http://www.marketwatch.com/story/german-defense-giant-in-the-making-2010-01-18?reflink=MW_news_stmp
MarketWatch January 18, 2010 German defense giant in the making Commentary: Making up for lost time in military muscle By David Marsh -The merger seems sensible and well-timed. First, it ties in with the requirement of both MAN and Rheinmetall to bring more focus into their corporate activities. Second, it centers not on high-tech "smart" or airborne weaponry, but on the utilitarian area of land-borne systems that have been centre-stage priorities in the wars in Afghanistan and Iraq....[I]it meets the long-held German desire to build industrial companies with world scale in the defense field. -[S]uccessive German governments have long hankered after building national champions along the lines of Thales in France, BAE Systems in the U.K. and General Dynamics Corp. in the U.S. LONDON: Since the end of World War II, building up large-scale defense companies in Germany has always been something of a taboo. The dam seemed to burst in the late 1980s when Daimler-Benz joined up with aerospace group Messerschmitt-Bölkow-Blohm to form a defense giant with military equipment-making activities on the land, and at sea and in the air. But the timing - just before the fall of the Berlin Wall and the end of the Cold War - turned out wrong. In those days, don't forget, people started talking about the "peace dividend". Newly-reunited Germany was not in the mood to start supporting a new high-profile weapons-making titan. So, after a lengthy series of false starts and embarrassing reversals, Daimler these days has gone back to concentrate once again on making cars. Now Germany has made a new, less grandiose effort at picking winners in the defense industry. Last week came the news that truck maker MAN and defense and automotive group Rheinmetall are merging their military wheeled vehicle businesses to create a European land systems leader. Rheinmetall MAN Military Vehicles will eventually have about 1,300 employees and revenues of more than 1 billion euros after merging in two stages. Sales and development activities are coming together first, and then production at the end of 2011. The merger seems sensible and well-timed. First, it ties in with the requirement of both MAN and Rheinmetall to bring more focus into their corporate activities. Second, it centers not on high-tech "smart" or airborne weaponry, but on the utilitarian area of land-borne systems that have been centre-stage priorities in the wars in Afghanistan and Iraq -- and will be of increasing importance in fields like UN peace-keeping. Third, it meets the long-held German desire to build industrial companies with world scale in the defense field. The consolidation has been under discussion for about a year. The German government - a big supporter of building larger companies in the German defense business to compete with rivals in France, the U.S. and U.K. - has been providing behind-the-scenes assistance to make sure industry goes in the right direction. War-time sensitivities - and, in particular, Germany's highly delicate balancing act with Israel and the Arab states - preclude German government ministers or officials saying too much about this issue in public. However, successive German governments have long hankered after building national champions along the lines of Thales in France, BAE Systems in the U.K. and General Dynamics Corp. in the U.S. At present, MAN's wheeled military business, which makes trucks for the U.K.'s Ministry of Defence among others, has sales of about 500m euros while Rheinmetall's, which includes the Boxer and Fuchs armored vehicles, has revenues of about 250 million euros. One important aim of the merger is to provide international customers with an integrated offering and a "one stop shop" for military purchases. It could pave the way for an eventual deal for Rheinmetall to become undisputed leader of the German defense industry. One route would be for the company to divest its automotive division that contributed roughly half of the group's revenue last year but was far less profitable than defense. Rheinmetall has long had its eye on privately-held German tank-maker Krauss Maffei-Wegmann, but the two companies have been unable to agree a merger because of differences over control of the mooted new group. Now that Rheinmetall has acquired greater critical mass, it may be able in the next few years to remove obstacles to a link-up with Krauss-Maffei. David Marsh is chairman of London and Oxford Capital Markets. The Marsh on Monday column appears in German in the newspaper Handelsblatt. =========================== Stop NATO http://groups.yahoo.com/group/stopnato Blog site: http://rickrozoff.wordpress.com/ To subscribe, send an e-mail to: [email protected] or [email protected] Daily digest option available. ==============================
