us where
this timing is consistent with the assumptions used in your goodwill analysis.

Our initial antenna products became available slightly ahead of schedule in late Q1. We
continued to roll out new features and sizes of antennas through Q2 and into Q3 and Q4 to
meet the demands of our customers and the marketplace. Product availability was generally
consistent — if not slightly ahead of assumptions used in our goodwill analysis.

3.  SEC Comment

Please also tell us the cash inflow or outflow for Seascape (SeaSpace) factored in your
goodwill analysis for 2005 through the most recent practicable date and the actual cash
flows for the same period

Through August we are generally using less cash than we had expected for SeaSpace relative
to the goodwill analysis for 2005 — see table in (1).

2

SeaSpace Business Overview for SEC

Sept.16, 2005

Today.  And Tomorrow.

SeaSpace - Mission and Charter

Mission:     Empowering our customers to improve the understanding,
      safety, security and enjoyment of our global environment.

Charter:     Provide hardware, software, systems and services that
      enable users of space-based assets to directly obtain
      and process data useful to their missions.

SeaSpace - Core Competencies

Antennas and data acquisition

Complete self-manufactured antenna product line up to 7m
aperture; includes world's first functional NPOESS Ka-band
prototype

Data acquisition scheduling, area-of-interest (AOI) processing

Sensor data processing

Virtually all current spaceborne remote sensing instruments

Very deep domain expertise, including algorithm development

Data management

Deep satellite data archives

Data distribution, both web-based and real-time

World recognized customer service capabilities

SeaSpace - Industry Impact and Firsts

SeaSpace created the commercial direct-downlink market.

TeraScan(r) processing software is the de facto industry standard.

Strong name recognition with NASA, NOAA, DoD, IPO, Primes, and
Universities.

1986 - First low-cost COTS remote sensing ground station

1987 - First Antarctic installation to support flight ops

1989 - First S-band polar system to support DMSP

1990 - First global users group

1991 - First fully transportable system

1999 - First low cost COTS X-band system

2000 - First to provide Ocean Color Monitor capability (IRS-P4)

2004 - First commercial cluster-based MODIS data processing

Geospatial Systems - Strategic Direction

[CONFIDENTIAL TREATMENT REQUESTED] *

Geospatial Systems - Strategic Direction

[CONFIDENTIAL TREATMENT REQUESTED] *

Geospatial Systems - Why Market Exists

Because users want real-time data

...instead of time-delayed data

Because users want control of their data

Maintain own archives, control access and use

Because users want flexibility in exploiting their data

Ability to process data themselves to generate unique
value-added products

Geospatial Systems Division - TeraScan(r) Value Engine

Geospatial Systems Division - TeraScan(r) Value Engine

Geospatial Systems - Product Base

X-band systems are more
expensive and complex
and thus represent
revenue  (~40%) much
larger than fraction of
installed base (~10%)

[ Pie Segment Numbers Represent
Unit Sales]

Geosynchronous satellites all broadcast at L-band

Polar-orbiting satellites broadcast at either L- or X-band

Geospatial Systems - Major Downlinks

L-band (1.7 GHz)

Used since late 1960's by both low-Earth orbiters (LEO) and
geosynchronous (GEO)

Data rate usually 1.3 or 2.7 Mbps

S-band (2.2 GHz)

Added by military in 1970's for secure transmissions

Same data rate as L-band, usually encrypted

X-band (7.8-8.2 GHz)

First used for satellite downlink by NASA in 1999

Data rates 13 - 300 Mbps

Now the standard for all current- and most next-generation
missions

Ka-band (17-30 GHz)

The next big thing (NPOESS)

Very high data rates (> 150 Mbps)

Geospatial Systems - Major Strategic Initiatives

Geospatial Systems - Major Strategic Initiatives

[CONFIDENTIAL TREATMENT REQUESTED] *

Three Growth Markets Targeted by Current R&D

[CONFIDENTIAL TREATMENT REQUESTED] *

Three Growth Markets Targeted by R&D

[CONFIDENTIAL TREATMENT REQUESTED] *

Antenna Systems - Strategic Position

[CONFIDENTIAL TREATMENT REQUESTED] *

Antenna Systems - Strategic Directions

[CONFIDENTIAL TREATMENT REQUESTED] *

TacSAS Overview

TacSAS Overview

TacSAS - Tactical Satellite Acquisition System

A method of incorporating meteorological data to compute artillery firing
solutions using atmospheric data from existing satellites

Current method of computing artillery firing solutions is outdated and
often inaccurate - Army is still using weather balloons

Availability of satellite data (AMSU-A) provides possible paradigm
change

Could eliminate use of balloon on battlefield...thus no RF emissions or
other identification that discloses presence and location of troops

Man-portable and early-entry capable

Cuts crew size by 2/3 and eliminates consumables

Sets up in under 10 minutes

Can be located remote from battlespace and still provide theater-wide
coverage

TacSAS - Satellite Data Source...AMSU-A

Advanced Microwave Sounder Unit - A

A multi-channel microwave
temperature and humidity sounder
aboard polar-orbiting satellites

Indirectly measures global
atmospheric profiles

Has 12 spectral channels to provide
information on atmospheric water and
oxygen

Each spectral channel provides an
indirect measurement of conditions in
a broad band of altitude (e.g. chart at
right)

Actual MET parameters are derived
from this via neural net and/or a series
of integrations

of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations
of integrations

System provides a vertical
resolution of about 1000m

TacSAS - Why We Advocate TacSAS

Standard MET is inaccurate and on its way out (succeeded by
MMS-P)

MMS-P may always suffer from "the balloon"

JAAWIN is an alternative approach, but is fundamentally limited
by network access and bandwidth

Recent events show that military bandwidth is stretched
very thin

A TacSAS market will eventually exist because it is
fully organic: it allows ground units to function with
no links to the outside world and no position
identification.