New Perspectives for the Defense Industry

New Perspectives for the Defense Industry

Portrait of Massi Begous
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"Post-Truth, Post-West, Post-Order" is the particularly appropriate title of the Munich Security Conference’s latest security report. Brexit and the new American President have sparked intense debate about the future of European defense. They are a wake-up call. European industry has a number of lessons to learn – and without the British with their foot on the brake, there are new perspectives looming.

Europeans are realizing that their closest ally is thinking (out loud) that it would be more cost-effective to make a deal with Russia regardless of any potential losses, than to continue providing Europe with the unlimited protection of the US umbrella. We never thought it would come to this.

These days, countries buying US equipment need to be strictly aligned with US geopolitical interests.

Our trusted partner rightfully has its own interests in mind, however, these interests are not necessarily the same as ours. Having had such close links with the US for so long, many European armies rely heavily on US equipment. Were any of these countries to undertake military operations, their US-sourced systems could prove difficult to use without US support. These days, countries buying US equipment need to be strictly aligned with US geopolitical interests.

This is going to be the case for those countries including Denmark, Italy and The Netherlands, which have selected the F35 Joint Strike Fighter (JSF), in the hope that their industries would benefit from such a large program, along with the US umbrella. These countries now realize that such industrial returns come at a price (well beyond the considerable F35 cost of ownership), namely their geopolitical independence.

An industry to serve European interests

Faced with the potential disentanglement of European and American interests, reliance on US technology undeniably puts European countries at risk in a number of areas. These include restricted- or no access to the best technology as well as the risk of not being able to ensure their own security (weapons systems, spares, support).

"European nations need to be in a position to decide on their own where, when and how they address their security challenges."
Portrait of Massi Begous
Massi Begous
Paris Office, Western Europe

As far as air, sea and ground warfare systems are concerned, Europe suffers from extremely fragmented, and often restricted, capabilities reflecting available national budgets. (Note: UK players are not listed except when part of European groups, e.g. MBDA, Thales, Agusta/Westland. In addition, the UK landscape is not complex as it is largely dominated by BAE and RR).

  • Combat A/C: Airbus D&S, Dassault, Saab, BAE, Leonardo
  • Transport/Mission A/C: Airbus D&S, Leonardo, Dassault
  • Helicopters: Airbus HC, Leonardo, PZL (US)
  • Drones: all countries have some know-how, none is able to field a complete system comparable to those offered by Israel and the US.
  • Surface ships: by far the most fragmented landscape with 6 players with fully-fledged capabilities, TKMS, Navantia, Damen, DCNS, Saab, Fincantieri.
  • Submarines: TKMS, DCNS, Saab, Fincantieri, Navantia
  • Land warfare systems: KNDS (KMW/Nexter), RTD, Rheinmetall, OTO Melara, Santa Barbara (US), Mowag (US), Patria, Häaglunds
  • Missiles/Complex weapons (conventional): MBDA, Diehl, Kongsberg, Saab, Thales, Atlas (Torpedoes), DCNS (Torpedoes)
  • Defense Electronics/C4I: ex. Airbus D&S (US), Thales, Selex, Saab
  • Propulsion (conventional): Safran, MTU, Wärtsila, Avio (US)
  • Launchers: Airbus Safran Launchers, Avio
  • Cyber: Airbus D&S

"We are convinced that there is a new opportunity to revitalize the debate on Franco-German military integration."
Portrait of Manfred Hader
Manfred Hader
Hamburg Office, Central Europe

Of course, there is also a convincing geopolitical rationale to this. European nations need to be in a position to decide where, when and how they address their security and defense challenges, without having to rely on foreign suppliers. The only solution is a unified European defense market, served by European industrial players, bound by joint technologies and IP. The regulatory instruments are in place, but such a change would require industrial, but more so, political drive. We are convinced that there is a new opportunity to revitalize the debate starting with Germany and France.

For more "plug & play" approaches

Building European capabilities will require a more open, scalable and modular "plug & play" approach to avoid piling-up requirements, and hence cost and delays. Sharing common systems and capabilities is an innovative way forward, which could avoid the pitfalls of past programs.

An interesting showcase could be the NGWS (the German Tornado replacement), and the FCAS (French combat drone), both two "non F35" players and their industrial champions, Airbus, Dassault and Thales. A plug and play approach would make sense as platforms are different, but require a range of common systems and capabilities (autonomous flight, sensors, weapons, connectivity…).

No European country is able to field a complete system comparable to the drones offered by Israel and the US.

Of course, such an approach should not prevent transnational agreements, such as the recent merger between KMW and Nexter to create KNDS. Our industrial landscape is so fragmented that such alliances should be encouraged further.

Time for robust steps

Roland Berger is not pretending to sketch the big picture of a common European industrial landscape, even though we like the idea. However, we want to encourage European politicians and managers to take some robust steps now.

There has to be an end to regional military isolationism. Let's give the European defense union a chance with pooling and sharing of resources, common R&D for defense programs and a European single market for defense. This would strengthen our industry remarkably. The Munich Security Conference is the perfect platform to launch a new, more optimistic debate on the defense of Europe. We can no longer hide behind the US. Moreover, we shouldn't even try.

Portrait of Manfred Hader
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  • Photo credits 3dmentat / iStockphoto; pixedeli / iStockphoto; Stavklem / iStockphoto; everlite / iStockphoto