The arms boom is gripping German industry

"After intense discussions, there has been a decision by the business family and the company to make our technology available for defensive defense solutions," a Trumpf spokesman told NZZ this week. This is explicitly about "applications not directed against humans". Trumpf can manufacture systems for drone defense on a laser basis that do not exist so far. However, those who think of various Phaser radiation weapons from the series "Star Trek" are wrong. The technology is only at the beginning in the armaments sector. "The laser is not an all-purpose weapon for all distances," explains the Trumpf spokesman.

Military partner wanted

Although the company has so far offered laser technologies for a wide range of applications, ranging from the exposure of semiconductors to the cutting of metal sheets, Trumpf needs a military partner for the application of drone defense, such as target detection. Requests on this from Europe and Israel are reportedly already available.

After initial reports at the beginning of the year, Trumpf director Nicola Leibinger-Kammüller confirmed a possible entry into the defense sector. Children are also involved in the discussions as the next generation of the family. "This is not a turning point of values, but the evolution of our social responsibility," Leibinger-Kammüller also stressed. To enter the arms business, however, the company would still have to change the shareholder agreement, which until now excludes this.

Meanwhile, several companies have made similar changes in their strategy. In the summer of 2024, for example, engine manufacturer Deutz announced that it would also build armored engines in addition to its civilian activities. As a result, the share price had risen by more than 20 percent.

The Cologne-based company now sees the armaments sector as a strategic growth opportunity. "Armaments and defense are moving to the center of industry. That's a good thing," said company director Sebastian C. Schulte. "A defendable Germany and Europe need a strong industrial base. Deutz can and will contribute even more here in the future."

The company combines its technologies and portfolio into a newly created "Defense" business unit to strategically enter the market. Schulte is also considering growth through acquisitions. Deutz produces engines for small and medium-sized military vehicles, mainly infantry fighting vehicles and troop vans as well as generators. The production of large engines for heavy tanks is currently not planned.

The Salzgitter steel group also wants to enter into business with the German armed forces. In July, the company announced that its subsidiary Ilsenburger Grobblech had received the approval of the steel grade "Secure 500" by the German armed forces.

This means that the corresponding steel quality is officially approved for use by the military, for example in vehicles or in protective systems. The approval took almost two years.

By expanding its portfolio, Salzgitter is reacting to the increasing demand in the security and defense sector, according to its own figures. Salzgitter is already in the approval process for other steel grades and, following the final assessment by the German armed forces, wants to be able to offer the complete "Secure" product family for military applications.

The new federal government of CDU/CSU and SPD as well as the EU have promised hundreds of billions of euros for the defense sector in the coming years. The German armed forces, which has been neglected for decades, is now much more challenged by the turn of times, even abroad. In Lithuania, for example, Germany is setting up a battle tank brigade, and this week it was announced that the Air Force is transferring five Eurofighter planes with 150 soldiers to Poland for several weeks.

Financial institutions are also adapting to the increasing change of mind among many companies. Commerzbank, for example, has specialized defense experts in its sector teams. In the past, some companies had complained about financing problems because the arms sector did not meet the sustainability expectations of some banks on environmental, social and corporate governance issues.

"The large capital market-financed arms companies have no financing problems because they can issue new shares or bonds, they can make investments from cash flow and state customers generally make down payments," said Alexander Mann, Head of Industrials at Commerzbank. They would almost not need banks for traditional loans today, especially as the major government orders in Europe are still pending.

Opportunity for the automotive industry

Financing problems may be more likely for smaller suppliers, who have only achieved a fraction of their sales with the arms industry, but should now strongly boost production. However, orders were only gradually received by medium-sized companies, Mann added. Many of the companies in question would still primarily move outside the arms industry.

According to industry circles, one of the smaller companies that want to open up to military applications is Helrom Trailer Rail. Helrom is a rail freight and technology company. It enables customers with patented technology to switch between road and rail without high investments in loading terminals. However, the technology could also be used to unload tanks and military vehicles on the open track from railway wagons. According to media reports, several other companies are also examining new projects related to the military sector, such as the machine manufacturer Hawe Hydraulik, the textile specialist Freudenberg and the automotive suppliers Brose, Dürr, Jopp and Schaeffler. VW is already working with the German armed forces in the truck sector through its subsidiary MAN.

The recovery in the defense sector is also benefiting workers in the troubled car industry, where tens of thousands of jobs have been lost in recent quarters. This is an opportunity for armaments companies such as Rheinmetall, KNDS, Hensoldt and for many of the new players in the industry who are almost all looking for qualified employees. The turning point is also changing parts of the German economy. In a few years' time, the industry will have restructured itself.

The article was conducted and published in German. We received the permission to translate it into English from the Neue Zürcher Zeitung.