Germany's arms industry is under pressure to diversify its business because the government wants to reduce the country's arms exports. Talks have begun in Berlin aimed at engineering the change without losing jobs.
Germany's Economy Minister Sigmar Gabriel has announced plans to cut German arms exports to countries outside of the European Union and the NATO military alliance. For the heads of Germany's arms manufacturers, the minister's plans aim to ruin an entire industry and a profitable business model that has earned them billions of euros. Ever since taking office as minister in the cabinet of Chancellor Angela Merkel, Gabriel has rejected requests for the export of defense hardware to non-EU countries. The leader justifies his decisions by saying that he is abiding by legal requirements, stipulating that the government must ensure that German weapons don't end up being used in conflicts around the world.
The economics minister has rejected accusations he's bent on destroying the German arms industry, and has called on manufacturers to diversify into civil markets by altering the range and the scope of their products. To this effect, the minister has even pledged government help.
"We will have to discuss about what and how we can contribute to promote the creation of highly advanced spin-offs in civil sector from the classic defense industry, in order to increase the scope of the companies," he said.
Conversion a job killer
There had already been a debate on the subject after the end of the Cold War, when militaries all over the world, including in Germany, rapidly cut back on spending and troops. The German army, for instance, had almost 500,000 soldiers in 1989. But that number declined very quickly in the following years and currently stands at a low 183,000. This cut back in personnel was accompanied by a reduction in weapons' purchases, already creating problems for the German arms industry two decades ago. It also resulted in massive job cuts. Defense companies partially offset their losses by increasing exports to other countries. As a result, Germany is currently one of the world's top arms suppliers.
Difficult entry into the civil market
But it is unclear, for instance, whether it will be possible to convert a weapons production unit to make products for the civil market.
"To manufacture tractors instead of armored vehicles in a market where tractors are already being produced is not easy," said Hans-Peter Bartels, chairman of the defense committee in the German parliament. Conversion does not secure defense technology jobs, Bartels told DW, pointing out that there haven't been any major instances of successful defense conversion over the past 25 years.
Hilmar Linnenkamp, researcher at the think tank German Institute for International and Security Affairs (SWP), however, does not share this view. He explains that there is a large and widespread tendency among defense industrial companies to diversify as much as possible, in a bid to exploit the opportunities offered by civil markets. The expert believes the companies are more successful in their attempts than is publicly known. On the one hand, civilian and marketable technologies are the most important driver of technological progress in the defense sector. And on the other, many defense technologies are also suitable for commercial applications, Linnenkamp said in an interview with DW.
Conversion discussion has changed
Jürgen Kerner, board member of the metalworkers' union IG Metall, agrees. "If a company is manufacturing large gears for armored vehicles, for instance, then it can also make gearboxes for wind turbines and market them," he underlined, adding that the debate over conversion has evolved. He pointed out that in the 1980s, the subject was approached in an idealistic manner and companies wanted to change their production lines to make completely different products.
"It was, however, often very difficult to get the employees on board," Kerner stressed.
"It's not just about technological change, but also about rethinking the companies themselves," said peace researcher Herbert Wulf. In contrast to military contracts, where usually custom-made products in smaller quantities are demanded to suit specific needs, defense companies - after their conversion - will have to focus on mass production and price-performance ratios, Wulf explained. "Firms, therefore, need a totally different sales department," he told DW.
But many companies shy away from taking this step. "Whenever there was a new product idea, companies in the past constantly argued that it was not their business mission," said union leader Kerner. He, therefore, calls for promotion programs and political pressure on defense companies to ensure that they also make civilian products.
"It is important for us that employees, who are working on developing military and defense technologies, also have prospects to work on civilian products," he said.
Peace researcher Wulf also advocates government programs to encourage conversion. He says that the government has to inform the companies which countries they are allowed to export to in the future. Controversial issues such as delivering weapons to governments in the Middle East must be addressed, the expert underlined, adding that there is also a need to clarify the scope of orders the companies will receive from the German military. "This would enable the firms to plan long-term," he pointed out.
Massive change is going to sweep German arms makers when big ticket weapons projects like the A400M Military Airbus will have expired.
Huge military projects no more
Defense expert Bartels believes, after the ongoing modernization programs of aircraft Eurofighter, transport plane A400M as well as of NH90 and Tiger helicopters, there will not be any such big ticket programs in the military aviation industry in the foreseeable future.
Whether due to restrictive export policies or a lack of orders, it is believed that German arms industry is set to see further job losses. Experts are of the view that conversion and pan-European defense production could mitigate the effects of these losses. Future job cuts in the sector, however, can hardly be avoided as exports of weapons alone may not prove sustainable. The sector is also unlikely to receive much support from the government, as its political guidelines on the export of weaponse state that "employment policy reasons may not play a decisive role."