German-Italian tank alliance lurks for mega-deal
Italy, according to reports, will order new tanks worth 20 billion Euro. Rheinmetall and Leonardo, industry giants, are positioning themselves for the contract and are laying the groundwork. Previously, a cooperation with the Leopard manufacturer had failed.
German defense conglomerate Rheinmetall is gearing up for a billion-dollar deal from Italy for the delivery of hundreds of tanks. The company intends to establish a joint venture with Italian defense giant Leonardo. Both firms signed a corresponding intent declaration. Both Rheinmetall and Leonardo belong to the largest defense conglomerates in Europe.
The defense industry is thriving in the face of the war in Ukraine and conflicts in other regions. Today, the budget and defense committee of the German Bundestag gave the green light for the purchase of 105 Leopard-2A8 battle tanks for the Bundeswehr. The order is worth nearly three billion Euro. KNDS will supply the tanks to the Bundeswehr until 2030. Rheinmetall will provide the main weapon.
"We want to set new standards"
The two shareholders will each hold a 50% stake in the new company. It will develop a battle tank and an armored personnel carrier. The armored personnel carrier is expected to be a version of Rheinmetall's Lynx armored personnel carrier, while the battle tank could be the Panther. Rheinmetall touts the Panther as its newest generation of battle tanks, but it has not yet reached series production. The new joint venture is expected to land a contract in Italy, according to media reports, worth a volume of 20 billion Euro and a duration of more than ten years.
"Together, we want to set new standards and open the door for a new generation of highly modern combat vehicles in and for Europe," explained Rheinmetall CEO Armin Papperger. "We are addressing the Italian market as well as other partner states that have modernization needs in the field of combat systems."
Originally, Leonardo was to collaborate with the German part of the European defense conglomerate KNDS, that is, with the former Krauss-Maffei Wegmann. However, this agreement for the production of Leopard battle tanks fell through. Now, Rheinmetall is stepping in.
Up to 550 Tanks
"We view this agreement as a fundamental contribution to the creation of a common European defense space," said Leonardo CEO Roberto Cingolani. Regarding the tank quantities that the planned joint venture is targeting, Rheinmetall made no statements. According to information from "Handelsblatt," it's about more than 550 tanks, of which more than 200 are Panther and at least 350 are Lynx.
Rheinmetall already has three subsidiaries in the southern European country with around 1400 employees at five locations. In order for the intent declaration for the joint venture to be implemented, the approval of relevant regulatory authorities is still required.
Since the outbreak of the Ukraine war, Rheinmetall has grown significantly. Recently, the weapons manufacturer received framework contracts from the Bundeswehr. One contract is worth up to 8.5 billion Euro for artillery ammunition, and the other is worth up to 3.5 billion Euro for military trucks. With the large Italian order, the already steep growth curve would be further intensified. Leonardo, with over 50,000 employees, achieved a turnover of more than 15 billion Euro last year.
Rheinmetall generated a turnover of 7.2 billion Euro in 2023 with approximately 34,000 employees. The order books of the Düsseldorf-based company are fuller than ever. The DAX group's stock price of Rheinmetall has increased more than six-fold since Russia's attack on Ukraine and Chancellor Olaf Scholz's declaration of a "turning point" as well as the 100-billion Euro special fund for the Bundeswehr.
- Rheinmetall and Leonardo, two major players in the Dax companies and the defense industry, are aiming to capitalize on Italy's proposed 20 billion Euro tank order, partnering to develop a new battle tank and armored personnel carrier.
- The German Armed Forces have placed an order for 105 Leopard-2A8 battle tanks, worth nearly three billion Euro, with KNDS for delivery until 2030, with Rheinmetall providing the main weapon.
- Despite earlier collaborations with other companies failing, Italian defense giant Leonardo is now considering a partnership with Rheinmetall for the defense industry, given the substantial growth Rheinmetall has seen in the economy and military sector following the Ukraine conflict.
- The military in Italy and other partner states with modernization needs in combat systems are being targeted by the new joint venture, which aims to establish itself in the defense industry by setting new standards with its modern combat vehicles.
