The business of Europe’s defense companies is currently going well. But they are still small worldwide. Rheinmetall is now joining forces with Leonardo to build tanks. And has even bigger plans.
In view of the many wars and new conflict scenarios around the world, two of Europe’s major arms companies are coming together to build a new generation of tanks. The German group Rheinmetall and the Italian weapons manufacturer Leonardo launched a joint company in Rome. The first major order is an order from the Italian army worth 23 billion euros. The declared goal, however, is to equip the armed forces of other countries with battle tanks and infantry fighting vehicles – in Europe and beyond.
Both companies each hold 50 percent of the new company called Leonardo Rheinmetall Military Vehicles (LRMV). The company has its headquarters in Rome. However, the operational business will be located in the northern Italian port city of La Spezia, where Leonardo already has a large factory. It was agreed that 60 percent of the activities would be in Italy. Approval from the authorities is expected by the beginning of 2025. Leonardo originally wanted to work with Rheinmetall’s competitor KNDS. However, there was a break in the negotiations.
“New heavyweight in European tank construction”
Rheinmetall boss Armin Papperger praised the agreement highly. “We are creating a new heavyweight in European tank construction,” said the manager. In many countries there is a significant need for modernization in this area of the military. In the medium term, several thousand old tanks would have to be replaced, especially in Eastern Europe. He named the USA, the Middle East and Australia as further potential sales markets. In the medium term, the cooperation should also extend beyond the construction of tanks.
Leonardo boss Roberto Cingolani said that Europe’s defense companies were individually too small to compete against “giants” from the USA or China. This is now a first step towards a conceptually new defense system at European level. Both company bosses countered speculation that LRMV would create competition for the joint German-French Main Ground Combat System (MGCS) concept, which is intended to replace the Leopard from Germany and the Leclerc from France in the more distant future.
Order books are fuller than ever
First of all, it is now a question of soon supplying the Italian army, which wants to phase out older models. The basis for the main battle tank will be the Panther developed by Rheinmetall, which is not yet ready for series production. The Rheinmetall Lynx model will be the basis for the smaller infantry fighting vehicles. Cingolani promised delivery within two to three years. According to him, with KNDS (formerly also Kraus-Maffei Wegmann) this would have taken longer, at least five years.
Leonardo emerged from the former state-owned company Finmeccanica. The Italian state is still the largest individual shareholder today. With more than 50,000 employees, Leonardo recently had annual sales of more than 15 billion euros. The Italians are also involved in the construction of the F-35 and Eurofighter fighter jets. Rheinmetall is Germany’s largest arms company, with sales of 7.2 billion euros and 34,000 employees. As a result of the war in Ukraine, the Düsseldorf-based company’s order books are fuller than ever before.
European corporations lag behind in a global comparison
According to an industry expert who does not want to be named, the collaboration between the two national giants is a further step away from purely national thinking in the defense industry. “In Europe, Rheinmetall and Leonardo may be big. Globally, they are not,” says the expert. Of the ten largest defense companies in the world, only one is from Europe: the British BAE Systems, i.e. not a single one from an EU country.
According to a list from the Federal Statistical Office, Rheinmetall was in 20th place worldwide last year. World market leader Lockheed Martin from the USA generated the equivalent of around 62 billion euros in sales. Leonardo was in 14th place. “In order to be successful in the world league in the long term, we need larger European defense companies,” says the industry expert. The cooperation between Leonardo and Rheinmetall is an example of how one could have better cards.
However, the alliance between Düsseldorf and Rome is bad news for another arms manufacturer: KNDS, which emerged from the merger of the traditional Munich company KMW and the French arms company Nexter. Nothing will come of the planned delivery of 132 battle tanks to Italy. In June, KNDS presented a new version of its Leopard main battle tank, which the Panther now competes with.
Source: Stern
