It almost looks like the larva of an asian ladybug. Each time they molt they look a bit different but this looks like one of the instars(?)..think that's the term.
It would take a LOT of critters this size to de-needle that much of the tree and not cause damage to the branches below.
I lost a big deodara this summer but not in this manner.

The larva of ladybugs are carnivorous and not into eating vegetation. Not sure what the critter is but it is definitely not a ladybug larva. Take a sample to your local agricultural extension agency and they can tell you what the varmit is and how to control it.

That is a Deodar Weevil (Pissodes nemorensis).
Go to local nursery and buy yourself some insecticide.
Now.
Make sure its ok to use on young tree.
Home Depo usually sells a natural product that is safe for young trees.
Those things will kill your tree.
Watch it next year too.
The adult is red, with a long snoot.
I would spray it in spring again too.
It is in larva stage right now.
They kill trees, so kill it.
That's a shame.

Once you've treated the cedar and clip off the dead leader you can try bracing up one of the side shoots to form a new leader.

We live down town in the historic district of Hillsborough. The town is loaded with woodchucks! They do havoc to the garden and can do serious damage to your house.
You can even hear a gun go off every now and then, and you know it is a woodchuck sighting. I catch them and release a few miles away in the country.

{{gwi:587445}}

Frog,
That's a cute woodchuck!

Thanks for everyone's valuable input. I did not get a chance to go find a weevil control, but did erect a birdfeeder right near the tree in the hopes the birds would notice the weevils and eat them up. It may be just coincidence, but when I checked the tree 2 days later, there was not one weevil on it.
I will check for possible regrowth of the damaged areas next Spring and if I lost the entire top, I'll create the new leader as suggested and keep a watchful eye out for more weevils.
Thanks again,
Sandi

Unbelievable! I thought I had those caterpillar critters taken care of and then yesterday I discovered they were stripping the needles off my little Mugo Pine! I snipped off the branches they were clinging to and stuffed everything into a plastic bag, to suffocate them, and stomped the ground around the Mugo just in case any fell off.
I hope this is the last I see of them this season!

I have two deodara cedars 1 year old. i walked by one. the bug red headed saw fly. I live in Dotties area near wesley chapel. The bugs/worm catapiller beasties ate half of one of my trees. wife went to lowes sprayed with a heavy duty pesticide. All of the above critters are incorrect. This beastie is bad. I will respray tommorrow and pray. how can i attack them in the soil.

OK, so I should look up red headed saw fly?

Have to tell my landscape guy to be on the lookout.
Wondering if a drench product, systemic, would be a better solution than spraying..especially for the taller deodaras?

According to the google images and details these 10 species of sawflies attack May-June and second crop in Aug through October.
Original poster's photo appears to be a pupa, golden brown spun cocoon.
Pre-pupal probably from later year crop will overwinter in the soil so treating the soil is important also.
Catching the clusters of recently hatched worms and removal/disposal is highly recommended and regular monitoring for the appearance is a year round task.
U.Maryland site says these are not critters that can be controlled with BT.