Rheinmetall and KMW: the planned super-tank could change the German armament industry

Stand: 08:34 am | Reading time: 3 minutes

IIn the German defense industry, a sensational reorganization is emerging. The leading German engineering group Rheinmetall could take over the general contractor of the Leopard battle tank, the private company Krauss-Maffei Wegmann (KMW). The Düsseldorf-based technology giant, Rheinmetall, has issued a stock message, according to which discussions with KMW's parent company, Wegmann-Holding, about a possible purchase would be conducted. More precisely, it is KMW's share of 50% in the German-French arms company KNDS (KMW + Nexter Defense Systems).

Rheinmetall's brief stock market information is rather vague and suggests some obstacles to the conclusion. Thus, "other forms of cooperation with KNDS and / or KMW" are mentioned as an option. "The question of whether the transaction is legally feasible and economically viable is currently under consideration by the board of directors of Rheinmetall AG and depends on a large number of political, economic and regulatory factors", he declares.

In addition to the antitrust issues, one of the major difficulties should be the next steps for the future Franco-German next generation battle tank. According to the German and French Defense Ministers, the tank should be developed and built together, to succeed the German model Leopard and the French model Leclerc.

The Germans must take the lead of the tank project

While in the future new joint fighter plane, the French defense company Dbadault takes the lead and Airbus gets the second role, should take the lead of the joint battle tank Germany. By the end of 2018, benchmarks for reservoir requirements must be defined and Rheinmetall, KMW and Nexter must submit their industrial proposals for development in mid-2019. Experts talk about the main ground combat system (MGCS), a kind of high-tech battle tank and escort vehicles.

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The pressure to present an industrial concept for the development of the new main battle tank could have forced talks between the two German armaments companies. It is true that discussions took place several years ago about a merger between Krauss-Maffei Wegmann and Rheinmetall. But they have always failed because of mutual claims of power.

Now let's go back to Rheinmetall's takeover of KMW – just over a month after Manfred Bode, KMW's long-time boss, pbaded away at the age of 77.

KMW owners want to stay undetected

The manufacturer of Leopard tanks, KMW, is privately owned and, in addition to the Bode family, has about two dozen family members who prefer not to be detected. Bode, in collaboration with General Manager Frank Haun, sought a long-term solution for KMW.

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Almost three years ago, the private company KMW joined the French state-owned armaments company Nexter and founded the KNDS armaments holding company. In 2017, KNDS achieved a turnover of about 2.7 billion euros. According to data published in the Federal Gazette, the KMW Group represents approximately 1.34 billion euros. KNDS's order intake is estimated at 3.4 billion euros. There are more orders than sales. The KMW Group and Nexter both made a profit.

The hot issues now relate to the reaction of the French state to a possible acquisition of the Rheinmetall KMW. In essence, the public defense company Nexter would get a new German partner in the parent company KNDS. Industry experts badume that Nexter would have a right of first refusal on KMW shares. France could therefore cancel this German transaction. In addition, Rheinmetall would be a more powerful partner than KMW, since Rheinmetall is much larger than KMW. Overall, Rheinmetall-KMW talks show that there is a movement in the defense industry, according to experts.