WEBVTT - European Defense CEO Doerre Talks Spending Boom

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<v Speaker 1>To a key story now and a massive pivot by Germany,

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<v Speaker 1>that country looking to unlock hundreds of billions of euros

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<v Speaker 1>for defense and infrastructure investments in a dramatic shift which

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<v Speaker 1>has seen European bonds plunge, the Euro surge, equity markets

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<v Speaker 1>of Germany jumping three percent. It comes after the US

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<v Speaker 1>pau's military support for Ukraine in the EU put forward

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<v Speaker 1>a package worth up to eight hundred billion euros to

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<v Speaker 1>help countries increase defense spending. Joining us now is someone

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<v Speaker 1>incredibly well placed to talk about the impacts of this,

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<v Speaker 1>Oliver Dirt, CEO of Hensalt. It is a defense company

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<v Speaker 1>that makes radars, amongst other technology. The chancel in waiting

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<v Speaker 1>of Germany Friedick Murch saying, whatever it takes is the

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<v Speaker 1>mantra Olivia, thank you for joining us. When do you

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<v Speaker 1>expect to see this money deployed? How much and how

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<v Speaker 1>significant will it be for the defense space of Germany?

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<v Speaker 1>What will it mean for new orders for you in

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<v Speaker 1>the business going forward?

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<v Speaker 2>Well, thanks for having me, Tom, And indeed it's a

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<v Speaker 2>true paradigm shift. I think first time in history since

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<v Speaker 2>decad we're turning from a design to budget principle to

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<v Speaker 2>really a design to capability principle. I mean, we've always

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<v Speaker 2>believed that this would come in. So looking at at

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<v Speaker 2>the orders, I mean, if I compare it to the

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<v Speaker 2>last Extraordinary budget, it took probably about a year un

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<v Speaker 2>till those orders came floating in, and I think we

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<v Speaker 2>have to take that time because first the Parliament has

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<v Speaker 2>to approve the principle that has been introduced yesterday evening. Second,

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<v Speaker 2>as it's a design to capability, those capability documents have

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<v Speaker 2>to be built up. I mean for conventional like the Eurofighter,

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<v Speaker 2>the twenty additional Eurofighter and other framework contracts that.

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<v Speaker 3>Can come very quickly.

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<v Speaker 2>But what I also understand that this will be a

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<v Speaker 2>lot about new smart armament, new innovative products, where I

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<v Speaker 2>think we need a dialogue with industry that come in.

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<v Speaker 3>That would be then the second step of those orders.

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<v Speaker 4>Okay, how quickly do you think it will flow through then?

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<v Speaker 4>I mean looking to China, for example, which is also

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<v Speaker 4>hosting a major political meeting, they have a deadline of

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<v Speaker 4>twenty twenty seven for a modern military in China twenty

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<v Speaker 4>forty nine for it to be among the world's best.

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<v Speaker 4>One suspects that they're targeting to be the best military

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<v Speaker 4>in the world. What about Germany? How quickly? How soon?

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<v Speaker 2>Well, I think first of all, we have to note

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<v Speaker 2>we're not starting from scratch. I mean looking at the

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<v Speaker 2>one hundred billion extraordinary budget that hasn't been in place

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<v Speaker 2>since since almost three years now, so we are producing

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<v Speaker 2>according to this budget. I think also looking at Handshold,

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<v Speaker 2>we took the responsibility also in anticipation of additional budgets.

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<v Speaker 3>With one billion.

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<v Speaker 2>We build a new plant for the weapon sites optronics

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<v Speaker 2>in ober Korchen. We have put in place a new

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<v Speaker 2>logistics center to boost s up the supply chain. And

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<v Speaker 2>from all these past investments we still have fifty percent

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<v Speaker 2>of capacity headroom, headspace, so that we can.

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<v Speaker 3>Deliver quite quickly.

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<v Speaker 2>And I mean also Germany has seven twenty nine a

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<v Speaker 2>deadline in their minds. I mean looking at Russia and

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<v Speaker 2>the reconstitution after potential ceasefire in Ukraine, and in that

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<v Speaker 2>regards again I mean we have done something already. There

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<v Speaker 2>are quick steps to vamp up, and then, of course

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<v Speaker 2>the more important thing is that we have a long

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<v Speaker 2>term planning security.

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<v Speaker 1>Now, what is the biggest challenge to that ramp up

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<v Speaker 1>if it's not funding at this point.

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<v Speaker 2>Well, it's it's manifold, and I'm really happy that that

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<v Speaker 2>we had a lot of discussion with the outgoing government,

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<v Speaker 2>which is pretty much in consensus with the new government

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<v Speaker 2>coming in.

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<v Speaker 3>Also, I recently traveled to Brussels.

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<v Speaker 2>We're talking to the new Commissioner of European Defense Industry,

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<v Speaker 2>and I think key topics are our bureaucracy. I mean budget,

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<v Speaker 2>as you said, is the initiative requisite, but then we're

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<v Speaker 2>talking bureaucracy. I mean we definitely have to easn the

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<v Speaker 2>business for defense players, looking at qualification and a couple

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<v Speaker 2>of registrative acts that are out there, access to raw material,

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<v Speaker 2>talking broader for industry, for Hansholt as we have a

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<v Speaker 2>very deep coverage of our supply chain.

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<v Speaker 3>That is not the critical pass. And last, but not least,

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<v Speaker 3>it's about.

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<v Speaker 2>Personal I mean here we're taking advantage of a struggling

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<v Speaker 2>automotive industry in Germany. But if we want to be innovative,

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<v Speaker 2>I mean, looking at AI, we will need a total

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<v Speaker 2>different set of engineers as we walk forward.

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<v Speaker 4>Yes, I was reading about the people that you've hired

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<v Speaker 4>from that sector into your business. In terms of rearmament

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<v Speaker 4>in Europe and independence, how much do you think there

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<v Speaker 4>is going to be an emphasis on technology that is

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<v Speaker 4>independent from the United States in terms of the weapons

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<v Speaker 4>build out.

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<v Speaker 2>Well, of course, I assume that this will be an evolution,

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<v Speaker 2>not a revolution. It will be a transformative pass over

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<v Speaker 2>the next years. I mean, first of all, it's about

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<v Speaker 2>conventional capabilities. Air defense is at the very top of

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<v Speaker 2>the agenda here. Handshould with our battle proven radar can

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<v Speaker 2>play a significant role. I think also what we see

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<v Speaker 2>from Ukraine is electromagnetic warfare. We haven't taken care a

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<v Speaker 2>lot of that in the past decade, so that is

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<v Speaker 2>vamping up. So for example, with our Pegazos signal intelligence aircraft,

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<v Speaker 2>that's a similar capability where we today depend on the US.

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<v Speaker 2>So that's about We had the first flight last year,

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<v Speaker 2>that's about to come in and we would be ready

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<v Speaker 2>once the aircraft is ready to produce more and of

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<v Speaker 2>course looking at the vehicles. But for the innovative capabilities,

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<v Speaker 2>I think it's about intelligence, surveillance, reconnaissance, where we today

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<v Speaker 2>still have a strong dependency here. It's about networking European

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<v Speaker 2>capabilities and having effective software algorithms that bring the data

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<v Speaker 2>together to have information superority, decision superiority, and in the

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<v Speaker 2>end also effectors a seperiority, and space is a topic.

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<v Speaker 2>I mean, we're discussing as handsholt to bring some of

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<v Speaker 2>our sensors into the space. We see great opportunities with

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<v Speaker 2>new constellations. And last but not least a challenge for

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<v Speaker 2>US is addressing the UAV. So we so far we

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<v Speaker 2>have been rather on the past of larger UAVs helicopters, aircraft,

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<v Speaker 2>but now we see those mass smaller UAVs. So here

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<v Speaker 2>we about to initiate partnerships with UAV vendors to look

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<v Speaker 2>at new payloads that we bring in that have to

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<v Speaker 2>of course also be smart and connectable.

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<v Speaker 1>Yeah, when we taught you av as, we're talking unmanned

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<v Speaker 1>area vehicles or roans effectively, aren't we, Oliver? The UK

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<v Speaker 1>and the US have a uniquely close military partnership. Does

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<v Speaker 1>that make the UK uniquely exposed in terms of our

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<v Speaker 1>over reliance on the US?

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<v Speaker 3>Well, I think definitely.

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<v Speaker 2>I mean looking at Europe now, because I think important

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<v Speaker 2>in the current discussion, as we see evolutionary pass going forward,

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<v Speaker 2>we should not turn our back on the US. But

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<v Speaker 2>I think the view is really to take responsibility for

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<v Speaker 2>defense in Europe and here as we saw Minister President

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<v Speaker 2>Starma in inviting the Europeans, I would see that the

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<v Speaker 2>German French engine has to really be revived. Around that,

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<v Speaker 2>we have the Weimarra triangle with Poland, and we see

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<v Speaker 2>that now UK and probably the Baltics and also the

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<v Speaker 2>Nordic countries are entering the game. Recently, visiting the Munich

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<v Speaker 2>Security Conference, we could see that there's still a kind

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<v Speaker 2>of divide between the NATO and EU members, where some

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<v Speaker 2>of them are feeling the breath of Putine in the

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<v Speaker 2>sense of a true threat, and others are rather reluctant.

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<v Speaker 2>So I think it depends on a coalition of the willing,

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<v Speaker 2>where the UK is, at least to my perception at

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<v Speaker 2>the moment, a strong player.

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<v Speaker 3>A strong player.

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<v Speaker 4>Okay, interesting, what if there is a truth in Ukraine

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<v Speaker 4>with Russia. What if that war is somehow resolved, Does

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<v Speaker 4>all of this defense spending fade the rush that we've

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<v Speaker 4>seen in this week, the sudden kind of realization and

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<v Speaker 4>huge ramp up in spending. Does that falter if there

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<v Speaker 4>is a truce?

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<v Speaker 2>Well, yes, I mean if we look into the past,

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<v Speaker 2>I mean I share that concern because we had a

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<v Speaker 2>lot of volatility in the past three years after the

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<v Speaker 2>Zeide and vendor where which you could also see at

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<v Speaker 2>the volatility of our stock prize going up and down

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<v Speaker 2>whenever there were news about the ceasefire and Ukraine. To

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<v Speaker 2>make it very clear, from a business perspective, we depend

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<v Speaker 2>on a very low digit one digit percentage on the

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<v Speaker 2>Ukraine business. Despite that this is a top priority for

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<v Speaker 2>US to stand with Ukraine. But but but business wise,

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<v Speaker 2>I mean, if there would be a ceasefire, it it

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<v Speaker 2>it it, It.

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<v Speaker 3>Doesn't have a great impact.

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<v Speaker 2>On the other hand, I definitely see and that also

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<v Speaker 2>reflects the discussions I had in Brussel and Berlin. Everybody

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<v Speaker 2>is well aware that a ceasefire and Ukraine looking at

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<v Speaker 2>the broader threat from Russia, is really increasing that threat

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<v Speaker 2>because Russia would would would use this time for reconstitution

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<v Speaker 2>and and with now US drawing back, I think they

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<v Speaker 2>they will dare as we see twenty twenty nine to

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<v Speaker 2>to to test the Article five of NATO, and in

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<v Speaker 2>that regards I can only strongly recommend to to sustain

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<v Speaker 2>that activity. But what we see with a rearm plan

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<v Speaker 2>from from Osula Fondeline and also what what Fredrichmertz and

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<v Speaker 2>his coalition potential coalition partners have introduced yesterday evening that

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<v Speaker 2>is aiming at a long term I would say one

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<v Speaker 2>decayed spending of re arming you Bob or to say

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<v Speaker 2>it with the words of Trump, Europe and Germany are back.

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<v Speaker 1>Yeah, well, that's a nice line to end it on,

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<v Speaker 1>but I don't want to end it on that. One

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<v Speaker 1>quick one before you go, Oliver, Oliver, the interoperability challenge

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<v Speaker 1>of European defense. The US has one main battle tank,

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<v Speaker 1>Europe has more than a dozen battle tanks. How it's

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<v Speaker 1>a fragmented space. Are you willing to play your role

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<v Speaker 1>in terms of consolidation? How willing are policymakers across the

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<v Speaker 1>EU to push through for a more coordinated defense industry?

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<v Speaker 4>No?

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<v Speaker 3>I think definitely we have to work on both sides.

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<v Speaker 2>I mean that's a discussion I had with also the

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<v Speaker 2>Defense Commissioner and what I see in these defense papers.

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<v Speaker 2>The white paper is about to release on EU level,

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<v Speaker 2>the fading German government has released the paper. So this

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<v Speaker 2>is about harmonizing capabilities, and I think here we need

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<v Speaker 2>a strong political impetus to really force the nations, based

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<v Speaker 2>on budget incentives and so on, to harmonize on the

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<v Speaker 2>other hand, industry has.

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<v Speaker 3>To take responsibility.

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<v Speaker 2>And again whenever we talk consolidation, we're very quickly in

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<v Speaker 2>this mood that the big players go together and so on.

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<v Speaker 2>I'd rather drive it from partnership. For me, consolidation is

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<v Speaker 2>a means to an end. You saw that Hansholt has

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<v Speaker 2>recently announced cooperations with Lockheed Martin with SAP, so we're

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<v Speaker 2>working on a lot of other cooperation and I think

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<v Speaker 2>from that regards, we are absolutely tom ready to drive

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<v Speaker 2>interroperability across the system, especially if you look at software

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<v Speaker 2>defined defense.

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<v Speaker 3>That's a true momentum.

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<v Speaker 2>While hardware stays head to regenius, you put software and

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<v Speaker 2>data algorithms on top to bring that interoperability even in

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<v Speaker 2>a heterogeneous landscape.