European Automakers See Opportunities In The Defense Industry

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Ever since the end of World War II, US companies have dominated the global defense industry. US-made tanks, airplanes, and missile systems have been the first choice of dozens of nations. But with the current administration telling many of America’s former allies to go spit in the ocean, some of them are rethinking their options and starting to consider the idea of manufacturing more of the weaponry they need to protect their borders themselves.

Germany this past week paved the way for more defense expenditures by loosening national debt rules, while Sweden, the Czech Republic, and the Baltic nations are increasing their military budgets. The European Union plans to mobilize €800 billion ($874 billion) to bolster the continent’s security, and NATO Secretary General Mark Rutte has called on European countries to boost defense spending to 3.5% of their economies. Much of this newfound interest in defense spending is spurred by the policies of the US government, which is actively courting dictators like Vladimir Putin while telling NATO nations they should learn to fend for themselves.

Many European automakers, especially Volkswagen, are struggling. Overall sales of new automobiles in Europe are falling, leaving many factories underutilized and workers at risk of layoffs or termination. Martin Büchs runs Jopp, a family business in Bavaria that has been supplying gearshift and engine cooling systems to carmakers for more than a century. With Europe’s automotive sector in turmoil, Büchs told Bloomberg recently he is trying to reinvent the company to become a supplier to the military, which is one of Germany’s fastest growing industrial sectors. “We see a lot of opportunities in the defense industry,” he said. Jopp has had to cut 20% of its workforce over the past five years due to the automotive downturn. “Our employees are generally open to new ideas because their priority is to have sustainable jobs in the long term.”

His decision is part of a growing trend in Europe, as many small and midsized manufacturers struggle with the auto industry’s shift to electric vehicles that require different and far fewer parts. Many are turning to the defense industry in hopes of cashing in on the hundreds of billions of euros European governments are allocating to ramping up their military forces as the US walks back its commitment to the North Atlantic Treaty Organization.

Volkswagen, Europe’s biggest carmaker, has recently reached an agreement with the trade union that represents its workers to reduce its manufacturing capacity and eliminate up to 40,000 jobs in the coming years. That has made it especially interested in tapping into the defense industry to absorb some of its excess capacity. Rheinmetall AG has looked into using the Volkswagen factory in Osnabrück to make armored vehicles. The Audi production facility in Brussels could undergo a similar transformation. Italy’s Industry Minister Adolfo Urso has proposed converting car factories to defense production due to the auto industry crisis. The plan is driven by a 63% drop in vehicle output in January and the shrinking domestic presence of Stellantis, the parent company of FIAT, which wants to protect jobs by leveraging the overlap between building vehicles and manufacturing military equipment.

The Defense Industry Is Hard To Access

Transforming factories to supply the military isn’t easy. It requires equipment to be refitted and workers to be retrained, but the lure of new business and more income is already mobilizing manufacturers across the continent. In Germany, auto parts maker Schaeffler is looking for defense industry partners to expand sales, while Trumpf SE, an industrial manufacturer known for its specialty lasers, is considering building devices that can shoot down drones. Hungary’s Büttner Kft, which previously supplied German automotive tool makers, expects to shift more of its capacity to the defense sector.

In France, Europlasma, a company that develops solutions to destroy hazardous waste, made a takeover offer for the Fonderie de Bretagne factory, which supplies cast metal parts to Renault. It said the bid is part of a strategy to diversify into the defense sector in order “to respond to the challenge of national sovereignty and to growing demand on a European scale.”

Although the defense industry is booming, it’s still much smaller than the automotive sector and can only make up for part of the job losses and production cuts that have started to materialize there. Roughly 13 million people work in Europe’s auto industry — about 7% of EU employment — while the defense sector employs just over one million. “I think the discussion that defense will stop the decline in the automotive industry and its suppliers is an illusion,” Jürgen Kerner, deputy chief of IG Metall, Germany’s largest union, told Bloomberg. “None of this can be done overnight.” Military spending is also giving rise to new companies. In Estonia, a civil servant, a general, a rocket scientist, and one of the country’s richest businessmen launched Frankenburg Technologies to build air defense systems. The country, which borders Russia, has doubled its military budget since 2022.

In addition to retooling factories to make weapons, manufacturers have to contend with a cumbersome certification and security clearance process. To directly supply the military or produce specialized military products requires NATO certification, which typically takes one to two years and costs a minimum of €200,000, according to Christian Bartsch, chief executive officer of ACATO, a firm specialized on certifications and cyber security. And the process can’t start until the company has already received an order from the military. “In Germany, the procurement process is tenacious and difficult. The company is starved until it gets its turn,” Bartsch said. “It takes time for the German authorities to actually order, during which companies have costs, costs, costs, and don’t earn a single euro.”

Yet, if Europe wants to achieve military independence from the US, it will need to support its own companies, like Jopp, which employs about 1,600 people worldwide. “We will probably be able to become a supplier for companies in the defense industry,” Büchs said. “We’ll talk to potential customers to see if there is demand.” Thomas Hirsch, who founded Germany’s Hirsch Engineering Solutions, has already made the leap. The automotive sector accounted for 95 percent of the company’s revenue four years ago. Now, the mechanical parts it produces go into everything from military vehicles to satellites and rocket engines. “Getting into this sensitive sector takes time and energy,” Hirsch told an audience of more than 100 entrepreneurs at a recent event organized by the chamber of industry and commerce. “But once you’re in the system, you remain in the system.”

One Person Caused This

All of this is caused by the ravings of a madman with a Louis XIV complex who does not seem capable of understanding the concept that if Europe builds more of the military equipment it needs, it will buy less of it from the US. The CBC reports that Canada is considering alternatives to the US-built F-35 stealth fighter and will open talks with rival aircraft makers. That news comes just one day after Portugal signaled it also planned to ditch its acquisition of the US made warplane.

Thanks to the ridiculous threats emanating from Assington, DC over tariffs and annexing Canada, there has been a groundswell of support among Canadians to kill the $19 billion contract and find aircraft other than those manufactured and maintained in the United States. Some countries are worried that the US-made airplanes may have a “kill switch” built into their operating systems that would allow the US to disable them if it suited its political agenda to do so. What all this means, apparently, is that US defense contractors did not provide large enough bribes campaign contributions to the idiot in charge and are now being punished for their mistake. No doubt they will learn their lesson and pony up lots more money in the future if they want to stay in the game.

If there is a bright side to this scenario, it is that more defense strategists are advocating for electric vehicles, weapons systems, and renewable energy to reduce the carnage inflicted on military supply convoys that need to deliver fossil fuels to the front lines. That may be a rather small silver lining, but it exists nonetheless.