Imagine it’s war and you’re an armaments manager! Rheinmetall boss Armin Papperger predicts profitable years for his Düsseldorf group.
The “China Club” in the back of the Hotel “Adlon” in Berlin is one of the more discreet restaurants in the capital. If you don’t necessarily want to be seen, you can book a booth here. You have to be a member anyway, just like Rheinmetall boss Armin Papperger, who certainly looks after guests from politics here from time to time.
Ever since the Russians invaded Ukraine, the armaments manager has been in demand like never before. The 59-year-old from Lower Bavaria still takes around two hours to talk to FOCUS. There are also plenty of hot topics to discuss. And Papperger is open.
Only when there is a question that only arises after the conversation does the group management become monosyllabic: Apparently, a main department head of the Rheinmetall tank division had recently disappeared for four days and then reappeared – heavily intoxicated. Had the man been kidnapped? Was there a private drama behind it? “Of course we are fulfilling our obligations to examine the facts,” said a company spokesman. However, one should “please understand that we generally do not provide any information on matters affecting our employees”.
FOCUS: Mr. Papperger, you are CEO of the largest German armaments company. Did you actually serve?
Armin Papperger: No.
community service?
Papperger: Not either. I had a cast on my leg from a sports injury. When I was born in 1963, I was one of the cohorts with the largest number of births. The squad didn’t have any young talent problems anyway. And then the doctor asked me whether I wanted to join the federal government or study straight away. Then I decided to go to university.
Are you glad you got around it?
Papperger: I would have liked to serve because I was always convinced of the importance of a well-fortified democracy. You can see that from the fact that, after studying mechanical engineering, I spent almost my entire professional life at Rheinmetall.
How did you experience the Russian invasion of Ukraine on February 24?
Papperger: To be honest, I had expected it a few weeks beforehand. At some point, the effort that Putin had started at the border could no longer be justified with a maneuver.
And when did you start thinking about what this war means for your business?
Papperger: At first I was of course shocked as a human being and thought about what effects all of this would have on the pan-European security architecture. Only then do you start sorting yourself out.
Three days after the start of the war, Chancellor Olaf Scholz proclaimed a “turning point” and promised the Bundeswehr 100 billion euros for construction and modernization. How much of that would you like?
Papperger: Life is not a request concert. Shortly after the speech I was called by the Ministry of Defense and asked for a list based on three premises: How can Ukraine be helped quickly? How can the material of the Bundeswehr be made fit as quickly as possible? And: What can we produce at short notice to close gaps?
The list you submitted saw product potential worth 42 billion euros. Competitors are said to have been pretty angry about your advance.
Papperger: We had already done our homework before the invasion. In that sense, we were simply prepared. The other companies then followed promptly.
As an armaments manager, what mistrust and rejection have you heard in the past few decades?
Papperger: There was always criticism and doubts as to whether security and defense technology was still needed at all. I also think these debates are important. And thank God we live in a democracy with freedom of the press and freedom of speech. My understanding only ends with acts of violence. For example, when police officers are kicked or activists storm our general meeting and tear down our lecterns. We already had everything.
In the EU there were recently plans to even put the armaments industry on a list of “unsavory investments”, as your lobbyist, former Development Minister Dirk Niebel, put it, “along with the alcohol, gambling and porn industries”. Is that off the table now?
Papperger: No, not yet. And a lot has really been done to brand us as “socially harmful”.
“Socially harmful”?
Papperger: We are doing an incredible amount to become even more sustainable in all areas. For example, we will be CO2-neutral by 2035, because that is also a goal of our major customer, the Bundeswehr.
Wage a lasting war?
Papperger: That may sound crazy, but we are also building large solar parks in many places around the world. Even our wheeled tanks will soon be available as hybrids. A diesel would only be used in the event of war. ESG is very important to us.
Because according to these so-called ESG criteria for the topics of environment (environment), social issues and leadership (governance), even large investors and banks today decide with whom they will invest their money at all. Has Rheinmetall suffered as a result?
Papperger: Of course, we were often sorted out in the past. But that’s about to change.
How did you experience politics before the “turning point”?
Papperger: Ambiguous. The first thing I asked every new Secretary of Defense was: “Do you need and want us at all?” In the vast majority of cases, I got a positive answer. When it came to the question of how politics and industry could develop a joint strategy, things got more difficult.
Were you surprised by the Green Party’s quick call for heavy weapons for Ukraine?
Papperger: No. The Greens have long drawn a clear line between humanitarian aid and the fight for human rights on the one hand and pacifism on the other. That has all my respect, because it’s not always easy for the party.
What exactly does the Bundeswehr need?
Papperger: The logistical fleet, i.e. trucks of all kinds, has to be overhauled. You knew that beforehand, but the money wasn’t there. The Bundeswehr needs many thousands of additional trucks. Without them, no supply of supplies is secured. That was still quite easy to calculate and would cost 15 billion euros over ten years. That is our core business – as is the urgently needed ammunition. The Inspector General himself is assuming 20 billion euros for the next ten years.
And what can Rheinmetall really deliver?
Papperger: We can at least triple the production of ammunition within the next twelve months, and that of trucks can be doubled – simply because we mothballed a lot of infrastructure from the Cold War and can reactivate it quite quickly. In addition, we will create 3000 new jobs relatively quickly.
Has it been easier for you to find offspring since the Ukraine war?
Papperger: It wasn’t difficult to win people over before. We have around 145,000 unsolicited applications worldwide every year, 64,000 of them from Germany alone. We’re ready to go.
The special fund for the Bundeswehr hasn’t even been released yet…
Papperger: …but we are now making advance payments in many areas. We’ve wasted enough time already.
Do you understand the government’s maneuvering when it comes to concrete aid and orders?
Papperger: Yes, I have. After all, three parties have to be taken along. On the industrial side I can only do three things: inform, formulate applications, provide. In the coming weeks, the government can, must and will make decisions on this basis.
Is the discussed “ring swap” of arms with Eastern European neighbors a good idea?
Papperger: First of all, yes. It makes sense if the Ukrainians get old Russian weapons from the Czech Republic, for example, which they already know how to use, and in return we make our material available to the Czechs. But of course we also have to clarify in advance what can actually be delivered or what the Bundeswehr is not missing. But I’m optimistic.
What if Putin simply declares us a “war party”?
Papperger: To be honest, I can’t imagine that he will mess with NATO. And that would be the start of this discussion.
Have you ever looked deep into Putin’s eyes?
Papperger: “Deep” is a matter of opinion. But I’ve already looked Putin in the eye in Moscow, yes. There was a time when we were literally asked by the federal government to cooperate with the Russians.
Back then you were even supposed to build a combat training center for the Kremlin.
Papperger: At that time, the terrorism of the Islamic State was considered a common enemy. But we had only set up a high-bay warehouse for the Russians when Putin invaded Crimea in 2014. Then it was over. A few months later the project would have been finished…
…and you should hear today that you supported Putin’s madness.
Papperger: It is always our risk that political situations change. Back then, it was considered business among friends. We experience such twists and turns again and again.
In the Russian case, several million euros are said to have flowed in bribes.
Papperger: The money seeped away between the Kremlin and the responsible Russian liaison company. We were more like victims.
After all, Rheinmetall paid a five-digit amount…
Papperger: …because in return for this payment, the German investigation was stopped. I didn’t want it to drag on for years.
You also had trouble when Rheinmetall products were delivered to Saudi Arabia.
Papperger: It’s good that you’re addressing that, because that shows how crazy some debates are.
In what way?
Papperger: Rheinmetall currently operates 142 plants around the world, plus around 30 development pools. For example in Great Britain, Australia, Italy and the USA. If American colleagues are now developing new ammunition in our US laboratories, who should make the political decision as to where it may be delivered?
The USA?
Papperger: Right. But if Italian Rheinmetall employees build something in Italy and the government there wants to send it to Saudi Arabia, should Germany intervene or should we as a group say, “We don’t want that”? A crazy debate!
Now you are offering Ukraine, among other things, 88 Leopard 1 tanks for 72 million euros. They’re old, aren’t they?
Papperger: We don’t have to like the tanks, the Ukrainians do. They asked about it and will know what helps them, because they risk their lives every day. The first Leopard could be delivered in five months.
Isn’t the war already over then?
Papperger: I wouldn’t assume that at the moment. Especially since the question would still be: How do I stabilize Ukraine afterwards? This also requires safety technology. Our job has only just begun.
Suppose you were allowed to sell brand new Leopard 2 to Ukraine, how long would it take to deliver?
Papperger: About three years. But there are used machines out there too. We bought back quite a few.
The German anti-aircraft vehicle Gepard is also to be delivered, but it is being built by your competitor Krauss-Maffei Wegmann.
Papperger: Weapon technology and ammunition – everything that fires on the cheetah is from us. We have the production for the necessary medium caliber in Switzerland. However, it now insists on its political neutrality and declares that the ammunition may not be delivered to a crisis area.
With the result that the Ukrainians are now getting tanks without ammunition.
Papperger: If all the raw materials were ready, we could produce in three to six months. I haven’t even been asked about it by the Department of Defense yet.
There is talk that initially 60000 rounds of ammunition will be supplied.
Papperger: A single cheetah can fire about 1100 rounds per minute. I’ll leave the rest of the billing to you.
Lieutenant General Alfons Mais, Inspector of the Army, caused a sensation when he declared shortly after the outbreak of war that the Bundeswehr was “more or less blank”. Is he right?
Papperger: That’s true, unfortunately, yes. It is now a question of clarifying what is strategically important. With the Marder, for example, we have so much ammunition that we could even give some away.
Of the 350 Puma infantry fighting vehicles that the Bundeswehr has, only 150 are operational. Is that your fault too?
Papperger: I will spare you the evening-long lecture on this. But the regular maintenance cycles consume an incredible amount of time. If a German tank is damaged, for example from a maneuver, we at Rheinmetall see it for the first time after about five months. But that’s just where the problems start.
Why?
Papperger: Up until a few years ago, we had considerable problems with spare parts simply because they were never ordered. This austerity mania goes back to the CSU Defense Minister Karl-Theodor zu Guttenberg. Unlike the car industry, however, I cannot keep a spare parts store for armored personnel carriers on my own billing billions. That’s why there used to be a readiness level of only 30 percent. Today we are still at almost 70 percent.
And is that a lot?
Papperger: Definitely more than with other branches of arms. Only 40 percent of the Bundeswehr helicopters are currently operational. Such numbers are really not the industry’s fault…
…but politics?
Papperger: The Bundeswehr once gave us a fixed price for the Puma. After the award, however, the customer came and wanted something here and something else there. We have accepted 1100 changes – free of charge. 1100! The development therefore took three and a half years longer and cost us as an industry a lot of money. We don’t get involved in anything like that anymore.
How can our troops’ operational and combat readiness be increased in the short term?
Papperger: Provide enough spare parts. The leopard, by the way, has the same problem. We saved ourselves to death in the Bundeswehr. Unfortunately. The chancellor already knew that when he was finance minister. This is slowly being corrected, but it will take time.
And how could the processes in the procurement office of the Bundeswehr be accelerated, which is also considered to be the bottleneck?
Papperger: This authority does what it is allowed to do, but has to take into account a gigantic jungle of specifications. You have to get to the processes.
Is it faster in other countries than in Germany?
Papperger: I don’t think so. We do business with around a hundred countries. In most of them, however, the issue of defense enjoys a higher profile. That often helps.
Internationally, Rheinmetall only ranks 27th among the largest armaments companies. Could you possibly even become a takeover candidate for the leading US corporations?
Papperger: It may well be.
But the federal government could veto it, right?
Papperger: Sure. We don’t have to be taken over by China right away. The capital market regulates this sort of thing quite well. And sales are not a one-way street. I could also imagine making purchases. We at Rheinmetall will rise to the top ten in the next few years with sales in the double-digit billions. That’s my internal goal. This year we will grow between 15 and 20 percent. Up to 25 percent next year.
Where might Rheinmetall want to buy?
Papperger: In the area of digitization, we will certainly continue to look around. We’ve already bought into start-ups around the world. In many fields we are IT service providers ourselves. The areas of artificial intelligence and cyber security are also of growing importance to us. In any case, we are no longer the steel benders that we are sometimes mistaken for.
Your company’s share price has more than doubled since the Russian invasion. Is it in the nature of things that Rheinmetall is a war profiteer?
Papperger: “War profiteer” is a bad term, don’t you think? We are crisis workers. We’re just seeing how important that is.
The idea of taxing those who profited from the war, such as oil companies, is growing in popularity, and not just among the left and the Greens. As a defense contractor, what did you think of that?
Papperger: Again: We are not profiteers of the war. We always take responsibility for protecting our societies and their people, especially in times of peace. Our products and systems serve this purpose. As far as the debate mentioned is concerned, it has become virulent, of course. But at the moment, at least in our case, it is still very academic and theoretical.
Why?… Rheinmetall definitely wants to grow strongly – also in terms of profits.
Papperger: We want to grow and we will grow. This results solely from the need for protection and security in our home markets. As far as Germany is concerned, the special fund must be anchored in the constitution. And only then may there be further orders whose profits could be taxed. So we’ll let that come to us for now.
This article first appeared in the current FOCUS magazine.
