WEBVTT - Saab CEO Micael Johansson Talks Defense Spending

0:00:02.440 --> 0:00:08.119
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Now, let's turn to

0:00:08.320 --> 0:00:12.319
<v Speaker 1>earnings this morning the air the defense Swedish arrow and

0:00:12.360 --> 0:00:15.440
<v Speaker 1>defense company SAB had hit a fresh record this morning

0:00:15.480 --> 0:00:18.760
<v Speaker 1>a touch off of that after reporting earnings. Joining us

0:00:18.800 --> 0:00:23.480
<v Speaker 1>now is the CEO Michael Johansen. Michael, thanks for joining

0:00:23.520 --> 0:00:25.439
<v Speaker 1>us this morning. I do want to get to your earnings,

0:00:25.440 --> 0:00:28.240
<v Speaker 1>but I have to start with this it outage. Considering

0:00:28.240 --> 0:00:30.960
<v Speaker 1>it has to do with cybersecurity software and as a

0:00:31.000 --> 0:00:34.280
<v Speaker 1>defense company, obviously, this is something you're acutely aware of

0:00:34.320 --> 0:00:36.639
<v Speaker 1>and keeping track of. I just want to start this.

0:00:36.680 --> 0:00:38.800
<v Speaker 1>Is it impacting your systems at all? This morning?

0:00:40.000 --> 0:00:42.440
<v Speaker 2>We're looking into it, but so far we haven't seen

0:00:42.479 --> 0:00:45.800
<v Speaker 2>an effect all. But of course we take this seriously

0:00:46.040 --> 0:00:48.920
<v Speaker 2>and we are continuously monitoring. But I don't have any

0:00:48.960 --> 0:00:51.599
<v Speaker 2>datas I haven't seen anything that has affected us yet.

0:00:52.120 --> 0:00:54.480
<v Speaker 1>How do you think about this moment in terms of

0:00:54.480 --> 0:00:59.840
<v Speaker 1>the vulnerability of industries? Cybersecurity Networks obviously is a defense company.

0:01:00.000 --> 0:01:02.200
<v Speaker 1>This is very important to you to build the type

0:01:02.200 --> 0:01:05.720
<v Speaker 1>of industry that so many countries need. Is does this

0:01:05.760 --> 0:01:08.520
<v Speaker 1>show some underlying fragility an issue with the supply chain?

0:01:10.200 --> 0:01:13.800
<v Speaker 2>Well, of course, I mean and we need to continue

0:01:13.840 --> 0:01:17.000
<v Speaker 2>to work on this sort of zero trust approach of things,

0:01:17.560 --> 0:01:20.840
<v Speaker 2>which is more about how you protect your information all

0:01:20.880 --> 0:01:25.120
<v Speaker 2>the time and how data centric you become, rather than

0:01:25.200 --> 0:01:28.080
<v Speaker 2>to protect the fourth of information, so to say. And

0:01:28.160 --> 0:01:31.119
<v Speaker 2>this we discussed during the summit in DC last week

0:01:31.240 --> 0:01:35.800
<v Speaker 2>and there are solutions going in that directions. So you

0:01:35.920 --> 0:01:38.160
<v Speaker 2>have to be to be able to interact at the

0:01:38.160 --> 0:01:42.320
<v Speaker 2>same times going into a cloud sort of based information

0:01:43.880 --> 0:01:47.360
<v Speaker 2>set up, you have to work on the serriu trust approach,

0:01:47.400 --> 0:01:50.120
<v Speaker 2>which I think there are many companies going in that direction,

0:01:50.280 --> 0:01:53.480
<v Speaker 2>but this is something we take really seriously in working

0:01:53.520 --> 0:01:57.360
<v Speaker 2>diligently upon. So it's an important area going forward. But

0:01:57.520 --> 0:01:59.960
<v Speaker 2>without the seru trust approach, I think it will be difficult.

0:02:00.360 --> 0:02:02.280
<v Speaker 1>Is there a concentration risk the fact that this is

0:02:02.320 --> 0:02:06.400
<v Speaker 1>all stemming just from one company, I.

0:02:06.280 --> 0:02:09.480
<v Speaker 2>Think so far. I think it's more about the architecture

0:02:09.520 --> 0:02:12.280
<v Speaker 2>and how the service based approach will look like. To

0:02:12.320 --> 0:02:15.120
<v Speaker 2>be agnostic, you have to be able to work with

0:02:15.200 --> 0:02:18.320
<v Speaker 2>several different suppliers, of course, and you have to certify

0:02:18.360 --> 0:02:20.640
<v Speaker 2>them and they have to prove that they are as

0:02:20.960 --> 0:02:26.320
<v Speaker 2>certified and reassured as we are on our system. So

0:02:26.600 --> 0:02:29.560
<v Speaker 2>we haven't selected anyone yet. We're looking into this, so

0:02:29.600 --> 0:02:31.120
<v Speaker 2>we will see what happens going forward.

0:02:31.440 --> 0:02:33.960
<v Speaker 1>Michael, Obviously, if this kind of happened this morning, we

0:02:34.240 --> 0:02:36.920
<v Speaker 1>would have started by talking about your earnings. Let's go

0:02:36.960 --> 0:02:39.560
<v Speaker 1>there next, because you did have a very high order book.

0:02:39.760 --> 0:02:42.680
<v Speaker 1>And I wonder where you see us in the defense

0:02:43.040 --> 0:02:45.679
<v Speaker 1>spending cycle. Is it a moment that's about to ramp

0:02:45.760 --> 0:02:47.720
<v Speaker 1>up or are we somewhere near a peak.

0:02:49.160 --> 0:02:50.800
<v Speaker 2>I don't think we near a peak at all. I

0:02:50.840 --> 0:02:54.639
<v Speaker 2>think we're looking at the growth in the next coming

0:02:54.720 --> 0:02:57.920
<v Speaker 2>ten years. Look at the that the need for the

0:02:57.960 --> 0:03:01.880
<v Speaker 2>support to Ukraine, but also the replenishment of stock and

0:03:01.919 --> 0:03:05.600
<v Speaker 2>capabilities in the European countries which are now spending more

0:03:05.639 --> 0:03:09.240
<v Speaker 2>and more on defense and also increasing capabilities at the

0:03:09.240 --> 0:03:12.400
<v Speaker 2>same time. So there will be I think lots of

0:03:12.400 --> 0:03:15.880
<v Speaker 2>growth going forward. And we have just started the last

0:03:15.919 --> 0:03:19.040
<v Speaker 2>two years just to take these steps, and I'm afraid

0:03:19.040 --> 0:03:21.760
<v Speaker 2>we're not doing enough. I think there will be has

0:03:21.800 --> 0:03:23.760
<v Speaker 2>to be more, has to be done. So this is

0:03:23.760 --> 0:03:26.600
<v Speaker 2>more like a paradigm shift than anything else.

0:03:27.200 --> 0:03:30.239
<v Speaker 1>You know. The Sweden's defense minister only a few months

0:03:30.280 --> 0:03:32.440
<v Speaker 1>ago said this that this is a challenge that's being

0:03:32.440 --> 0:03:34.520
<v Speaker 1>felt across Europe right now, and in terms of the

0:03:34.600 --> 0:03:36.880
<v Speaker 1>lack of defense capability, is that we have a defense

0:03:36.960 --> 0:03:41.840
<v Speaker 1>industry base shaped for a peace time situation. So what's

0:03:41.880 --> 0:03:44.920
<v Speaker 1>necessary to change what needs to happen to get things

0:03:44.960 --> 0:03:46.960
<v Speaker 1>in the right place when there is a heart warrant

0:03:47.000 --> 0:03:48.120
<v Speaker 1>euroup happening right now?

0:03:49.640 --> 0:03:52.720
<v Speaker 2>Well, we as industries are investing a lot as we speak,

0:03:52.760 --> 0:03:56.080
<v Speaker 2>of course, but these things that's long term commitments over

0:03:56.200 --> 0:04:01.160
<v Speaker 2>sort of mandate periods for politicians or important to take

0:04:01.200 --> 0:04:04.280
<v Speaker 2>the really big steps, to really be big, build the

0:04:04.320 --> 0:04:08.680
<v Speaker 2>new facilities, to invest in automation, to take the big investments.

0:04:08.720 --> 0:04:12.920
<v Speaker 2>Were getting there, But I would say that to realize

0:04:12.960 --> 0:04:16.880
<v Speaker 2>that this is really a paradigm shift rather than incrementally

0:04:16.920 --> 0:04:21.359
<v Speaker 2>taking small steps, which is difficult for industry to refer to,

0:04:21.520 --> 0:04:24.560
<v Speaker 2>to relate to when you take big investments decisions is

0:04:24.600 --> 0:04:28.480
<v Speaker 2>probably the most important thing. Then of course, if EU,

0:04:28.600 --> 0:04:32.640
<v Speaker 2>for example, takes a big decision together put lots of

0:04:32.720 --> 0:04:38.359
<v Speaker 2>money in initiatives like the European Defense Industrial Program that

0:04:38.760 --> 0:04:42.480
<v Speaker 2>has been discussed, like we did when the pandemic hit us,

0:04:43.040 --> 0:04:45.359
<v Speaker 2>then of course, if we put a lot of money there,

0:04:45.800 --> 0:04:50.200
<v Speaker 2>then the collaboration and big programs and alignment or requirements

0:04:50.240 --> 0:04:54.560
<v Speaker 2>will happen, but these things must be implemented to make

0:04:54.800 --> 0:04:58.680
<v Speaker 2>sort of taking the big steps, but long term commitments

0:04:58.920 --> 0:05:04.000
<v Speaker 2>is important to us from governments while we are taking

0:05:04.080 --> 0:05:05.839
<v Speaker 2>risks as industry and investing.

0:05:06.200 --> 0:05:09.520
<v Speaker 1>I mean, there's certainly more prospects for disruption, and one

0:05:09.560 --> 0:05:12.400
<v Speaker 1>of them might come from the US, not just European

0:05:12.440 --> 0:05:15.839
<v Speaker 1>hot wars, but of the growing likelihood of a second

0:05:15.960 --> 0:05:18.960
<v Speaker 1>term for former President Trump and the language that him

0:05:19.000 --> 0:05:21.400
<v Speaker 1>and his vice president have been using are certainly more

0:05:21.440 --> 0:05:25.520
<v Speaker 1>isolationist of not necessarily being willing, for example, to help Ukraine.

0:05:25.880 --> 0:05:28.359
<v Speaker 1>If the US does drop out as a supporter of

0:05:28.440 --> 0:05:32.760
<v Speaker 1>Ukraine and supplying weapons, the supplying defense systems, is Europe

0:05:32.760 --> 0:05:33.880
<v Speaker 1>ready to pick up the slack?

0:05:36.480 --> 0:05:38.599
<v Speaker 2>I would say that your passed to that's the most

0:05:38.600 --> 0:05:42.320
<v Speaker 2>important thing that your has to realize that they have

0:05:42.400 --> 0:05:45.440
<v Speaker 2>to take a bigger responsibility going forward to invest more

0:05:45.480 --> 0:05:48.600
<v Speaker 2>money into this. And I saw the summit last week.

0:05:48.640 --> 0:05:51.640
<v Speaker 2>I attended it myself to see that so many countries

0:05:51.640 --> 0:05:55.080
<v Speaker 2>now within the Alliance and now seeing two percents of flaw,

0:05:55.480 --> 0:05:57.960
<v Speaker 2>and many are going further than that. And the support

0:05:58.000 --> 0:06:00.920
<v Speaker 2>of Ukraine with a forty billion US dollar support going

0:06:00.960 --> 0:06:04.640
<v Speaker 2>forward the next year and the coordination from NATO now

0:06:04.760 --> 0:06:09.520
<v Speaker 2>supporting Ukraine. I think that's great initiatives. Meanwhile, I mean

0:06:09.760 --> 0:06:13.440
<v Speaker 2>Europe continue to step up, do it more quickly, and

0:06:13.480 --> 0:06:16.000
<v Speaker 2>we have to sort of work with that independently of

0:06:16.080 --> 0:06:19.760
<v Speaker 2>administration in the US and the transatlantic link is really important.

0:06:20.200 --> 0:06:23.480
<v Speaker 2>But we have to have to be more sovereign as

0:06:23.520 --> 0:06:26.039
<v Speaker 2>European continent when it comes to the defense in the

0:06:26.120 --> 0:06:27.440
<v Speaker 2>terrens and resilience.

0:06:28.000 --> 0:06:30.320
<v Speaker 1>Okay, Michael, thank you so much for joining us this morning.

0:06:30.360 --> 0:06:32.960
<v Speaker 1>We appreciate Michael Johansen, SAB Group CEO