Defense Needs

German Arms Industry in Search of Structural Reform and New Opportunities

Sigmar Gabriel. Source DPA
Economics Minister Sigmar Gabriel has his eye on German arms producers.
  • Why it matters

    Why it matters

    Germany is the world’s third largest arms exporting nations. The country’s businesses and national defense depend on a sound national policy.

  • Facts

    Facts

    • Sigmar Gabriel aims to talk soon with Chancellor Angela Merkel about the industry’s future.
    • Issues include inefficiencies, planning, jobs and industry consolidation.
    • Arms makers shuddered when Mr. Gabriel recently criticized weapons exports.
  • Audio

    Audio

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Sigmar Gabriel isn’t exactly regarded as a friend of the arms industry. Germany’s economy and energy minister said it was a “shame” that Germany was among the largest weapons exporters, and he panicked the industry when he announced that deals with countries outside of NATO would be allowed only as exceptions.

For all that, when Mr. Gabriel met Friday with the chief executives of the arms companies the expected confrontation didn’t happen. For a good reason: Mr. Gabriel, the head of the Social Democratic Party, has committed to developing new opportunities with them.

For companies, hardly anything is more important than planning security — and that is something the economy minister is hoping to provide. Mr. Gabriel has arranged with Chancellor Angela Merkel to talk about the future of the industry over the coming weeks. Horst Seehofer, the head of the Christian Social Union and Bavarian premier, who fears for Bavarian jobs, will also be involved.

Mr. Gabriel also wants to meet with Defense Minister Ursula von der Leyen and Finance Minister Wolfgang Schäuble to discuss which contracts the industry can expect from the German military over the coming years and what industry know-how should be maintained in Germany — although this really falls under Ms. von der Leyen’s area of competence. However, after the debates over the delivery of weapons to the Kurds, Mr. Gabriel might be happy to use Ms. von der Leyen to push through his own interests.

“Gabriel is the first minister in 14 years who is launching an industry policy initiative.”

Hans-Peter Bartels, Chairman of the defense committee in the Bundestag

In addition, the economy minister wants to promote the upcoming consolidation in the industry, so the companies no longer depend so heavily on individual export orders. In 2000, then-Chancellor Gerhard Schröder had discussed a concept with industry representatives to merge the still fragmented companies in fields of land force technology and navy vessels into bigger entitites. Mr. Gabriel said the concept was “a good template for future talks.”

The defense experts from his party had hoped for such an initiative. “Gabriel is the first minister in 14 years who is launching an industry policy initiative to systematically tackle structural problems in the industry,” said Hans-Peter Bartels, chairman of the parliamentary defense committee. The previous structures in the industry were often inefficient: “It is absurd, that we commission two tank builders for one tank and four shipyards for a single ship.”

Mr. Gabriel’s stricter policy on exports has triggered hectic activity in the industry. Merger negotiations of the Munich tank builder Krauss-Maffei Wegmann (KMW) with French competitor Nexter had already been made public. However, that deal might fall apart: Germany-based Rheinmetall is also wooing KMW. From Rheinmetall’s viewpoint, the national solution would be more appealing, as the merged companies could present themselves as strengthened on an international level. Mr. Gabriel would also prefer a national solution.

IG Metall, Germany’s dominant metalworkers’ union, and the workers’ councils of the defense companies have made it clear that a stricter export policy would cost jobs. Mr. Gabriel cannot sweep such concerns aside. At the beginning of November, he will meet again with industry representatives. In two weeks, he wants to present his weapons policy in a keynote speech.

This article was translated by Anna Park Kim. Vinny Kuntz also contributed to the story. Contact the authors: hoppe@handelsblatt.com and murphy@handelsblatt.com

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