The head of Germany’s biggest military contractor Rheinmetall has called on European countries to abandon their preference for national champions in favour of building larger, more specialised defense groups to compete against US rivals.
Armin Papperger said in an article that countries need to specialize in different types military technology if they want a closer defense collaboration in Europe.
“It doesn’t make sense to pick, for example, the second or third best technology just because one country wants it” out of nationalistic reasons. “That’s the most difficult conversation they have at the government level.”
The 61-year old Bavarian added, “We need large companies in Europe.”
The fragmentation of the defence industry has thwarted efforts by EU leaders to boost defence cooperation. European arms companies are in competition with each other. Military budgets are controlled on a national basis, and countries want to retain control over strategic supply chains, factories, jobs, and technological advantage.
A good example of cross-border cooperation is Europe’s largest missile manufacturer MBDA. It is owned by BAE Systems of the UK and Airbus of Europe, each of which holds 37,5%, while the remaining shares are held by Leonardo, an Italian company.
The rush by Europe to remobilise their armies is a boon for companies like Rheinmetall which makes infantry fighting vehicle, combat drones, and the smoothbore rifle that sits on a Leopard 2 tank.
The 1889-founded company in Dusseldorf did business with Russia up until 2014, when the German government revoked its export license following the Kremlin’s annexation the Ukrainian peninsula Crimea.
Rheinmetall’s shares have more than doubled since Russia’s invasion of Ukraine. The company also expects a backlog worth €60bn of orders by 2024 from Nato and its allies. Papperger sold shares last month worth nearly €5mn, just over 6% of his total holdings.
Rheinmetall is reviving its plans to consolidate the sprawling defence industry in the region. The company acquired its Spanish rival Expal for €1.2bn last year, cementing its position as a leader in the munitions industry. On March 18, the company agreed to purchase Reeq, an Dutch manufacturer of unmanned ground vehicle used for combat for an undisclosed amount.
Papperger is a controversial figure who often speaks out in an industry which operates under the radar. He has also asked the EU to look at an alternative to Israel’s Iron Dome defense system. Papperger is optimistic about Germany’s military awakening, or Zeitenwende, as Olaf Scholz called it, since Russia’s invasion of Ukraine. Papperger said in an interview with Der Spiegel that a text message from Boris Pistorius, the defence minister of Ukraine, was enough to convince Rheinmetall to increase production.
Papperger noted that while other German defence contractors complained about the lack concrete orders from Berlin in the past, Rheinmetall was able to quickly increase its capacity — it will produce 700,000 artillery rounds next year, compared to 70,000 in 2022, thanks to new production lines invested before war returned to Europe.
Papperger has worked for Rheinmetall since 1990. “That’s the reason we invested early,” Papperger said, pointing out investments in Hungary Australia and UK.
He added that it was crucial to future orders to localise and grow production capacity in several countries. “You must give back to the country. . . “This is what I am discussing with the prime ministers at this moment.”
Papperger said that if Donald Trump were to become president of the United States again, “the stress on Germany would be greater”. However, the race to rebuild Germany’s military might continue regardless of the outcome.
He said that the US focused more on Asia-Pacific than Europe. If the “very dangerous situation” in the area were to spark a full blown armed conflict “the US would focus on Asia and Europe would be completely alone”.
Papperger stated that in recent decades European leaders took it for granted the US would be there to save them in the event of a threat. “That will no longer occur”, he said. In the US, where Republican lawmakers blocked military aid for Ukraine, a “very strong message” was sent: “we no longer pay you”.
Papperger highlighted the growing polarisation of politics as a challenge to US defence capability. The next US president’s biggest task will be to bring both parties closer together. It is bad that the largest economy in the World — and the most powerful defence force — is divided.
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