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German arms builders buck downward trend

Tom Barfield · 14 Dec 2015, 10:42

Published: 14 Dec 2015 10:42 GMT+01:00

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German companies sold 9.4 percent more arms in 2014 than in the previous year, the report for the Stockholm International Peach Research Institute (Sipri) into the 100 biggest arms and military services companies showed.

That was largely thanks to a big boost in business for ship- and submarine-builder ThyssenKrupp, which saw its turnover from arms grow by 29.5 percent.

"[ThyssenKrupp] has several orders in place, in particular for submarines for countries like Turkey, South Korea and Greece, that's presumably an important part of the total," Sipri Germany expert Pieter Wezeman told The Local.

The shipbuilder also has rolling contracts with the German navy to build and maintain its fleet.

But aside from ThyssenKrupp, there was little change at other arms manufacturers.

Germany's biggest arms company, Rheinmetall, saw sales increase slightly in 2014 over the previous year, while third-ranked producer Krauss-Maffei Wegmann shrank slightly.

Airbus group, a European multinational which operates in several countries but is particularly strong in Germany, also registered a slight fall in arms sales in 2014 compared with 2013.

Germany and Switzerland were the only two countries to see their arms sales grow in western Europe and the USA.

But Russia was the biggest winner of the 2014 arms race, as companies there saw a 48 percent jump in sales – something Sipri said reflects high military spending from Moscow and export success for Russian companies.

Companies smell cash in eastern Europe

Moscow's splashing out on arms could see German companies booking many more orders from eastern Europe in the future.

Countries across eastern Europe, unsettled by Russia's grabbing of territory and military support for rebels in eastern Ukraine, have boosted military budgets – and may well look to Germany to supply their needs.

Just last week, Lithuania ordered 88 Rheinmetall-made Boxer armoured fighting vehicles to outfit its army.

"Companies like Kraus-Maffei Wegmann will look with great interest at the situation in eastern Europe, such as Poland, where there is great interest in items for territorial defence, including tanks," Wezeman said.

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Rheinmetall is also closely involved in the manufacture of Germany's Leopard 2 tank and upgrades for existing ones.

But although the German tank builders have survived while most of their competitors in western Europe have closed their doors, they are facing new competition from countries like South Korea, which this year booked a big Polish order for armoured vehicles.

The German government's own spending decisions will likely be decisive in whether its arms industry is able to develop new, more competitive products.

Kraus-Maffei Wegmann, in particular, will be watching the Defence Ministry's new-found interest in battle tanks closely after a decision earlier this year to add 100 to the army's fleet.

"There are discussions about producing a follow-on to the Leopard 2," Wezeman said. "National orders, European orders and cooperation with European partners will be important for the German arms industry in maintaining its position in the market."

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Tom Barfield (tom.barfield@thelocal.com)

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