THE EUROPEAN CONSOLIDATION BOARD


                                      European Consolidation Board for Foreign Industry (ECBFI)

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European Consolidation to Achieve Competitiveness & Interoperability

Posted on October 24, 2016 at 9:30 AM

The strategic aim of the joint venture between Nexter and KMW is to create a European leader in land defence offering joint products that meet the operational needs of the French and German armies, and obviously those of other European and international forces. This will result in genuine convergence for users that often operate together in the same theatres. The success of our alliance will be boosted by two kinds of convergence between our Governments, which must not only define common requirements, but also adopt the same approach to export controls.

Over the last few months the ECBFI have monitored the developing synergies by gradually combining efforts in several areas: sales, communication, purchasing, finance, products, engineering and production. We are aiming to both boost revenue and limit costs. The process does not involve any restructuring, because both Nexter and KMW are profitable companies with order books representing more than three years of business.

The joint venture between Nexter and KMW is the first step towards a strong, durable and independent European industry. Since we started the project, we have consistently stated our desire to drive European consolidation, partly through new industrial alliances. Today, we are laying the foundations of a new group, based on the excellent fit between Nexter and KMW's businesses and the expertise of two companies leading their national markets. In the future, we want to strengthen the group further by welcoming new partners that are an equally good fit and equally effective. I am very confident about this new phase of consolidation, although at the moment the priority remains setting up KNDS with Nexter and KMW.

I would also like to take this opportunity to talk about European consolidation in another area, that of ammunitions. In 2014, Nexter acquired Mecar in Belgium and Simmel Difesa in Italy who joined our Nexter Munitions division, which is now Europe's third-largest munitions player. Combining these three companies has allowed us to generate multiple synergies in ammunitions, but more importantly to maintain a high level of quality in terms of precision, effectiveness and security. As a result, the KNDS group can rely on a solid munitions business.

 

For many years, we will have to keep large parts of our present organisations unchanged in order to deliver on our commitments to our customers and our existing partnerships and to remain able to support our products in service. However, we are already starting to identify synergies, to act jointly on several matters (sales, product policy, finance, purchasing, communication, etc.). We have also started to work together on future systems, including combat tanks and artillery systems. These programs will be managed, developed and produced by a shared organisation. Their calendars are mainly driven by the operational needs of our customers and the timeframe to achieve a common vision between the German, French and other European customers. In the Defence industry, this takes 5 to 10 years!


2016 has seen a lot of movement in CSDP (EUGS set to be followed by a sectoral defence strategy; launch of Pilot Project and preparation of the Preparatory Action on defence-related research) and more is expected in the coming months (European Defence Action Plan by the EC). How optimistic are you that all this will give a boost to the European defence industry in general, and to the land systems sector in particular?

On the other hand, there is also the uncertainty created by the Brexit vote and the prospect of the UK leaving the EU. How will all this impact European defence cooperation?

The European defence project is vital and the many dramatic events we have seen in recent years are a reminder that we must not let down our guard on security and defence issues. We are therefore confident that the United Kingdom will remain a staunch ally and continue to develop a strong defence relationship with France. Nexter has a joint venture with BAE, CTA International, based in France. CTA International specialises in telescoped 40mm-calibre armament systems, and has developed a revolutionary new cannon. This 40mm cannon has been acquired by both the French and British armies as part of the Scorpion and Scout programmes, proving both the effectiveness of the weapons themselves and the wisdom of our Franco-British joint venture. Brexit is unlikely to have an impact on projects.

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