Concerted Attack

Industry on the Offensive over Defense

Defense action press
Puma tanks in the desert.
  • Why it matters

    Why it matters

    The German arms industry is facing unprecedented uncertainty due to twin government policies that both limit exports and domestic orders.

  • Facts

    Facts

    • Economy Minister Sigmar Gabriel wants to limit military exports to non-NATO countries.
    • Defense Minister Ursula von der Leyen has said that the Bundeswehr only needs to procure limited key technologies.
    • The Economic Council, a business association with ties to the governing CDU, has produced a paper calling for a coherent arms policy from the government.
  • Audio

    Audio

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It’s not something that happens often: business and labor unions working together. The split between capital and labor lives on today, something made obvious by the ongoing wage conflicts at Deutsche Bahn and Lufthansa. In the defense industry, however, both sides are cooperating, united by their common opponent: the German federal government.

The current right-left coalition has embarked on a new defense policy, spearheaded by Economy Minister Sigmar Gabriel and Defense Minister Ursula von der Leyen. Mr. Gabriel, who is the head of the center-left Social Democrats has set about limiting the export of tanks, small arms or surveillance technology to countries outside of the European Union or NATO.

Ms. von der Leyen, a member of Chancellor Merkel’s Christian Democrats, meanwhile, wants to increasingly free the German army or Bundeswehr from being limited to domestic arms manufacturers. She is therefore fighting against a broad definition of key technologies, those which are deemed so vital to national security that they can only be produced by the German defense industry.

Both are therefore ruffling the business principles of the defense companies, and are bringing unions and industry into the ring.

The influential Economic Council, a business association with 11,000 members which has ties to the CDU, is now warning in a position paper of the “drying up of the German defense and security industry through a further tightening of export policies,” and it is calling for higher military spending.

“Those who are for global engagement and more security at home must also support the necessary equipment for our soldiers and police officers, and greater investment and the preservation of our own technological skills,” Kurt Lauk, president of the Economic Council, told Handelsblatt.

Labor union IG Metall is also applying pressure, though limited so far to criticism of the government behind the scenes. Participants at a meeting of chief executives and workers’ representatives with Matthias Machnig, junior economy minister, at the end of March, said it was primarily Jürgen Kerner, executive member of the management board of IG Metall who pounded the government’s quickly made major decisions.

“Those who are for global engagement and more security at home must also support the necessary equipment for our soldiers and police officers, and greater investment and the preservation of our own technological skills.”

Kurt Lauk, President of the Economic Council

He reportedly argued that the politicians have a responsibility to the employees of the defense companies, because long negotiations within the government over key technologies and export permits create considerable uncertainty for future planning. The union declined to comment on the issue.

According to a study by the Federation of German Security and Defense Industries, about 100,000 people are employed in the armaments industry in Germany, and another 200,000 are indirectly dependent on the sector.

German Arms Exports-01

For about six months officials at the respective ministries have been negotiating a joint arms strategy. Despite their rapprochement on some points, it remains unclear when there will be results. A round of negotiations planned before Easter was cancelled at the last minute.

But time is of the essence, warns the Economic Council, as Germany is ultimately facing “a critical setting of the industrial policy agenda for an entire industry.” If the domestic industrial capacities were to be lost, the council warns, the Bundeswehr, as a customer of foreign arms manufacturers, would slide “quickly into the second or third tier.”

The United States, meanwhile, shows how the domestic industry in other sectors can be strengthened through contracts for military development – the digital economy being a prime example.

The council is calling specifically for the so-called system manufacturers to be declared producers of key technologies. They include the two major tank specialists, Rheinmetall and Krauss-Maffei Wegmann.

The suppliers need domestic systems providers as an “entrance ticket” to international procurement programs, according to the council. Their lobbying adds to the pressure on the defense minister from within her own party. So far, Ms. von der Leyen has, however, ruled out such a broad definition.

 

Till Hoppe is a Berlin-based correspondent covering politics for the paper. To contact the author: hoppe@handelsblatt.com

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