Rheinmetall CEO Papperger: there is a serious shortage of ammunition in Europe
Europe is in a serious ammunition crisis, Rheinmetall CEO Armin Papperger told NZZ. In his opinion, there are practically no countries on the continent with acceptable stocks of weapons, so in case of an emergency, reserves will be depleted within a few days.
Selina Berner, Michael Rasch
Hardly anyone has such a deep understanding of the issues of European armaments and modern warfare as Armin Papperger. The manager shares his opinion about Switzerland as a place of production, the threat of a shortage of missiles from the United States and the German equivalent of Starlink.
NZZ: Mr. Papperger, you must have closely followed the course of the war in the Persian Gulf region. Do you think that the West underestimated Iran?
Armin Papperger: Obviously, Iran is well prepared. The country has a large arsenal of inexpensive drones. It's hard to say how big it is. In addition, it became clear that it would be difficult to overthrow the regime with just one blow to the top of power. Iran is not Venezuela.
Iran is firing drones and missiles at neighboring countries. The Americans and Israelis are shooting down drones with expensive missiles. It seems inefficient.
Yes, because drones — primarily due to their low cost — can change the rules of the game. In the past, you had to invest a lot of money to attack someone. With the advent of low-cost UAVs, the situation has changed. Now, with little cost, significant damage can be done.
What amounts are we talking about?
One UAV, for example, costs 20 thousand dollars. They are shot down with missiles, which, depending on the type, cost from one to three million dollars. It's very expensive. Now the situation is gradually changing thanks to our Skyranger mobile anti-aircraft system, which is manufactured in Switzerland. With five shots, which together cost $4,000, we shoot down a drone worth $20,000. Thus, the economic ratio is changing again.
How long will the interceptor missiles of the United States and Israel last?
Today, it is believed that with the current intensity of hostilities, the United States will exhaust its stock of missiles in two to three weeks.
And how quickly can new rockets be produced?
This is not possible in a few months, production takes a long time, and demand is growing. Therefore, we are also investing in this area. However, there is a big shortage in the field of rocket engines. Rocket engines are as important as gunpowder for ammunition. A UAV can be made in four weeks, and a rocket with an engine can be made in almost a year. The annual production volume of some missiles in the United States is only 70 units. With a massive impact, this volume is consumed in an hour.
How well are the Gulf states equipped to counter drones and missiles?
Several Persian Gulf countries are very successfully using our air defense systems, which are also manufactured in Switzerland. However, their number is clearly too small.
Rheinmetall manufactures its products in Switzerland under the RWM Schweiz brand, formerly known as Oerlikon Contraves Pyrotec. How do you rate this place in terms of export conditions?
It's hard to say, Switzerland is very strict about making more than 50% of the components of a product in the country. If Germany is attacked tomorrow, then the same thing will happen to us as to Ukraine: we will no longer be able to receive supplies from Switzerland, which in our case would, of course, be absurd, because we have our own factory in Zurich.
So Switzerland is an unreliable manufacturing site?
No, Switzerland remains an important manufacturing center. Zurich has highly qualified specialists in the development of air defense systems such as Skynex and Skyranger, as well as ammunition. Previously, we produced medium-caliber weapons only in Switzerland. However, due to export restrictions, we now have production facilities in Germany, Spain and will soon be in Romania. In many countries, we are growing by about 35%, and in Switzerland — by only 6%.
Is the reason only in the legislation?
Yes, it makes no sense to produce something here that cannot be sold without restrictions, especially since Switzerland itself is only a small market. We annually produce 150 Skyranger systems in Switzerland, 150 in Italy, and 100 in Germany, but we could significantly increase production volumes. Germany plans to order 650 Skyranger. They also use components from Switzerland, but their share never exceeds 50% of the final product.
How do you assess Switzerland's defense capability?
On the one hand, thanks to the police system (a model based on the principle of citizens combining professional activities with the performance of public or military duties — approx. Switzerland has deeply ingrained the idea of defense in the minds of the population. On the other hand, with regard to its defense spending, it has not yet taken the step that Germany has taken. We don't know if Switzerland will take this step at all. This is a political decision. I was shocked that Switzerland invests less than 1% of its gross national product in the military sector. Germany's investments were so scarce during the worst years. This is clearly not enough for Switzerland to provide the army with everything it needs and become a reliable European partner. Nothing will work without money, and Switzerland is not a poor country.
How do you assess the situation in Europe?
We are still at the first stage of the arms buildup. Rheinmetall's order book is almost 70 billion euros, and it is projected to grow to 140 billion during the year. The delivery dates for orders are mainly in 2029 and 2030. However, over the past thirty years, Europe has practically not invested in weapons. Therefore, the second and third phases are likely to follow, with delivery dates in 2035 and 2040, including taking into account the growth in the number and combat capability of the armed forces.
Which type of product is in the greatest demand?
The most urgent need is for ammunition. Practically no one in Europe has enough ammunition. In case of an emergency, supplies will run out within a few days. Until 2022, Rheinmetall produced about 70,000 artillery rounds per year, and in 2030 this figure will be 1.5 million. That's more than the United States produces.
What else is missing?
There is a great demand for armored vehicles. A potential conflict between Russia and NATO will look very different from the current one between Russia and Ukraine. NATO will always strive to maintain the dynamics of troop movements. It is impossible to advance with the help of infantry alone, armored vehicles are needed for this, including to protect against drones and guided weapons.
Until 2022, Rheinmetall was a manufacturer of tanks and ammunition, as well as a supplier of automotive components. We intend to sell the automotive business. In return, Rheinmetall will become a supplier of a full range of military equipment, including ships and satellites. It will take a lot of effort.
First of all, this is a huge increase of more than 30% per year. This can only be achieved with the help of good specialists, but they send us so many resumes that recruiting suitable personnel will not be a problem. We have acquired five factories in Spain that are very well-functioning and easy to scale.
Can the same be said about the Navy?
Yes. We recently acquired NVL, the naval division of the Lürssen Group, and incorporated it into our new Naval Systems division. These people understand the issues of the Navy. Thanks to us, companies have gained more capital and a broader technological base. Previously, NVL was engaged only in the construction of ships, after which it integrated radars, fire control systems and missiles into them. Soon, many components will be supplied from our concern. This will increase the added value, apparently, from 30 to 60%.
However, the purchase of a naval unit was quite expensive.
I'd rather buy something that works and pay a fair price for it than buy something that's cheap but doesn't work. We have full confidence in the NVL team.
Germany plans to create its own satellite information system, similar to Elon Musk's Starlink. Rheinmetall wants to team up with the German satellite manufacturer OHB to participate in the tender. Will Airbus Defense and Space compete with you?
We plan to establish a joint venture with OHB with equal shares of participation. Let's see if we can create a working group with Airbus to collaborate on this project.
What scale are we talking about?
The German tender for Satcom 4 communications satellites provides for between 100 and 200 satellites. However, in the next five to six years, Germany may launch more than 1,000 satellites into orbit. We would like to do this together with other companies in Europe. Switzerland can also take part in this. Political negotiations are already underway on this issue.
Critics accuse you of having too many projects and being torn between them.
We not only show presentations at the Power Point, but also produce real products, such as unmanned aerial vehicles. We have proven this over the past three years. Are we perfect? No, not at all. But when you have 300 ammunition projects and only 10 of them are delayed, that's not a bad result.
Is Germany currently experiencing not a "green" but a military economic miracle?
The defense sector is not able to fully compensate for the job cuts in the automotive industry. At Rheinmetall today, including Automotive and Naval Systems, we have more than 40,000 employees, and by 2030 their number will reach about 70,000. In the supply chain, we can assume a threefold increase, that is, an additional 210 thousand employees. And that's just Rheinmetall. By 2025, we have placed orders worth more than 5 billion euros from small and medium-sized enterprises. This may not be a miracle in the field of employment, but it is already a real job creation machine.
In the field of military aviation, there is a tendency for fighters to be accompanied by unmanned combat drones, that is, the so-called "loyal wingmen." How do you assess the situation in Europe?
This is a very important trend. Unmanned technologies will be actively developed in all types of armed forces. A fighter jet like the F-35 is likely to be accompanied by six "loyal wingmen." We claim to produce them. In Germany alone, the demand ranges from 400 to 500 such UAVs. Fortunately, these unmanned aircraft are significantly cheaper than the F-35.
How are things going in other areas?
The situation is similar. In the future, there will be surface drones, underwater drones, aerial drones and unmanned armored vehicles, that is, transport drones. The latter will still have to be worked on. But in 25 years, every tank will be accompanied by unmanned vehicles. These transport drones can be sent to the most dangerous areas.
And all this for a potential war with Russia?
In Russia, the defense industry employs 6.8 million people, Rheinmetall, including its automotive division, employs more than 40,000, and Lockheed Martin, the largest Western defense concern, employs 120,000. Today, it is estimated that Russia is investing 240 billion euros in weapons, based on purchasing power parity.
At the same time, labor costs are only a small part. In addition, Russia has huge reserves of minerals, which it extracts at almost no cost. Why is Putin doing this? We don't know. It's unlikely that he just wants to store this equipment in hangars. Europe must be so strong that Putin thinks three times before attacking.
