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Saab is boosting production of its counterdrone Giraffe 1X sensor.
European defense manufacturing is undergoing a renaissance, spurred by the promise of billions in increased government spending and a sense of urgency the region needs to bolster its armed forces.
New factories are springing up to build components to address a range of needs. They include plants to make enough sensors for customers looking to ensure they can spot threats as well as missile-making facilities to furnish the weapons to intercept those targets. Companies are either scaling up or scrutinizing plans to assess where they need to bulk up to address an anticipated surge of orders or, in some cases, assure security of supply.
The sense of urgency is palpable. “We used to have plenty of time and no money,” says Carl-Johan Bergholm, the head of Saab’s surveillance business, a major driver of the company’s expansion. “Now we have plenty of order intake and no time. If we don’t grow with our customers, someone else will.”
- Atacms production could move to Europe under joint venture agreement
- Saab adds sensor production capacity in England and Sweden
It is not just industry officials who are anxious. A recent Eurobarometer survey found that 81% of respondents support a common defense and security policy among EU members, the highest level in more than 20 years. And 78% of those surveyed expressed concern about the region’s defense and security in the next five years.
Rheinmetall CEO Armin Papperger, whose company has been expanding armored vehicle and ammunition production capacities, said the company recently struck an agreement with Lockheed Martin to create a missile-making joint venture. The German tank-maker would control 60% of the business, with the rest held by the U.S. defense giant. The two were already partners on rocket motors, and Rheinmetall is becoming a supplier to the Lockheed F-35 program.
Lockheed previously said it was pursuing a weapons production site in Europe as the company scales up output across different families of missiles. Tim Cahill, president of the company’s Missiles and Fire Control business, said recently that Lockheed also has its eye on a similar arrangement in the Middle East, adding that the effort is not as far along.
Under the European missile joint venture, Rheinmetall will work on the Army Tactical Missile System (Atacms) rocket, Guided Multiple Launch Rocket (GMLR) system, Hellfire missile, Joint Air-to-Ground Missile (JAGM) and PAC-3 interceptors. The joint venture will have a production capacity of more than 10,000 missiles per year, Cahill said, roughly split among 600-800 Atacms, about 2,500 GMLRs, 5,000 Hellfires, 5,200 JAGMs and 250-300 PAC-3s. Annual sales from the partnership, if fully booked and ramped up in a few years, could reach some €5 billion ($5.7 billion), Papperger said.
Rheinmetall will furnish warheads and rocket motors as part of the deal. The company plans to break ground next month at a rocket motor facility in Unterluess, a village in northern Germany. The plant should be ready in about a year. Missile assembly eventually will take place there, too.
The joint venture may evolve to become an expanded delivery entry for Atacms, including the U.S., Papperger said, as the U.S. Army and Lockheed shift their focus to production of the longer-range Precision Strike Missile.
Down the road, the two companies may work to pursue technology and joint intellectual property toward future programs, Papperger noted.
Rheinmetall also struck an agreement with Iceye to start producing synthetic aperture radar satellites in Germany at a new defense electronics facility it is building. More deals are under discussion, he added.
Munition demand is fueling expansion elsewhere. Diehl, which provides the ground-launched IRIS-T system to Ukraine, is scaling up personnel and site capacity, as is MBDA. The European missile joint venture expects to produce twice as many missiles this year as in 2023, driven by the appetite for products such as the Mistral and Aster air defense missiles. The company is investing €2.5 billion in new facilities and equipment over five years and has plans to add staff.
South Korea’s Hanwha Aerospace is growing its European footprint as well. The company agreed in April to produce rockets for the K239 Chunmoo system in Poland after already agreeing to make the launcher there. Hanwha expects to start producing CGR-080 rockets within three years through a joint venture with Polish defense company WB Group. Hanwha will hold a 51% stake in the joint venture, and WB Electronics will control the rest.
“Our industries will also gain the opportunity to jointly enter new European markets,” said Billy Boo-hwan Lee, head of Hanwha Aerospace’s Precision Guided Munitions business. The company signaled it plans to expand further in Europe, too, eyeing additional production bases after raising capital in April to help foster its global expansion.
All the expansion is not without challenges. In some cases, a shortage of precursor materials hampers higher output. And in some regions, local rules encumber rapid factory plans. Personnel needs are a concern as well, and some companies are looking to tap Europe’s large skilled automotive workforce.
Europe’s defense purchases so far this year have focused on munitions and missiles, but companies see an upswing ahead for other systems. Airbus CEO Guillaume Faury told shareholders in April the company is exploring what internal investments are needed to address that coming order wave.
Defense electronics provider Hensoldt is also examining what it may need to do. “We have to consider the next steps of scaling our production,” CEO Oliver Dörre said.
Hensoldt already has been expanding, which it says should address its needs through around 2027, but the company is realizing that will not be sufficient afterward. The company expects to finalize plans for further investment over the coming months.
The company has agreed on expansion efforts covering a range of activities, including boosting production of printed circuit boards. With customers hunting for more sensor capacity, Hensoldt determined it needed to build more circuit boards to have certainty of supply, increasing the figure to 80,000 per year from 36,000 over a two-year period.
Saab is similarly in growth mode. In February, the company opened a sensor production facility in Fareham, England, where it is building some equipment ahead of orders to meet growing customer demand for quick delivery. In April, Saab said it would expand radar and sensor operations in Gothenburg, Sweden. The company also said in January that it was scaling up Sirius Compact passive electronic warfare sensor production in Finland.
In terms of investments, Saab CEO Micael Johansson says: “We will continue to be forward-leaning.”
Saab is working on several fronts, he noted during a recent investor event. It is adding facilities that rely more heavily on robotics to accelerate production or in some cases redesigning equipment to facilitate greater automation. It also is helping suppliers financially to scale up to mitigate bottlenecks.
In a tangible sign of Europe’s efforts to rebuild production capabilities that have long been dormant, Denmark asked Scandinavian ammunition-maker Nammo in March to revive a disused munitions plant in Elling that was closed by a prior owner in 2020 after a period of losses and declining orders.
The Danish facility is only part of Nammo’s scaling up that the company projects will double or triple its revenue and staffing by the end of the decade. Output of some products, such as advanced artillery ammunition, is going up tenfold, a company official said.
European company efforts are not just focused on strengthening their local industrial footprints. Saab is growing in India and the U.S., and Rheinmetall and Nammo also are expanding.
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