Speaker 1: Now. Shares and defense companies rallied on Monday, and European
Speaker 1: bonds slipped on the growing expectation of more military spending
Speaker 1: in Europe and potentially more government borrowing to fund it.
Speaker 1: Joining US now is ASD Secretary General Jan P. The
Speaker 1: ASD is the voice of the European aerospace, security and
Speaker 1: defense industries based in Brussels. Yeah, thank you so much
Speaker 1: for joining us this morning. Your members must be gearing
Speaker 1: up for more defense spending. Do you have any idea
Speaker 1: of how much defense spending we could be seeing?
Speaker 2: Well, it's difficult for me, so first of all, thank
Speaker 2: you for inviting me. It's difficult for me to actually
Speaker 2: point the numbers on how much we would be seeing.
Speaker 2: But we expect the major race in the defense spending
Speaker 2: on the European side. I think what we're looking at
Speaker 2: is to pay the price for the underinvestments indicates if
Speaker 2: the US is pulling out, and obviously this is going
Speaker 2: to be for European industry to ramp up and to
Speaker 2: deliver towards what would be expected from member states to
Speaker 2: be able to continue first of all the support to
Speaker 2: themselves and to continue to support their support to Ukraine.
Speaker 2: I think we are in for a very tough situation.
Speaker 2: But the further you would push that down the line,
Speaker 2: the tougher it would be. And I think at the
Speaker 2: same time, it's evident that we have extremely good examples
Speaker 2: of how quickly European industry can ramp up when we're
Speaker 2: given the orders. We see that on the ammunition side,
Speaker 2: with the Iran metall as an example, gearing up from
Speaker 2: seventy thousand rounds of one fifty five millimeter ammunition to
Speaker 2: one point one million in five years. We see sab
Speaker 2: Net recruiting six three hundred employees in only two years,
Speaker 2: and we see MBDA, and the list could be made long.
Speaker 2: MBDA is making a lot of own investments. So when
Speaker 2: we're getting the orders, the industry is ramping up quickly.
Speaker 2: The problem today is that for the bigger systems, for
Speaker 2: the bigger platforms, we don't get the orders. There's a
Speaker 2: lot of policy making, a very little action on the
Speaker 2: European side.
Speaker 3: President Trump, though, who suggested that you can buy US
Speaker 3: made weapons to give to Ukraine to use for themselves
Speaker 3: as well, are you concerned that there will be pressure
Speaker 3: on Europe to buy American Are you concerned that domestic
Speaker 3: European manufacturers will be bypassed.
Speaker 2: And that's absolutely a major concern. I think there will
Speaker 2: be a huge political pressure for European leaders to place
Speaker 2: the orders there on the US market, and I think
Speaker 2: this is one of the biggest mistakes and failures Europe
Speaker 2: can do. If you want to have a sustainable and
Speaker 2: strong and non dependent European defense industrial base, the only solution,
Speaker 2: the only way to get there is to place the
Speaker 2: investments on the European side. So I think what our
Speaker 2: leaders need to do is to stay firm against that
Speaker 2: and actually invest in the European defense industry.
Speaker 1: When we're looking at investments in the defense industry, are
Speaker 1: you having your eye on whether Europe will agree to
Speaker 1: joint financing for this debt? Is that something as something
Speaker 1: in your view, can make the amount of defense spending
Speaker 1: even larger.
Speaker 2: It's one of those things where it's a bit difficult
Speaker 2: for us to have a view on exactly how things
Speaker 2: should be done when it comes to the scope or
Speaker 2: the size of the spendings that needs to be done.
Speaker 2: It's really a political issue. We try to deliver when
Speaker 2: we get the orders. What we see right now is
Speaker 2: that it seems to be blocking in the system where
Speaker 2: the need is very well identified and the orders are
Speaker 2: still not coming. So indeed there's a huge challenge to
Speaker 2: find the money. What I personally is very concerned about
Speaker 2: is every time I hear that Europe cannot afford to
Speaker 2: build up or ramp up its own defense industrial base
Speaker 2: or defense capabilities in general. I think this is simply,
Speaker 2: if you excuse my language, economy, it's only about priorities.
Speaker 2: Europe has the GDP, it has the economy, it has
Speaker 2: financial strength, but it needs to get it's act together.
Speaker 3: Okay, all right, so it's a strong language on that.
Speaker 3: What do you make then, as you say, Europe knows
Speaker 3: the difficulty. It's a German defense minnester only a few
Speaker 3: months ago talked about Russia's military producing in three months
Speaker 3: what Europe produces in a whole year. How do you
Speaker 3: assess Europe's defense production capacity? Now you've talked about when
Speaker 3: you get the orders you can ramp up. How quickly
Speaker 3: do you think you can really ramp up to a
Speaker 3: level that we you know, potentially needs to deter Russia.
Speaker 2: Well, I think, as said in the beginning, I think,
Speaker 2: first of all, to be very blant and very honest
Speaker 2: this is going to be tough, but I think at
Speaker 2: the same time, European defense industry today as we speak,
Speaker 2: is not challenged at is maximum capacity. Even now. What
Speaker 2: we see is a number of companies that are challenged
Speaker 2: to a hard capacity or high capacity level on certain products,
Speaker 2: but we do have major European players that are not
Speaker 2: even challenged at all. Even the contrary, they could be
Speaker 2: challenged to keep production going at a low rate for
Speaker 2: as long as possible, And an excellent example of that
Speaker 2: is the A four hundred M where we see I
Speaker 2: don't recall the exact numbers, but if I take it
Speaker 2: from my back of my head, roughly some hundred and
Speaker 2: sixty or some one hundred and sixty to one hundred
Speaker 2: and seventy aircraft or something like that has been ordered.
Speaker 2: Three quarters of that has been actually delivered. And now
Speaker 2: maybe with a ten or twelve deliveries per year, there's
Speaker 2: a few more years to go, three or four more
Speaker 2: years to go before before the quarter is filled and
Speaker 2: we don't get new orders. And when the last aircraft
Speaker 2: has been delivered, if Europe then realizes we need more
Speaker 2: four one hundred a four hundred M and the last
Speaker 2: aircraft has already been delivered. The supply chain has been dissolved,
Speaker 2: you lose the capability, so we won't be able to
Speaker 2: ramp up correctly. So my point being that as we speak,
Speaker 2: there are so many companies that are not being challenged
Speaker 2: to their maximum capacity, so it's simple important to have
Speaker 2: that part of the picture as well.
Speaker 1: Are your members focused on making more interoperable weapons across
Speaker 1: Europe or is manufacturing for these products still siloed?
Speaker 2: It is unfortunately siloed to a very large extent. It
Speaker 2: is not what our members want. What we ask for
Speaker 2: on the industry side is harmonization of the military requirements.
Speaker 2: We ask for consolidation. On the demand side, we ask
Speaker 2: for much large, larger procurements. But the consolidation really needs
Speaker 2: to come on the demand side. As long as every
Speaker 2: nation is playing on their own ground, if I may
Speaker 2: say so, dealing with the detailed requirements that the other
Speaker 2: the neighboring nation didn't have, what they don't align budgetary processes,
Speaker 2: et cetera, et cetera. As long as that is the situation,
Speaker 2: we will have a fragmented industry as well. Industry wants
Speaker 2: the consolidation, so get that right, because if we don't
Speaker 2: get it. We believe that we will have a very
Speaker 2: tough being a competitive in the long run.
Speaker 3: Yeah, I mean, and potentially Europe looks to be fragmenting
Speaker 3: already in terms of a core number of countries gathering
Speaker 3: in Paris, and the proposals may be put to a
Speaker 3: wider group in March. But you know, it's that core
Speaker 3: kind of capability that gathered with Immanuel Macon yesterday, including
Speaker 3: I should say the UK. Britain has had a really
Speaker 3: disastrous run in terms of large purchases and in terms
Speaker 3: of acquisition of military hardware. The Public Accounts Committee and
Speaker 3: Defense Committee have called defense procurement in the UK broken
Speaker 3: in twenty twenty three. They call for root and branch
Speaker 3: reform to break a cycle of costly delay and failure.
Speaker 3: Britain supposedly wants to be sort of at the forefront
Speaker 3: of a defense in Europe, maybe even sending troops to Ukraine.
Speaker 3: Is that credible. As far as the industry that you
Speaker 3: lead as concerned that the UK could ramp up enough.
Speaker 2: Well, you know, from our perspective, a UK is a
Speaker 2: very appreciated member of AD and I think roughly the
Speaker 2: UK industry is behind some one third of the middle
Speaker 2: of the industrial defense industry capabilities in Europe as a whole.
Speaker 2: So to us, the UK is an extremely important component.
Speaker 2: It has knowledges, it has skills, it has competency, it
Speaker 2: has technologies that we desperately need on the EU side.
Speaker 2: If iMac so then and vice versa. So the interlinqual
Speaker 2: we think, I know Brexit was a fact and it
Speaker 2: is what it is. We have to live with it.
Speaker 2: We think Brexit was wrong from the very first day
Speaker 2: day and also the our UK members had that feeling
Speaker 2: and our a SD members in the rest of the
Speaker 2: organization had the same feeling. It is what it is.
Speaker 2: We have to live with it. But it doesn't change
Speaker 2: the fact that that UK is part of Europe and
Speaker 2: the industrial corporation across the channel is very strong.
Speaker 3: Terms of a timeline, you know, some parts of Europe
Speaker 3: are it would seem perhaps more on a war footing.
Speaker 3: Obviously Ukraine deeply in conflict for three years. How quickly
Speaker 3: do you think things are going to move in terms
Speaker 3: of the industry expectations now for actual spending. This is
Speaker 3: what the Trump administration is talking about all the time. Action,
Speaker 3: less talk, more action. When do you think the action
Speaker 3: or more spending might actually come through to your mind.
Speaker 2: Well, that is again it's it's a very tricky question
Speaker 2: because it's a political decision making that we're looking for.
Speaker 2: If you, if you, if I take it from my
Speaker 2: perspective and say what would we want to see, we'd
Speaker 2: say that we're already too late, too slow, too little.
Speaker 2: All the orders that would be placed in order to
Speaker 2: have a European defense industrial base that is ready to
Speaker 2: sustain are the members military capabilities if Europe would be
Speaker 2: in a large scale conflict with Russia. Those orders should
Speaker 2: have been placed five years ago, not tomorrow, and still
Speaker 2: we don't see them in place as we speak. We
Speaker 2: see it Frome's we see ammunition, but we see a
Speaker 2: lot of For example, on battle tanks, we only see
Speaker 2: orders to replace those battle tanks that has been sent
Speaker 2: to Ukraine. We don't see orders to increase the stocks
Speaker 2: of battle tanks in Europe. So, from from my perspective,
Speaker 2: what we see is far too slow. The political leadership
Speaker 2: seems to know what to do, but do not dare
Speaker 2: to do it or do not find the finances to
Speaker 2: do it. So it is extremely will it change expectations
Speaker 2: on our side? Is hopefully yes. Of course. This is
Speaker 2: really what we want to see, is that there would
Speaker 2: be a major shift in going from policy making to action,
Speaker 2: and in that perspective, I think mister Trump is absolutely right.
Speaker 3: Okay, yeah, and Pet, thank you so much for your
Speaker 3: time with us this morning. We really appreciate the front conversation.