Rheinmetall to convert German factories to make defence equipment
By Christoph Steitz and Matthias Inverardi
February 24, 2025
The logo of Rheinmetall is displayed at the Eurosatory international land and air defence and security trade fair in Villepinte, France, June 17, 2024. REUTERS/Benoit Tessier/File Photo Purchase Licensing Rights
FRANKFURT/DUESSELDORF, Feb 24 (Reuters) - Rheinmetall, Europe's top ammunition maker, intends to repurpose two of its automotive plants in Germany to mostly make defence equipment, highlighting the impact of an expected surge in spending in the region amid U.S. tensions over the Ukraine war.
Europe's political leaders, sidelined in U.S.-Russia talks over Ukraine, came together at last week's Munich Security Conference that served as a wake-up call for the EU to come up with its own sustainable defence plan.
Rheinmetall's (RHMG.DE), opens new tab defence expansion affects its factories in Berlin and Neuss, where the company currently makes automotive parts, a business that has faced challenges as Germany's carmakers battle high costs and competition from abroad.
Under the plans, which still need to be finalised, both factories would become part of Rheinmetall's Weapon and Ammunition division and serve as so-called hybrid plants, ensuring some automotive production can still take place.
"Above all, the plants will benefit from the industrial strength that the Rheinmetall Group has as a major military equipment supplier, as well as from the high demand from customers in Germany and worldwide," the group told Reuters in e-mailed comments.
The company said no final decisions had been made regarding the new structure. It also said no explosives would be processed at the sites but they would produce protection and mechanical components for military use.
Shares of European weapon makers have surged in expectation of the spending boom after U.S. President Donald Trump said Europe would need to step up investment in military resources.
The STOXX aerospace and defence index (.SXPARO), opens new tab hit record highs last week as investors bet the region's governments will have to spend more on weapons and military equipment as the U.S. prepares to step back.
This could also give German manufacturing a boost at a time when traditionally strong sectors, most notably automakers including Volkswagen (VOWG_p.DE), opens new tab, are cutting capacity and thousands of jobs.
The country's weak economy was a major grievance among voters in Germany's elections over the weekend.
Rheinmetall's action marks the second time within a month that a defence company has unveiled plans to convert existing manufacturing capacity, after defence group KNDS agreed to take over a plant in eastern Germany from French trainmaker Alstom (ALSO.PA), opens new tab.
KNDS, 50-50 owned by Germany's Wegmann & Co GmbH and the French state, plans to make military equipment at the site, including the LEOPARD 2 battle tank and the PUMA infantry fighting vehicle.
Rheinmetall's market value has soared since Russia's invasion of Ukraine. It was elevated to Germany's blue-chip DAX 30 (.GDAXI), opens new tab two years ago and is now worth about 39 billion euros ($40.8 billion), based on LSEG data, almost double its value before Trump was elected.