Speaker 1: To a key story now and a massive pivot by Germany,
Speaker 1: that country looking to unlock hundreds of billions of euros
Speaker 1: for defense and infrastructure investments in a dramatic shift which
Speaker 1: has seen European bonds plunge, the Euro surge, equity markets
Speaker 1: of Germany jumping three percent. It comes after the US
Speaker 1: pau's military support for Ukraine in the EU put forward
Speaker 1: a package worth up to eight hundred billion euros to
Speaker 1: help countries increase defense spending. Joining us now is someone
Speaker 1: incredibly well placed to talk about the impacts of this,
Speaker 1: Oliver Dirt, CEO of Hensalt. It is a defense company
Speaker 1: that makes radars, amongst other technology. The chancel in waiting
Speaker 1: of Germany Friedick Murch saying, whatever it takes is the
Speaker 1: mantra Olivia, thank you for joining us. When do you
Speaker 1: expect to see this money deployed? How much and how
Speaker 1: significant will it be for the defense space of Germany?
Speaker 1: What will it mean for new orders for you in
Speaker 1: the business going forward?
Speaker 2: Well, thanks for having me, Tom, And indeed it's a
Speaker 2: true paradigm shift. I think first time in history since
Speaker 2: decad we're turning from a design to budget principle to
Speaker 2: really a design to capability principle. I mean, we've always
Speaker 2: believed that this would come in. So looking at at
Speaker 2: the orders, I mean, if I compare it to the
Speaker 2: last Extraordinary budget, it took probably about a year un
Speaker 2: till those orders came floating in, and I think we
Speaker 2: have to take that time because first the Parliament has
Speaker 2: to approve the principle that has been introduced yesterday evening. Second,
Speaker 2: as it's a design to capability, those capability documents have
Speaker 2: to be built up. I mean for conventional like the Eurofighter,
Speaker 2: the twenty additional Eurofighter and other framework contracts that.
Speaker 3: Can come very quickly.
Speaker 2: But what I also understand that this will be a
Speaker 2: lot about new smart armament, new innovative products, where I
Speaker 2: think we need a dialogue with industry that come in.
Speaker 3: That would be then the second step of those orders.
Speaker 4: Okay, how quickly do you think it will flow through then?
Speaker 4: I mean looking to China, for example, which is also
Speaker 4: hosting a major political meeting, they have a deadline of
Speaker 4: twenty twenty seven for a modern military in China twenty
Speaker 4: forty nine for it to be among the world's best.
Speaker 4: One suspects that they're targeting to be the best military
Speaker 4: in the world. What about Germany? How quickly? How soon?
Speaker 2: Well, I think first of all, we have to note
Speaker 2: we're not starting from scratch. I mean looking at the
Speaker 2: one hundred billion extraordinary budget that hasn't been in place
Speaker 2: since since almost three years now, so we are producing
Speaker 2: according to this budget. I think also looking at Handshold,
Speaker 2: we took the responsibility also in anticipation of additional budgets.
Speaker 3: With one billion.
Speaker 2: We build a new plant for the weapon sites optronics
Speaker 2: in ober Korchen. We have put in place a new
Speaker 2: logistics center to boost s up the supply chain. And
Speaker 2: from all these past investments we still have fifty percent
Speaker 2: of capacity headroom, headspace, so that we can.
Speaker 3: Deliver quite quickly.
Speaker 2: And I mean also Germany has seven twenty nine a
Speaker 2: deadline in their minds. I mean looking at Russia and
Speaker 2: the reconstitution after potential ceasefire in Ukraine, and in that
Speaker 2: regards again I mean we have done something already. There
Speaker 2: are quick steps to vamp up, and then, of course
Speaker 2: the more important thing is that we have a long
Speaker 2: term planning security.
Speaker 1: Now, what is the biggest challenge to that ramp up
Speaker 1: if it's not funding at this point.
Speaker 2: Well, it's it's manifold, and I'm really happy that that
Speaker 2: we had a lot of discussion with the outgoing government,
Speaker 2: which is pretty much in consensus with the new government
Speaker 2: coming in.
Speaker 3: Also, I recently traveled to Brussels.
Speaker 2: We're talking to the new Commissioner of European Defense Industry,
Speaker 2: and I think key topics are our bureaucracy. I mean budget,
Speaker 2: as you said, is the initiative requisite, but then we're
Speaker 2: talking bureaucracy. I mean we definitely have to easn the
Speaker 2: business for defense players, looking at qualification and a couple
Speaker 2: of registrative acts that are out there, access to raw material,
Speaker 2: talking broader for industry, for Hansholt as we have a
Speaker 2: very deep coverage of our supply chain.
Speaker 3: That is not the critical pass. And last, but not least,
Speaker 3: it's about.
Speaker 2: Personal I mean here we're taking advantage of a struggling
Speaker 2: automotive industry in Germany. But if we want to be innovative,
Speaker 2: I mean, looking at AI, we will need a total
Speaker 2: different set of engineers as we walk forward.
Speaker 4: Yes, I was reading about the people that you've hired
Speaker 4: from that sector into your business. In terms of rearmament
Speaker 4: in Europe and independence, how much do you think there
Speaker 4: is going to be an emphasis on technology that is
Speaker 4: independent from the United States in terms of the weapons
Speaker 4: build out.
Speaker 2: Well, of course, I assume that this will be an evolution,
Speaker 2: not a revolution. It will be a transformative pass over
Speaker 2: the next years. I mean, first of all, it's about
Speaker 2: conventional capabilities. Air defense is at the very top of
Speaker 2: the agenda here. Handshould with our battle proven radar can
Speaker 2: play a significant role. I think also what we see
Speaker 2: from Ukraine is electromagnetic warfare. We haven't taken care a
Speaker 2: lot of that in the past decade, so that is
Speaker 2: vamping up. So for example, with our Pegazos signal intelligence aircraft,
Speaker 2: that's a similar capability where we today depend on the US.
Speaker 2: So that's about We had the first flight last year,
Speaker 2: that's about to come in and we would be ready
Speaker 2: once the aircraft is ready to produce more and of
Speaker 2: course looking at the vehicles. But for the innovative capabilities,
Speaker 2: I think it's about intelligence, surveillance, reconnaissance, where we today
Speaker 2: still have a strong dependency here. It's about networking European
Speaker 2: capabilities and having effective software algorithms that bring the data
Speaker 2: together to have information superority, decision superiority, and in the
Speaker 2: end also effectors a seperiority, and space is a topic.
Speaker 2: I mean, we're discussing as handsholt to bring some of
Speaker 2: our sensors into the space. We see great opportunities with
Speaker 2: new constellations. And last but not least a challenge for
Speaker 2: US is addressing the UAV. So we so far we
Speaker 2: have been rather on the past of larger UAVs helicopters, aircraft,
Speaker 2: but now we see those mass smaller UAVs. So here
Speaker 2: we about to initiate partnerships with UAV vendors to look
Speaker 2: at new payloads that we bring in that have to
Speaker 2: of course also be smart and connectable.
Speaker 1: Yeah, when we taught you av as, we're talking unmanned
Speaker 1: area vehicles or roans effectively, aren't we, Oliver? The UK
Speaker 1: and the US have a uniquely close military partnership. Does
Speaker 1: that make the UK uniquely exposed in terms of our
Speaker 1: over reliance on the US?
Speaker 3: Well, I think definitely.
Speaker 2: I mean looking at Europe now, because I think important
Speaker 2: in the current discussion, as we see evolutionary pass going forward,
Speaker 2: we should not turn our back on the US. But
Speaker 2: I think the view is really to take responsibility for
Speaker 2: defense in Europe and here as we saw Minister President
Speaker 2: Starma in inviting the Europeans, I would see that the
Speaker 2: German French engine has to really be revived. Around that,
Speaker 2: we have the Weimarra triangle with Poland, and we see
Speaker 2: that now UK and probably the Baltics and also the
Speaker 2: Nordic countries are entering the game. Recently, visiting the Munich
Speaker 2: Security Conference, we could see that there's still a kind
Speaker 2: of divide between the NATO and EU members, where some
Speaker 2: of them are feeling the breath of Putine in the
Speaker 2: sense of a true threat, and others are rather reluctant.
Speaker 2: So I think it depends on a coalition of the willing,
Speaker 2: where the UK is, at least to my perception at
Speaker 2: the moment, a strong player.
Speaker 3: A strong player.
Speaker 4: Okay, interesting, what if there is a truth in Ukraine
Speaker 4: with Russia. What if that war is somehow resolved, Does
Speaker 4: all of this defense spending fade the rush that we've
Speaker 4: seen in this week, the sudden kind of realization and
Speaker 4: huge ramp up in spending. Does that falter if there
Speaker 4: is a truce?
Speaker 2: Well, yes, I mean if we look into the past,
Speaker 2: I mean I share that concern because we had a
Speaker 2: lot of volatility in the past three years after the
Speaker 2: Zeide and vendor where which you could also see at
Speaker 2: the volatility of our stock prize going up and down
Speaker 2: whenever there were news about the ceasefire and Ukraine. To
Speaker 2: make it very clear, from a business perspective, we depend
Speaker 2: on a very low digit one digit percentage on the
Speaker 2: Ukraine business. Despite that this is a top priority for
Speaker 2: US to stand with Ukraine. But but but business wise,
Speaker 2: I mean, if there would be a ceasefire, it it
Speaker 2: it it, It.
Speaker 3: Doesn't have a great impact.
Speaker 2: On the other hand, I definitely see and that also
Speaker 2: reflects the discussions I had in Brussel and Berlin. Everybody
Speaker 2: is well aware that a ceasefire and Ukraine looking at
Speaker 2: the broader threat from Russia, is really increasing that threat
Speaker 2: because Russia would would would use this time for reconstitution
Speaker 2: and and with now US drawing back, I think they
Speaker 2: they will dare as we see twenty twenty nine to
Speaker 2: to to test the Article five of NATO, and in
Speaker 2: that regards I can only strongly recommend to to sustain
Speaker 2: that activity. But what we see with a rearm plan
Speaker 2: from from Osula Fondeline and also what what Fredrichmertz and
Speaker 2: his coalition potential coalition partners have introduced yesterday evening that
Speaker 2: is aiming at a long term I would say one
Speaker 2: decayed spending of re arming you Bob or to say
Speaker 2: it with the words of Trump, Europe and Germany are back.
Speaker 1: Yeah, well, that's a nice line to end it on,
Speaker 1: but I don't want to end it on that. One
Speaker 1: quick one before you go, Oliver, Oliver, the interoperability challenge
Speaker 1: of European defense. The US has one main battle tank,
Speaker 1: Europe has more than a dozen battle tanks. How it's
Speaker 1: a fragmented space. Are you willing to play your role
Speaker 1: in terms of consolidation? How willing are policymakers across the
Speaker 1: EU to push through for a more coordinated defense industry?
Speaker 4: No?
Speaker 3: I think definitely we have to work on both sides.
Speaker 2: I mean that's a discussion I had with also the
Speaker 2: Defense Commissioner and what I see in these defense papers.
Speaker 2: The white paper is about to release on EU level,
Speaker 2: the fading German government has released the paper. So this
Speaker 2: is about harmonizing capabilities, and I think here we need
Speaker 2: a strong political impetus to really force the nations, based
Speaker 2: on budget incentives and so on, to harmonize on the
Speaker 2: other hand, industry has.
Speaker 3: To take responsibility.
Speaker 2: And again whenever we talk consolidation, we're very quickly in
Speaker 2: this mood that the big players go together and so on.
Speaker 2: I'd rather drive it from partnership. For me, consolidation is
Speaker 2: a means to an end. You saw that Hansholt has
Speaker 2: recently announced cooperations with Lockheed Martin with SAP, so we're
Speaker 2: working on a lot of other cooperation and I think
Speaker 2: from that regards, we are absolutely tom ready to drive
Speaker 2: interroperability across the system, especially if you look at software
Speaker 2: defined defense.
Speaker 3: That's a true momentum.
Speaker 2: While hardware stays head to regenius, you put software and
Speaker 2: data algorithms on top to bring that interoperability even in
Speaker 2: a heterogeneous landscape.