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German Land Combat Contractors

In 1955, when Germany joined NATO and rearmed, there was negligible domestic defense production capability. However since then a substantial defense industrial base has developed. Major companies include Alcatel (telecommunications), the Diehl Group (missiles, land vehicles, ammunition), Daimler-Benz Aerospace (DASA) (broad range of products, especially combat aircraft, defense electronics, ground and naval systems), ESG (systems engineering and software), Henschel (armored vehicles), Krauss Maffei (armored vehicles, systems integration), Rheinmettal Group (armored vehicles), HDW (Submarines) and Siemens (defense electronics).

By government policy, Germany’s defense industrial base lies almost entirely within the private sector, although many have stock owned by federal states or banks. There are no government defense production plants, and most defense industries are also heavily involved in civilian markets. Private industry executes about 85 percent of all military research, development, procurement, and maintenance. The Armaments Division of the Ministry of Defense has responsibility for planning and managing the armaments sector. Subordinate to this, the Federal Office for Military and Technology and Procurement (BWB) procures all armaments and also staffs seven armaments research and testing centers, each responsible for a specific class of systems.

In 1991 Germany had seven companies in the global top 100 defense industries as measured by annual defense revenue. Those seven companies had a combined defense revenue of about $7.7B (1991$US).26 By 1999 that number had dropped to three with a combined revenue of about $2.4B (1999$US). Those three companies are Rheinmettal, Krauss-Maffei AG, and Deihl Stiftung. (Daimler Chrysler Aerospace, which prior to 1999 had been the largest German defense company, was now a part of the newly formed transnational EADS, a French company.) Annual defense revenues for the largest German defense company in 1999 are $1.2B, compared with $3.6B in 1991. The largest German company (in terms of annual defense revenue) ranked 25th globally in 1999, compared with 14th globally in 1991.

Rheinmetall Berlin, another major defense contractor, produces armored vehicles, artillery, and munitions. Rheinmetall is based in Berlin and Düsseldorf. In 1991 it assumed a controlling interest in Krupp Mak Maschinenbau, thereby adding tracked armored vehicles, such as the Marder, to its output. The Krupp industrial group's defense sector was thenceforth limited to naval weapons systems. AEG-Telefunken is a leading supplier of electronics and radar; Krauss-Maffei of Munich produces the Leopard tank.

The manufacturers of the Leopard-2 are subdivided into two groups, the prime contractor and sub-system manufacturers on the one hand, and the suppliers of components and important parts on the other hand. The share of total sales contributed by the Leopard-2 is significantly higher for the first group (30-70 percent of defense sales) than for the second group of firms (2-25 percent). The total annual sales in the early 1990s attributable to the Leopard-2 program differed greatly between these groups. In absolute terms they averaged DM 300,000 per tank for each of the first group and between DM 10,000 and DM 100,000 for each of the secondgroup, i.e., between about 4-10 percent ofthe price of one Leopard-2. Prospects and problems of conversion differed, too. Apart from the quantitative aspect, conversion in the first group included structural changes in the industry and organi-zational changes in the individual firms. Inthe second group, even though there arecases of severe changes, the firms are notaffected in any significant way structurally.

By the ealy 1990s some firms had practically "written off" all larger efforts in the defense area. The underlying belief was that there would be no more large procurement of armored vehicles or tanks and that the small projects that may become available fell below the minimum efficiency level of operations (economic scale). They believed that the defense market in Europe was not large enough to support three main tank-building firms and, hence, it was better to withdraw from defense as far as possible and to minimize all capacities and efforts in this area.

Some firms, in contrast, were trying to focus on the new needs of the armed forces. Their underlying belief was that the Army would undergo substantial qualitative changes, e.g., restructuring toward a rapid deployment force, that would make new equipment necessary. This will not consist of large main battle tanks, but of smaller armored vehicles that can be air-lifted. Furthermore, electronics was becoming more important and so was a standard chassis for armored vehicles. Here, international cooperation was sought. In addition, military operations will follow new directions. Reductions in manpower meant less combat personnel, e.g., smaller tank crews, making new technologies such as an autoloader necessary, as well as more maintenance in industry facilities. Even if the cake was shrinking, it would not vanish.

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Page last modified: 07-08-2012 19:00:34 ZULU