The Largest Security-Cleared Career Network for Defense and Intelligence Jobs - JOIN NOW

Military


Krauss-Maffei Wegmann GmbH

On 01 July 2014 the French arms manufacturer Nexter signed a letter of intent with its German rival Krauss-Maffei for the merger of the two companies that both produce tanks and armored vehicles. The merger must be in place in early 2015 and would create a Franco-German arms company with over 6,000 employees. On 01 July 2014 in Paris, the owners of the French and German companies signed a Heads of Agreement to this effect. The alliance of the two groups under the umbrella of a joint holding company created a Franco-German defence technology group with a current annual turnover nearing 2 billion euro, an order book of around 6.5 billion euro, and more than 6,000 employees.

KMW, Nexter and their owners viewed this step as decisive for the consolidation of the defence technology industry in Europe. Their new strategic alignment made it possible to retain jobs and skills in the heart of the European Union. The product portfolios of the two companies and their regional presences on the world market complemented each other. The alliance of KMW and Nexter created a group with the momentum and innovative force required to succeed and prosper in international competition. In addition, it offered to its European and NATO customers the opportunity of increased standardisation and interoperability for their defence equipment, with a dependable industrial base.

Nexter S. A. was in the sole ownership of the French State holding company GIAT Industries S. A.; Krauss-Maffei Wegmann GmbH & Co. KG was in the sole ownership of Wegmann GmbH & Co in Kassel. For the intended unification of the two companies, the current sole owners intended to contribute their shares into a newly incorporated joint holding company. They would each receive 50 percent of the shares of this holding company, which would become the sole shareholder in KMW and Nexter. The governance of the holding company would take into account the balance between the two shareholders, who will be reference investors in the new combined group with a long term industrial perspective.

The target date for the alliance was early 2015. In the meantime, the two future partners will both be subject to a process of due diligence. The alliance project will be subject to legal and customary regulation approvals.

Krauss-Maffei Wegmann GmbH & Co. KG led the European market for highly protected wheeled and tracked vehicles. In the year 1999, the defence activities of Krauss-Maffei AG and the Wegmann & Co. GmbH joined under the roof of Krauss-Maffei Wegmann. The resulting synergies, the broad product portfolio and the united system compentencies enabled KMW to gain a leading position in the world market.

At locations in Germany, Brazil, Greece, the Netherlands, Singapore, the USA and Turkey some 3500 employees develop, manufacture and support a product portfolio ranging from air-transportable, highly protected wheeled vehicles through reconnaissance, antiaircraft and artillery systems to main battle tanks, infantry fighting vehicles and bridgelaying systems. In addition, KMW has wide-ranging system competence in the area of civil and military simulation, as well as in command and information systems and remote-controlled weapon stations with reconnaissance and observation equipment for day and night missions. The armed forces of more than 30 nations worldwide rely on tactical systems by KMW.

Krauss-Maffei Wegmann GmbH & Co.KG leads the European market for armored wheeled and tracked vehicles. At locations in Germany, Greece, theNetherlands, Singapore and the USA, some 3400 employees manufacture and support a product portfolio ranging from air-transportable, heavily armored wheeled vehicles (MUNGO, DINGO, GFF4 and BOXER) through reconnaissance, anti-aircraft and artillery systems (FENNEK, GEPARD, LeFLaSys, Armored Howitzer 2000, AGM and DO-NAR) to heavy battle tanks (LEOPARD 1 and 2), armored personnel carriers (PUMA) and bridge-laying systems (LEGUAN and PSB2). In addition, KMW has wide-ranging system competence in the area of civil and military simulation, as well as in command and information systems and remote-controlled gun-carriages with reconnaissance and observation equipment for day and night missions. The armed forces of more than 30 nations worldwide rely on the operational systems by KMW.

Backed by a worldwide network of subsidiaries, Krauss-Maffei Wegmann is able to react fully and swiftly to the specific requirements of its customers. These subsidiaries include: ATM Computersysteme GmbH, market leader in computer technology for reconnaissance, command and armament deployment systems; Hellenic Defense Vehicle Systems; Dutch Defense Vehicle Systems; and Wegmann USA. Comprehensive manufacturing structures exist in Greece, the Netherlands and the United States. KMWS in Hamburg is a competence center for welding technologies. KMW Asia Pacific ensures an international presence in Asia.

Krauss-Maffei

Krauss-Maffei, a corporation with 5,000 employees and annual sales of 1.4 billion DM in 1990, was the prime contractor for the Leopard-2 tank. The majority ownership position in Krauss-Maffei was held by Mannesmann AG, one of the largest corporations in Germany (125,000 employees and 24 billion DM sales). Minority ownership positions were held by the State of Bavaria and Diehl GmbH, one of the Leopard-2s' sub-system manufacturers.

In the year 1999, the defence activities of Krauss-Maffei AG and the Wegmann & Co. GmbH joined under the roof of Krauss-Maffei Wegmann. The resulting synergies, the broad product portfolio and the united system compentencies enabled KMW to gain a leading position in the world market.

Joseph Anton von Maffei founded Munich’s first locomotive factory in 1838. In 1931, Krauss & Co. took over the factory, which then traded under the name of Krauss-Maffei AG. During the 1930s, the company developed its first military products. In 1963, Krauss-Maffei as general contractor started series production of the LEOPARD 1 main battle tank, then later the GEPARD self-propelled anti-aircraft gun (SPAAG) system and the LEOPARD 2 MBT.

The company underwent substantial change in the late 1980s. In 1985, for example, the firm had annual sales of 2 billion DM and employed 5,200 people. However, whereas 75 percent of sales were due to defense production, only 25 percent of the labor force worked in the defense division. This was explained by the high share of inputs for tank production bought from other firms with Krauss-Maffei doing the final assembly only. This latter outcome is the result of the German MoD's desire to avoid the development of a highly specialized tank industry or tank manufacturer. As such, it had been the policy of the German Ministry of Defense to keep the value-added component allocated to the prime contractor at as low a level as is technically possible.

However, for Krauss-Maffei, profits were very large in the defense area and, in fact, covered heavy losses in the civilian section, making overall results in 1985 and 1986 slightly positive with 0.1 million DM in profits earned in both years. Between 1985 and 1990, defense sales dropped from 1,537 billion DM, on average, or by 15 percent annually, to 669 million DM, or a drop of 57 percent within five years. However, employment effects were by far not that large in the defense section due to the low-value added content of tank production. Because of this, employment decreased only slightly, from 1,250 to 1,100 employees, and to approximately 900 at the end of 1992. Total company sales declined by only 25 percent during this period in as much as civilian production (plastics processing and general-processing technology) increased. Dependency on defense declined from a 75 percent sales share in 1985 to only 46.4 percent in 1991. From 1988 to 1991, the share of exports in defense sales increased steadily from 23 percent to 40 percent.

The company claimed to be pursu-ing a threefold conversion-oriented strategy by cutting costs in the civilian sector, enhancing civilian areas of business (in part with new products) and restructuring its organization, i.e., purchasing of companies in related civilian fields of business. But the military industrial experience gained by the firm in the defense area was expected to be only of a very limited use. Parts of the "know-how" acquired can be used for civilian application, e.g., in the area of simulation technology. The production sites, in particular for tank assembly, however, cannot be converted into civilian production, and only one of the firms's products, transportable road beds, appeared to have a dual-use potential.

Wegmann

In 1882, Wegmann & Co. was founded in Kassel by Peter Wegmann and Richard Harkort as Casseler Waggonfabriken von Wegmann, Harkort & Co. In 1912 Wegmann was bought out by August Bode and the merchant Conrad Köhler. In the 1930s, the company became known as a manufacturer of railway carriages for the Henschel-Wegmann train. The manufacture of military vehicles was to follow. In the 60s Wegmann specialised in the development and construction of turret systems for the LEOPARD 1, GEPARD and LEOPARD 2 as well as for artillery & reconnaissance systems.

Wegmann AG, the manufacturer of the turret for the Leopard-2, was pursuing a strategy of rapid diversification into civilian fields in the early 1990s. This program included the expansionof existing civilian product lines, in particular in the field of control and measurement devices, general systems electronics, and automotive-related products. In keeping with its diversification policies, Wegmann purchased a number of smaller firms in related business areas.

As far as its defense markets were concerned, the company was seeking to improve its market position and to respond to potential military requirements. As operating costs were becoming increasingly relevant to the military forces, experienced management "know-how" had become critical. Here, Wegmann was seeking to apply for new defense projects as prime contractor using the administrative know-how acquired in managing a critical system for the Leopard-2. Since economizing on fuel requires an expansion of simulation equipment, one of the technological strengths of the firm, the firm was moving aggressively into this market. Finally, since asmaller Army implied less personnel available for in-house maintenance activities, the firm wanted to largely take over maintenance services for the Bundeswehr.

As a result of these early 1990s programs, the firm managed to keep employment fairly constant at 1,800 employees during the 5 years from 1985 to 1990, although total sales decreased by about 5-10 percent per year, from 780 million DM in 1987 to 610 million DM in 1990.

In the year 1999, the defence activities of Krauss-Maffei AG and the Wegmann & Co. GmbH joined under the roof of Krauss-Maffei Wegmann. The resulting synergies, the broad product portfolio and the united system compentencies enabled KMW to gain a leading position in the world market.



NEWSLETTER
Join the GlobalSecurity.org mailing list



 
Page last modified: 22-07-2014 19:03:44 ZULU