To economic pressures and commercial confrontations, an element has been joined that has ended up dynamiting the already convulsive geopolitics in the old continent. Russian invasion in Ukraine and that Chess game that is fought with the arrival of Trump made Europe speak A few days ago “Rearme”understanding itself as the need to invest again in “security” for what can happen. It was not a lantern, and Germany has already begun.
Ahead of VW at the pace of tanks. Few data to understand what is happening as the one offered this week. Rheinmetallthe largest defense contractor in Germany, has overcome value Market to Volkswagen, the company with the highest income in Europe, reflecting a structural change in the German economy towards a greater investment in the military industry.
While Volkswagen Face challenges In demand, reduction of foreign costs and competition, Rheinmetall has tripled its value from Donald Trump’s choice as president of the United States promoted by the expectation of an increase in European military spending. Trump’s position to distance Washington from his role as guarantor of Western security has encouraged That “rearme” of NATOgenerating a boom in the European defense industry.
From car factory to tanks. And as a great symbol of that German industrial change, Volkswagen and Rheinmetall are negotiating an agreement that until a few years ago would have seemed a real dystopia: The sale of the Osnabrück plant that Volkswagen plans as part of its restructuring.
Although Rheinmetall’s CEO, Armin Papperger, has indicated that it has not yet been closed, he has talked about using the plant To manufacture tanks and other military systems, thus avoiding the costs of building a new installation. Moreover, it would not be the first or the only factory they are buying.
More factories. Because Rheinmetall is in the process of reconverting two other automotive plants In Germany for the production of military equipment, reflecting the impact of the increase in defense expenditure in the region.
Apparently, two Berlin and Neuss factories, currently dedicated to the production of auto parts, will be redirected to the Rheinmetall weapons and ammunition division, although They will still keep a part of its capacity for automotive manufacturing. This transition illustrates how few the weakness of the German sector and the rise of military spending are redefining the industrial landscape of the nation.
One More Thing. Recently, the Defense Group Knds announced the acquisition of A plant in eastern Germanypreviously operated by the French Alstom, for the manufacture of Leopard 2 tanks and combat vehicles Puma. These conversions, again, show a change in approach to German manufacturing, where industrial infrastructures are being reconfigured for military production.
The decline of a sector. It We have counted before. Historically, Germany has been a pillar of the global automotive industry, with Volkswagen, BMW and Mercedes-Benz as sector giants. However, the combination of factors such as cost up for the War in Ukrainethe Chinese competitionthe demand drop and the slower adoption The expected of electric vehicles (EVS) has significantly weakened the industry.
Volkswagen, who in 2023 headed the Fortune 500 Europe With 348 billion dollars In income, he has seen how its market value has fallen to only 60 billion, placing it in position 46 among the most valuable companies on the continent. The company has also had a Hard battle with unions which has resulted in production reductions and template cuts To mitigate your losses. Meanwhile, defense manufacturers such as Rheinmetall have seen their orders and their market value grow exponentially.
The impact of military spending. All this culture broth has led the European Union to design a plan to rear. 800 million euros. Germany, meanwhile, has taken even more aggressive measures, allocating 500 million dollars to the modernization of infrastructure and flexible its indebtedness policy to exclude spending in defense of its strict fiscal limits.
In total, the country could invest up to 1.3 billion dollars In economic measures, many of which will be linked to the military industry. Hence, the unprecedented impulse in European military spending has benefited defense contractors like Rheinmetall, Thales and Bae Systemswhose valuations have grown significantly. The demand for military team has led to an increase in the production of, for example, tanks, artillery systems and ammunition, reinforcing the German tendency towards a war economy.
A challenge. Thus, while the (until nothing) almighty Volkswagen struggles for survive the crisis That the sector lives, the defense industry has become the unexpected growth engine of the German industry and seems to become the symbol and shuttle of That European “rearme” which is presented as a key challenge for the old continent.
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