1 00:00:02,600 --> 00:00:06,920 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,280 --> 00:00:09,360 Speaker 2: The US is warning that it will impose new sanctions 3 00:00:09,400 --> 00:00:12,119 Speaker 2: on Iran in the coming days. The reason for this 4 00:00:12,200 --> 00:00:14,360 Speaker 2: fairly straight forward. The missile a tank that we saw 5 00:00:14,480 --> 00:00:16,960 Speaker 2: over the weekend. The Europeans may follow us, and that's 6 00:00:17,000 --> 00:00:18,760 Speaker 2: kind of one element that we need to factor in. 7 00:00:19,000 --> 00:00:21,840 Speaker 2: The other one is what is happening with Ukraine, where 8 00:00:21,920 --> 00:00:23,960 Speaker 2: Ukraine feels like it's on the back foot right now, 9 00:00:24,440 --> 00:00:26,440 Speaker 2: and that funding story is going to be very much 10 00:00:26,440 --> 00:00:28,880 Speaker 2: front and center when it comes today's meeting of G 11 00:00:29,000 --> 00:00:31,360 Speaker 2: seven finance ministers their meeting as well. They're trying to 12 00:00:31,360 --> 00:00:34,120 Speaker 2: figure out, particularly here in Europe, how they fund this 13 00:00:34,200 --> 00:00:40,199 Speaker 2: next stage of military expansion, industrial military expansion, and that 14 00:00:40,240 --> 00:00:42,720 Speaker 2: obviously takes us to the conference that is taking place 15 00:00:43,120 --> 00:00:45,440 Speaker 2: in Brussels. Olli Crook is there for us. This is 16 00:00:45,479 --> 00:00:47,360 Speaker 2: a big defense conference. We're trying to kind of get 17 00:00:47,360 --> 00:00:50,360 Speaker 2: a read therefore out of this as to how quickly 18 00:00:50,400 --> 00:00:52,279 Speaker 2: that process is going to unfold. Ollie, maybe you can 19 00:00:52,320 --> 00:00:52,919 Speaker 2: help us with that. 20 00:00:53,520 --> 00:00:55,720 Speaker 3: Yeah, absolutely, guy. As you mentioned, I mean, listen, there's 21 00:00:55,720 --> 00:00:57,440 Speaker 3: a lot of rhetoric, there's a lot of talking from 22 00:00:57,440 --> 00:01:00,400 Speaker 3: politicians and Brussels about getting this defense capacity, the app 23 00:01:00,400 --> 00:01:02,040 Speaker 3: and getting sort of all of this money that is 24 00:01:02,040 --> 00:01:04,840 Speaker 3: required to the defense industry. But then there's this other component, 25 00:01:04,920 --> 00:01:07,280 Speaker 3: right which is getting those volumes in that capacity up. 26 00:01:07,480 --> 00:01:09,839 Speaker 3: And someone who needs to figure out the mechanics from 27 00:01:09,880 --> 00:01:13,920 Speaker 3: the financing to the manufacturing is the person sitting right 28 00:01:13,959 --> 00:01:15,840 Speaker 3: in front of me, who is the chief executive officer 29 00:01:15,920 --> 00:01:18,480 Speaker 3: of SAAB, who joins us now for a conversation here 30 00:01:18,520 --> 00:01:21,039 Speaker 3: at the Defense and Security Summit in Brussels. So I 31 00:01:21,080 --> 00:01:22,959 Speaker 3: just want to start with the sort of latest developments 32 00:01:22,959 --> 00:01:25,880 Speaker 3: that we saw from Iran and Israel and the attacks. 33 00:01:25,959 --> 00:01:27,560 Speaker 3: Do you think that that is going to encourage even 34 00:01:27,640 --> 00:01:29,959 Speaker 3: more spending. Do you think it changes things in the 35 00:01:29,959 --> 00:01:31,760 Speaker 3: defense industry or is this more of the kind of 36 00:01:31,760 --> 00:01:33,920 Speaker 3: story that we've been seeing unfold Well, I. 37 00:01:33,959 --> 00:01:37,040 Speaker 4: Think it's the political focus on what sort of where 38 00:01:37,080 --> 00:01:39,680 Speaker 4: the threaten environment is in the world will of course 39 00:01:39,880 --> 00:01:41,880 Speaker 4: change a bit, and I'm. 40 00:01:41,360 --> 00:01:44,120 Speaker 1: More worried that they focus on the war. 41 00:01:43,959 --> 00:01:47,800 Speaker 4: In Ukraine will sort of disappear a bit, and that 42 00:01:47,920 --> 00:01:52,680 Speaker 4: wouldn't be good. I think all tensions, all threatened environments, 43 00:01:53,520 --> 00:01:57,120 Speaker 4: political tensions that happens now will drive defense spending. 44 00:01:57,200 --> 00:01:59,920 Speaker 1: Definitely. It's hard to say whether this sort of. 45 00:02:00,120 --> 00:02:02,640 Speaker 4: What's happening in the Middle East now in the end 46 00:02:02,760 --> 00:02:07,000 Speaker 4: will get even more defense bending happening. But I think 47 00:02:07,120 --> 00:02:09,680 Speaker 4: right now is more like the focus in Ukraine versus 48 00:02:09,720 --> 00:02:11,360 Speaker 4: the Middle East is worrying me. 49 00:02:11,440 --> 00:02:13,160 Speaker 1: Can you see that shifting the balance? Yeah? 50 00:02:13,200 --> 00:02:16,720 Speaker 4: I think I think all of us see that, And 51 00:02:16,320 --> 00:02:20,720 Speaker 4: the attention to Ukraine is not sort of that high anymore. 52 00:02:20,840 --> 00:02:22,600 Speaker 3: And it's hard to get exact figures on this, but 53 00:02:22,639 --> 00:02:25,160 Speaker 3: I saw some reporting saying that, you know, the much 54 00:02:25,160 --> 00:02:27,680 Speaker 3: has been made at Israel's very successfully shooting down these 55 00:02:27,680 --> 00:02:31,920 Speaker 3: three hundred drones in missiles. The cost approximate associated with 56 00:02:31,960 --> 00:02:34,000 Speaker 3: that was sort of six hundred million dollars in some 57 00:02:34,040 --> 00:02:35,640 Speaker 3: of the reporting I saw, that's two. 58 00:02:35,480 --> 00:02:36,480 Speaker 1: Million per drone. 59 00:02:36,600 --> 00:02:39,480 Speaker 3: The economics of that if you have a prolonged conflict, 60 00:02:39,480 --> 00:02:42,320 Speaker 3: doesn't really work out. As a defense company, how do 61 00:02:42,360 --> 00:02:44,280 Speaker 3: you think about this? How do you solve that problem? 62 00:02:44,440 --> 00:02:46,840 Speaker 4: I think all of us are figuring out ways to 63 00:02:46,880 --> 00:02:50,600 Speaker 4: do this in a more efficient way, being more agnostic 64 00:02:50,600 --> 00:02:53,359 Speaker 4: in what kind of effectors you will use depending on 65 00:02:53,800 --> 00:02:56,200 Speaker 4: the threat as such, I mean hypersonic threats, you have 66 00:02:56,320 --> 00:02:59,200 Speaker 4: to use your best capabilities to take them out and 67 00:02:59,240 --> 00:03:01,320 Speaker 4: then the most slow or drones. You can do other 68 00:03:01,400 --> 00:03:03,919 Speaker 4: things if you have all the sort of the measures 69 00:03:03,960 --> 00:03:04,640 Speaker 4: to use. 70 00:03:05,600 --> 00:03:07,359 Speaker 1: There will be new ways of doing that. 71 00:03:07,400 --> 00:03:09,280 Speaker 4: But you have to think about what these things are 72 00:03:09,360 --> 00:03:11,519 Speaker 4: aiming for also, so I mean you have to take 73 00:03:11,560 --> 00:03:13,160 Speaker 4: them out with the systems you have. 74 00:03:13,560 --> 00:03:15,280 Speaker 1: But over time this will change. 75 00:03:15,280 --> 00:03:17,480 Speaker 4: I think it will become more efficient and we're all 76 00:03:17,480 --> 00:03:18,760 Speaker 4: putting research into. 77 00:03:18,560 --> 00:03:21,160 Speaker 3: This, and so Europe is also you leaders are here 78 00:03:21,160 --> 00:03:24,359 Speaker 3: to talk about European competitiveness that obviously plays very much 79 00:03:24,400 --> 00:03:26,679 Speaker 3: into sort of the defense sector in the world. 80 00:03:26,440 --> 00:03:27,240 Speaker 1: That you're dealing with. 81 00:03:27,440 --> 00:03:30,120 Speaker 3: What do you think the biggest impeditiments are to European 82 00:03:30,160 --> 00:03:33,520 Speaker 3: competitiveness in defense that policymakers can address right now? 83 00:03:34,120 --> 00:03:36,960 Speaker 4: Well, I think in Europe we have had the tendency 84 00:03:37,040 --> 00:03:41,960 Speaker 4: of doing research programs for long term capabilities, and then 85 00:03:42,000 --> 00:03:45,320 Speaker 4: when it comes to sort of manufacturing and industrializing this 86 00:03:46,000 --> 00:03:49,600 Speaker 4: we buy outside EU, which is kind of crazy when 87 00:03:49,600 --> 00:03:51,440 Speaker 4: you think about the return on investment. 88 00:03:51,560 --> 00:03:54,280 Speaker 1: So of course I see the balance is wrong. 89 00:03:54,400 --> 00:03:58,120 Speaker 4: I mean Europe has to sort of put up industrial 90 00:03:58,200 --> 00:04:01,920 Speaker 4: capacity also from the research we're doing and not buying 91 00:04:02,000 --> 00:04:04,680 Speaker 4: so much outside Europe. I'm not trying to protector of 92 00:04:04,720 --> 00:04:07,440 Speaker 4: my own company, and I think we need competitiveness for sure, 93 00:04:07,720 --> 00:04:10,960 Speaker 4: but we have to have the whole life cycle of things. 94 00:04:11,000 --> 00:04:14,520 Speaker 4: Also with capacity in Europe that would increase competitiveness. 95 00:04:14,560 --> 00:04:16,560 Speaker 3: And how do you get there because this is traditionally 96 00:04:16,560 --> 00:04:20,080 Speaker 3: a very low volume industry now demanding extremely high volumes 97 00:04:20,120 --> 00:04:21,640 Speaker 3: and what are the kind of roadblocks for you and 98 00:04:21,640 --> 00:04:22,960 Speaker 3: how do you get that volume up? 99 00:04:23,279 --> 00:04:26,680 Speaker 4: I think from an industrial perspective, we've invested a lot, 100 00:04:26,760 --> 00:04:30,080 Speaker 4: but I think for many governments we need to have 101 00:04:30,120 --> 00:04:32,880 Speaker 4: long term commitments. I mean the big investments we need 102 00:04:32,920 --> 00:04:35,480 Speaker 4: to do in setting up a new site, a new facility, 103 00:04:35,480 --> 00:04:38,720 Speaker 4: a new production, creating a supply chain that comes with 104 00:04:38,839 --> 00:04:42,040 Speaker 4: that to support higher volumes. That is kind of huge 105 00:04:42,040 --> 00:04:45,560 Speaker 4: investments and without knowing that this is long term and 106 00:04:45,600 --> 00:04:48,680 Speaker 4: we will not fall below a critical mass again in 107 00:04:48,960 --> 00:04:53,160 Speaker 4: sort of industry necessitating, so that's what's needed. You actually 108 00:04:53,200 --> 00:04:57,960 Speaker 4: need money in funds to use and intensive ize companies 109 00:04:57,960 --> 00:04:59,960 Speaker 4: to work together to do that, and that could have 110 00:05:00,160 --> 00:05:02,200 Speaker 4: and if you put enough money intore. 111 00:05:02,240 --> 00:05:04,800 Speaker 3: And in the equation of sort of supply chains materials, 112 00:05:04,839 --> 00:05:07,000 Speaker 3: but also sort of suppliers. I've spoken to some other 113 00:05:07,040 --> 00:05:09,440 Speaker 3: defense contractors that are saying that basically if you really 114 00:05:09,440 --> 00:05:11,719 Speaker 3: want to ramp up capacity, you're going to have internal 115 00:05:11,760 --> 00:05:16,200 Speaker 3: competition between industries for material, whether it's auto industry or 116 00:05:16,240 --> 00:05:19,080 Speaker 3: other industrial sectors. Do you see that happening and do 117 00:05:19,160 --> 00:05:21,000 Speaker 3: governments that need to step in and say, hey, listen, 118 00:05:21,120 --> 00:05:22,560 Speaker 3: we need to prioritize defense. 119 00:05:23,480 --> 00:05:27,240 Speaker 4: I think I've been speaking to some companies providing us 120 00:05:27,240 --> 00:05:31,040 Speaker 4: with components, and when they realize that we have a 121 00:05:31,160 --> 00:05:34,760 Speaker 4: really important purpose of delivering things to support Ukraine, for example, 122 00:05:34,839 --> 00:05:38,080 Speaker 4: it actually changed their priorities. Whether you need politicians to 123 00:05:38,160 --> 00:05:41,880 Speaker 4: do that or not, that comes down to, I think 124 00:05:42,120 --> 00:05:45,839 Speaker 4: how capable are we of generating the systems needed to 125 00:05:45,960 --> 00:05:48,880 Speaker 4: sort of counter the threat In the end, there has 126 00:05:48,960 --> 00:05:52,080 Speaker 4: to be prioritization if you don't have enough material, so 127 00:05:52,160 --> 00:05:54,600 Speaker 4: that could happen. But right now, I think industry leaders 128 00:05:54,680 --> 00:05:57,680 Speaker 4: are talking to other companies to try and convince them 129 00:05:57,720 --> 00:06:00,760 Speaker 4: about that we don't need the sort of the volumes, 130 00:06:00,800 --> 00:06:03,240 Speaker 4: but we need enough to be able to support Ukraine 131 00:06:03,279 --> 00:06:05,280 Speaker 4: in the end, and that makes a difference. 132 00:06:05,520 --> 00:06:08,040 Speaker 3: And within the industry this is sort of a question 133 00:06:08,080 --> 00:06:10,640 Speaker 3: that I have with we have to have more efficiency, 134 00:06:10,760 --> 00:06:12,720 Speaker 3: and you know, Europe is talking about kind of joint 135 00:06:12,760 --> 00:06:16,359 Speaker 3: procurement and really caring less about sort of competition in 136 00:06:16,400 --> 00:06:18,400 Speaker 3: the traditional sense where you say, hey, we're okay with 137 00:06:18,480 --> 00:06:21,480 Speaker 3: SAB basically owning a certain part of the defense sector. 138 00:06:21,680 --> 00:06:23,120 Speaker 3: Do you think there needs to be em and a 139 00:06:23,360 --> 00:06:25,760 Speaker 3: consolidation within the defense industry? 140 00:06:25,760 --> 00:06:27,400 Speaker 4: What does that look like in the next few years. 141 00:06:27,480 --> 00:06:29,640 Speaker 4: I mean, Europe is not sort of a federal level 142 00:06:29,880 --> 00:06:32,840 Speaker 4: that can decide how things can to be done top down. 143 00:06:32,640 --> 00:06:34,680 Speaker 3: From but there have been sort of concessions made on 144 00:06:34,720 --> 00:06:37,080 Speaker 3: anti competition, for example in the defense. 145 00:06:37,000 --> 00:06:41,560 Speaker 4: And I think continue to incentivize sort of companies to 146 00:06:41,600 --> 00:06:43,880 Speaker 4: work together. If you find a couple of three countries 147 00:06:43,920 --> 00:06:47,360 Speaker 4: working together, you find defense forces needed the same things, 148 00:06:47,760 --> 00:06:50,000 Speaker 4: and then you will see industries coming. 149 00:06:49,760 --> 00:06:50,880 Speaker 1: Together to work as well. 150 00:06:51,000 --> 00:06:54,120 Speaker 4: That will lead to your adventures that will lead eventually 151 00:06:54,160 --> 00:06:55,000 Speaker 4: to consolidation. 152 00:06:55,440 --> 00:06:56,840 Speaker 1: You have to do it that way, I. 153 00:06:56,760 --> 00:06:59,400 Speaker 4: Think, then rodded than trying to sort of top down 154 00:06:59,720 --> 00:07:01,000 Speaker 4: this who will do what? 155 00:07:01,800 --> 00:07:03,640 Speaker 1: In Europe? That won't be possible, I think. 156 00:07:03,880 --> 00:07:05,880 Speaker 3: And then in terms of these sort of valuations, because 157 00:07:05,920 --> 00:07:07,800 Speaker 3: we saw I think last week it was a huge 158 00:07:07,839 --> 00:07:10,600 Speaker 3: move in the defense starts, you're a little bit concerned 159 00:07:10,600 --> 00:07:13,360 Speaker 3: about how quickly things have gone and that maybe again 160 00:07:13,480 --> 00:07:15,680 Speaker 3: volumes and the financing may not all be there, and 161 00:07:15,720 --> 00:07:16,840 Speaker 3: what kind of that means. 162 00:07:17,200 --> 00:07:20,200 Speaker 4: You know, I don't sort of look at the valuation 163 00:07:20,280 --> 00:07:23,120 Speaker 4: of the company or the companies. I look more at 164 00:07:23,120 --> 00:07:26,160 Speaker 4: what we do we need to do to increase capabilities 165 00:07:26,160 --> 00:07:31,320 Speaker 4: and capacity. Financing and attracting capital is really really important. 166 00:07:31,480 --> 00:07:33,800 Speaker 4: And still there's a little bit of wind addressing when 167 00:07:33,800 --> 00:07:36,960 Speaker 4: it comes to who is prepared to invest in defence companies. 168 00:07:37,040 --> 00:07:39,160 Speaker 1: It has changed a lot, yes, but. 169 00:07:39,560 --> 00:07:43,440 Speaker 4: I mean you have European investment banks still saying that 170 00:07:43,480 --> 00:07:46,000 Speaker 4: it has to be dual use. You can't invest in 171 00:07:46,000 --> 00:07:50,360 Speaker 4: defense capabilities or defense research. And if they changed their mind, 172 00:07:50,400 --> 00:07:53,239 Speaker 4: if the finance ministers in EU will change their mind, 173 00:07:53,480 --> 00:07:56,520 Speaker 4: that will send signals the bigger investors as well, the 174 00:07:56,600 --> 00:07:57,840 Speaker 4: pension funds and others. 175 00:07:58,000 --> 00:08:00,040 Speaker 1: That will be really really important. And so that's a 176 00:08:00,080 --> 00:08:00,520 Speaker 1: good signal. 177 00:08:00,560 --> 00:08:02,280 Speaker 3: But where do you think the bulk of the investment 178 00:08:02,280 --> 00:08:05,040 Speaker 3: will come if sort of the clouds cleared, and you know, 179 00:08:05,040 --> 00:08:06,920 Speaker 3: where do you expect most of that money to come from? 180 00:08:07,400 --> 00:08:09,800 Speaker 4: I think it will have to be It will be 181 00:08:09,840 --> 00:08:13,160 Speaker 4: private equity companies. There will be pension funds doing this, 182 00:08:13,320 --> 00:08:17,880 Speaker 4: there will be big consortiums doing it, investor companies like 183 00:08:18,320 --> 00:08:21,600 Speaker 4: the Volunberg family investor company in Sweden. It will be mixed, 184 00:08:21,840 --> 00:08:24,200 Speaker 4: but you need the big ones in play to sort 185 00:08:24,200 --> 00:08:27,200 Speaker 4: of really attracting the capital investment in Sweden. 186 00:08:27,280 --> 00:08:30,240 Speaker 3: Finally, sort of recently joining NATO, is that changing kind 187 00:08:30,240 --> 00:08:32,320 Speaker 3: of how you're positioning yourself in strategy or is that 188 00:08:32,440 --> 00:08:33,920 Speaker 3: just a demand volume story? 189 00:08:34,000 --> 00:08:35,840 Speaker 1: Is that changing how you're going about no. 190 00:08:36,000 --> 00:08:38,120 Speaker 4: I think it's changing our strategy a bit, because I 191 00:08:38,120 --> 00:08:40,320 Speaker 4: mean we need to get involved in the more sensitive 192 00:08:40,360 --> 00:08:43,920 Speaker 4: stuff that NATO is doing in terms of capability to developments. Absolutely, 193 00:08:43,960 --> 00:08:46,760 Speaker 4: we couldn't access that before. Right, Well, thank you so much. 194 00:08:47,040 --> 00:08:49,880 Speaker 3: Michael Johansson, who is the chief executive officer of SAAB 195 00:08:49,960 --> 00:08:52,840 Speaker 3: joining us here at the conference in Brussels for Security 196 00:08:52,880 --> 00:08:55,160 Speaker 3: and Defense within Europe and really putting some sort of 197 00:08:55,280 --> 00:08:58,360 Speaker 3: numbers and the reality around the conversation that's happening not 198 00:08:58,400 --> 00:09:00,360 Speaker 3: too far from here between EU leaders in the next 199 00:09:00,400 --> 00:09:01,200 Speaker 3: couple of days.