Arms race

Until Bundeswehr starts buying, KMW relies on overseas customers

Frank Haun, CEO of KMW
Frank Haun. Source: Imago/Thomas Koehler

Germany’s military is stretched thin, spread out among 13 foreign deployments and NATO obligations, and working with outdated technology. To fulfill its obligations, Germany needs a fully outfitted division ready by 2027, and two more by 2032. After a quarter-century of penny pinching, the Bundeswehr is working with outdated equipment.

Defense Minister Ursula von der Leyen said in 2016 that Germany must budget an additional €130 billion ($158 billion) through 2030 for armament upgrades. With funding levels at 1.2 percent of its gross domestic product, Germany’s defense budget is lagging under the 2-percent level, which NATO members agreed to reach by 2024. The slice of the federal budget will increase from €37 billion today to €47 billion by 2021.

Frank Haun, CEO of Krauss-Maffei Wegmann since 2006, said the firm had its strongest year of sales in history in 2017 and expects sales to keep growing. Munich-based KMW, which has about 3,000 employees and leads the European market for armored vehicles, merged with France’s Nexter Group in 2015.

“If we only bought European products in Europe, we wouldn’t need to export arms to third countries,” he said. “The development of the current Leopard 2A7 wasn’t financed by Europe but by the much-maligned third countries.”

“If we only bought European products in Europe, we wouldn’t need to export arms to third countries.”

Frank Haun, CEO of KMW

Like Qatar, which turned to KMW to modernize its army with 62 tanks and 24 howitzers. “I believe we must all be concerned about maintaining a balance of power in the region,” Mr. Haun said. With Iran and Saudi Arabia in a constant Cold War, the presence of power lets both sides know they wouldn’t come out unscathed in a hot war.

KMW ended its relationship with Turkey at the end of 2017 after supplying hundreds of tanks over many years. Mr. Haun said it no longer made financial sense, as Turkey is developing a tank with South Korea. But his firm also faced substantial backlash when news footage showed Turkey sending Leopard tanks into Syria to crush Kurdish forces in January.

He estimates total European spending on tanks and artillery will reach a total volume of €100 billion through 2050. “We’d be happy if we get half of that,” he said. Mr. Haun estimates that Europe will need 5,000 new tanks in the next 20 to 30 years; at €15 million each, that’s a cool €75 billion. “Nobody believes our eastern European and NATO partners will be using Russian tanks,” he said. And when European partners are deploying together, it naturally makes sense for them to be using the same systems, preferably his own.

Markus Fasse writes about the aviation and automobile industry. Donata Riedel covers economic policy for Handelsblatt. To contact the authors: fasse@handelsblatt.com, greive@handelsblatt.com.

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!