1 00:00:02,920 --> 00:00:06,640 Speaker 1: Bloomberg Audio Studios, podcasts. 2 00:00:06,200 --> 00:00:07,280 Speaker 2: Radio news. 3 00:00:07,640 --> 00:00:10,560 Speaker 1: That defense industry framework now coming in just days as 4 00:00:10,600 --> 00:00:12,920 Speaker 1: Sweden is about to join NATO, so we thought who 5 00:00:12,960 --> 00:00:15,000 Speaker 1: better to speak to than one of the biggest defense 6 00:00:15,040 --> 00:00:18,160 Speaker 1: companies in Sweden, SAB. They just as a reminder to everybody, 7 00:00:18,200 --> 00:00:21,920 Speaker 1: they make submarines, they make ships, they make missiles, torpedoes, 8 00:00:22,120 --> 00:00:24,759 Speaker 1: they make surveillance equipment and of course those Grippin jets 9 00:00:24,920 --> 00:00:27,440 Speaker 1: that were so key to Sweden joining NATO. So we're 10 00:00:27,480 --> 00:00:31,440 Speaker 1: joined now by the CEO, Michael Johansen, the CEO of SAB, 11 00:00:31,520 --> 00:00:33,520 Speaker 1: joining us here from Stockholm. 12 00:00:33,520 --> 00:00:34,440 Speaker 2: Michael, I'd like to just. 13 00:00:34,400 --> 00:00:36,760 Speaker 1: Start by for you to just sort of quantify for 14 00:00:36,840 --> 00:00:39,600 Speaker 1: us what's happening here in historic terms for SAAB, in 15 00:00:39,680 --> 00:00:42,720 Speaker 1: terms of demand, you have huge amount of NATO wanting 16 00:00:42,720 --> 00:00:44,760 Speaker 1: to hit it. Sorry, it's a huge amount of military spending. 17 00:00:45,120 --> 00:00:48,040 Speaker 1: Quantify for us the demand that SAB is seeing and specifically, 18 00:00:48,159 --> 00:00:50,000 Speaker 1: where are you seeing the demand in all of the 19 00:00:50,040 --> 00:00:51,080 Speaker 1: hardware that you offer? 20 00:00:51,479 --> 00:00:55,120 Speaker 3: Well, good morning, Yeah, absolutely, it's been a huge wake 21 00:00:55,240 --> 00:00:58,480 Speaker 3: up call for many countries and in Europe since the 22 00:00:58,520 --> 00:01:00,440 Speaker 3: tragic war started in your and of. 23 00:01:00,360 --> 00:01:03,040 Speaker 2: Course, so the two last years are. 24 00:01:02,920 --> 00:01:06,880 Speaker 3: Being completely different and earlier in terms of capacity need 25 00:01:07,560 --> 00:01:10,679 Speaker 3: and the investments that we're doing to increase capacity, and 26 00:01:10,760 --> 00:01:18,000 Speaker 3: it starts with weapons systems, ammunition, surveillance equipment to create 27 00:01:18,080 --> 00:01:22,120 Speaker 3: situation awareness. So that part of our business has been 28 00:01:22,800 --> 00:01:25,880 Speaker 3: booming the last two years in terms of growth, and 29 00:01:25,920 --> 00:01:29,160 Speaker 3: the whole company did grow twenty three percent last year, 30 00:01:29,240 --> 00:01:33,360 Speaker 3: so it's been much about capacity increases. Unfortunately, we started 31 00:01:33,360 --> 00:01:36,399 Speaker 3: that investment before the war actually started, because it's a 32 00:01:36,440 --> 00:01:39,919 Speaker 3: market trend in growing that part. So we've doubled once 33 00:01:40,360 --> 00:01:42,880 Speaker 3: and we're doubling again. So next year we will have 34 00:01:43,040 --> 00:01:47,480 Speaker 3: quadruple the output on the support weapon side and ammunition side. 35 00:01:47,840 --> 00:01:49,640 Speaker 2: So lots of things are happening right now. 36 00:01:49,960 --> 00:01:51,880 Speaker 1: Yeah, and I thinking here from what we heard from 37 00:01:51,960 --> 00:01:55,520 Speaker 1: Vessier and the other commissioners yesterday from Brussels in terms 38 00:01:55,520 --> 00:01:58,080 Speaker 1: of the new defense strategy, what did you make of 39 00:01:58,080 --> 00:01:59,720 Speaker 1: what we heard and do you think that it's right 40 00:01:59,800 --> 00:02:02,600 Speaker 1: sort of centralize more of this activity in Brussels. 41 00:02:02,960 --> 00:02:06,840 Speaker 3: I welcome sort of incentives and initiatives which are incentive 42 00:02:06,880 --> 00:02:11,639 Speaker 3: drivens to the line requirements to make countries collaborate and 43 00:02:12,080 --> 00:02:16,519 Speaker 3: by that also industries to boost capacity. And what EU 44 00:02:16,720 --> 00:02:19,880 Speaker 3: has is of course a financial strength to do that. 45 00:02:20,080 --> 00:02:23,720 Speaker 3: So if you put enough money into an EDEP fund 46 00:02:23,840 --> 00:02:27,560 Speaker 3: like that and you have a view of creating more 47 00:02:27,680 --> 00:02:31,320 Speaker 3: sovereign capacity in Europe, I really welcome that and I 48 00:02:31,320 --> 00:02:35,080 Speaker 3: think that will drive less fragmentation going forward. 49 00:02:35,639 --> 00:02:39,160 Speaker 4: Michael, good morning, it's guy in London. I'm Donald Trump 50 00:02:39,720 --> 00:02:42,720 Speaker 4: one Super Tuesday. Convincingly last night it looks like he's 51 00:02:42,720 --> 00:02:45,519 Speaker 4: going to be the Republican candidate in the US election 52 00:02:45,680 --> 00:02:49,360 Speaker 4: that is upcoming in November. Were he to return to 53 00:02:49,440 --> 00:02:52,720 Speaker 4: the White House, how much more do you think Europe 54 00:02:52,720 --> 00:02:55,400 Speaker 4: would need to do in terms of a defense spending 55 00:02:55,560 --> 00:03:00,440 Speaker 4: and be sourcing that defense spending from home from domestic sources. 56 00:03:00,480 --> 00:03:03,280 Speaker 4: Do you think there will be a refocusing, a greater 57 00:03:03,400 --> 00:03:05,200 Speaker 4: refocusing on domestic sources. 58 00:03:05,720 --> 00:03:09,040 Speaker 3: Absolutely, And I see that trend already that we have 59 00:03:09,200 --> 00:03:12,239 Speaker 3: sort of walken up to realize that maybe the dependency 60 00:03:12,800 --> 00:03:15,800 Speaker 3: on the US is much too big. I'm not saying 61 00:03:15,800 --> 00:03:18,320 Speaker 3: that the transit DAN to click is not important. It 62 00:03:18,360 --> 00:03:22,400 Speaker 3: is really important, but the sort of the balance is 63 00:03:22,440 --> 00:03:25,120 Speaker 3: wrong today. I mean, we had a year with spending 64 00:03:25,240 --> 00:03:27,720 Speaker 3: from me, which is seven to eight percent of all 65 00:03:27,800 --> 00:03:32,000 Speaker 3: the defense spendings went outside in you the majority of 66 00:03:32,000 --> 00:03:35,440 Speaker 3: that eighty percent to the US, thirty percent to Korea 67 00:03:35,880 --> 00:03:38,640 Speaker 3: and a few percent to Israel. So of course we 68 00:03:38,760 --> 00:03:40,600 Speaker 3: have to change that sort of balance. 69 00:03:40,760 --> 00:03:42,440 Speaker 2: It should be the opposite. 70 00:03:42,480 --> 00:03:45,040 Speaker 3: It should be sort of seventy percent sol the capacity 71 00:03:45,120 --> 00:03:49,560 Speaker 3: in Europe and maybe thirty percent sort of external provisioning 72 00:03:49,640 --> 00:03:51,280 Speaker 3: of defense capabilities. 73 00:03:51,360 --> 00:03:52,480 Speaker 2: But that will take time. 74 00:03:53,200 --> 00:03:56,400 Speaker 3: But I think this European defense industry strategy is sort 75 00:03:56,440 --> 00:03:59,840 Speaker 3: of putting that in that direction now, so I welcome 76 00:03:59,880 --> 00:04:02,320 Speaker 3: that as well. I think that's absolutely necessary. 77 00:04:02,600 --> 00:04:06,560 Speaker 4: Michael, how durable do you think this new attitude towards 78 00:04:06,560 --> 00:04:09,520 Speaker 4: the FED spending will be If we were to see 79 00:04:09,640 --> 00:04:13,120 Speaker 4: peace in Ukraine, if that conflict were to end, do 80 00:04:13,160 --> 00:04:15,240 Speaker 4: you think there would be an expected peace dividend to 81 00:04:15,280 --> 00:04:17,920 Speaker 4: come from that, or do you think that this new 82 00:04:17,920 --> 00:04:20,599 Speaker 4: thinking is stickier than that, that it will be more durable, 83 00:04:20,600 --> 00:04:23,080 Speaker 4: that the Russian threat will be seen as a longer 84 00:04:23,160 --> 00:04:25,039 Speaker 4: term threat to Europe. 85 00:04:25,400 --> 00:04:26,880 Speaker 2: Well, I think it will be durable. 86 00:04:26,920 --> 00:04:31,279 Speaker 3: I mean only looking at the projections from independent sources 87 00:04:31,320 --> 00:04:34,400 Speaker 3: on the defense spending over the next decade from European 88 00:04:34,440 --> 00:04:39,640 Speaker 3: countries that increase by five hundred billion US dollars from 89 00:04:40,240 --> 00:04:43,640 Speaker 3: January twenty three to January twenty four. In terms of 90 00:04:43,680 --> 00:04:46,839 Speaker 3: projection in the next decade, I have a hard time 91 00:04:46,880 --> 00:04:50,520 Speaker 3: seeing that if we hopefully get win the war in 92 00:04:50,680 --> 00:04:52,160 Speaker 3: Ukraine and there. 93 00:04:52,040 --> 00:04:54,680 Speaker 2: Would get peace, to your sort of let the. 94 00:04:54,600 --> 00:04:58,080 Speaker 3: Goard down again and hope that nothing would happen having 95 00:04:58,360 --> 00:05:01,760 Speaker 3: Russia as a neighbor for decades to be not trusted. 96 00:05:02,000 --> 00:05:03,240 Speaker 2: I don't think that's possible. 97 00:05:03,560 --> 00:05:06,320 Speaker 3: So I think this is a long term trend that 98 00:05:06,360 --> 00:05:10,640 Speaker 3: we need to increase our deterrence or stock piles or 99 00:05:10,760 --> 00:05:12,040 Speaker 3: capabilities in Europe. 100 00:05:12,640 --> 00:05:13,360 Speaker 2: That's my view. 101 00:05:14,240 --> 00:05:16,200 Speaker 1: And in terms of strategic dependence we talked about the 102 00:05:16,279 --> 00:05:18,880 Speaker 1: United States, is it more difficult now just given the 103 00:05:18,920 --> 00:05:21,839 Speaker 1: concern about sort of the military industry about who you 104 00:05:21,920 --> 00:05:23,719 Speaker 1: do business with. And I'd also like to get a 105 00:05:23,760 --> 00:05:26,000 Speaker 1: sense for you, because you really have a good understanding 106 00:05:26,000 --> 00:05:29,599 Speaker 1: of this is how dependent is the European defense industry 107 00:05:29,680 --> 00:05:32,560 Speaker 1: broadly speaking on its materials, on its supply chain, and 108 00:05:32,600 --> 00:05:34,119 Speaker 1: specifically I'm thinking about China. 109 00:05:34,640 --> 00:05:38,920 Speaker 3: Well, I think we need to do more on the ecosystem. 110 00:05:39,000 --> 00:05:44,080 Speaker 3: On the supply chain part, I think we are going 111 00:05:44,120 --> 00:05:47,320 Speaker 3: in the direction of regionalizing that so we have resilient 112 00:05:47,360 --> 00:05:48,239 Speaker 3: supply chains. 113 00:05:48,640 --> 00:05:51,760 Speaker 2: I don't see a huge dependence. 114 00:05:51,120 --> 00:05:55,200 Speaker 3: On China when it comes to our defense capabilities or 115 00:05:55,240 --> 00:05:59,679 Speaker 3: defense technologies actually, but there are sort of of course 116 00:05:59,720 --> 00:06:02,520 Speaker 3: through aliens to be created. So that's a big movement 117 00:06:02,680 --> 00:06:06,000 Speaker 3: in every company to make sure that we have much 118 00:06:06,040 --> 00:06:09,479 Speaker 3: more resilient supply change than we have before the war, 119 00:06:09,880 --> 00:06:14,920 Speaker 3: not only because Ukraine, but also the effect on transport 120 00:06:15,240 --> 00:06:19,640 Speaker 3: channels and what happens if you I mean also the 121 00:06:19,720 --> 00:06:23,000 Speaker 3: pandemic started at the initiatives to make it supply changes 122 00:06:23,680 --> 00:06:26,520 Speaker 3: more resilience going forward. But I don't see a big 123 00:06:26,560 --> 00:06:28,839 Speaker 3: dependence on China in this area. 124 00:06:28,880 --> 00:06:31,279 Speaker 1: And I think obviously the war in Ukraine has taught 125 00:06:31,360 --> 00:06:33,520 Speaker 1: a lot of people a lot of things versus the 126 00:06:33,560 --> 00:06:35,919 Speaker 1: expectation of what war looks like and the reality of 127 00:06:35,960 --> 00:06:39,039 Speaker 1: what war looks like. One of the really great disruptors 128 00:06:39,080 --> 00:06:41,320 Speaker 1: I think of the defense industry and how war is 129 00:06:41,360 --> 00:06:44,359 Speaker 1: waged are drones. And I'm concerned I'd like to know 130 00:06:44,440 --> 00:06:46,839 Speaker 1: from you, how are you dealing with drones in terms 131 00:06:46,880 --> 00:06:49,520 Speaker 1: of dealing with detecting drones. You obviously make also very 132 00:06:49,560 --> 00:06:53,520 Speaker 1: expensive hardware that can be potentially knocked out by something 133 00:06:53,520 --> 00:06:55,840 Speaker 1: that is very inexpensive at high volume. How are you 134 00:06:55,920 --> 00:06:57,200 Speaker 1: dealing with the threat of drones. 135 00:06:57,480 --> 00:07:00,600 Speaker 3: I think many companies, including ours, are working to have 136 00:07:00,800 --> 00:07:05,560 Speaker 3: counter uas unmanned air system sort of with sort of 137 00:07:05,680 --> 00:07:09,600 Speaker 3: efficient measures to do. We have lots of sensor equipment 138 00:07:09,640 --> 00:07:14,160 Speaker 3: to detect drones in all domains, but the defector part 139 00:07:14,360 --> 00:07:19,200 Speaker 3: and the mobility of things is the important factor, and 140 00:07:19,440 --> 00:07:21,520 Speaker 3: there are solutions absolutely to this. 141 00:07:21,800 --> 00:07:22,720 Speaker 2: But there are more. 142 00:07:22,680 --> 00:07:24,880 Speaker 3: To come, I think in this area, because drones will 143 00:07:24,880 --> 00:07:27,480 Speaker 3: be there in the future and they will be integrated 144 00:07:27,520 --> 00:07:30,080 Speaker 3: with more sophisticated systems as well and be used in 145 00:07:30,120 --> 00:07:34,560 Speaker 3: the battlefield. So you're right, I mean counter US it's 146 00:07:34,680 --> 00:07:36,720 Speaker 3: a very very important area going forward. 147 00:07:36,920 --> 00:07:39,640 Speaker 4: Michael, let's get from the fighting to the financing. Do 148 00:07:39,680 --> 00:07:43,960 Speaker 4: you think Europe should jointly finance its defense spending? Do 149 00:07:44,000 --> 00:07:45,640 Speaker 4: you think we can see something similar to what we 150 00:07:45,640 --> 00:07:47,680 Speaker 4: saw in the pandemic. Do you think there should be 151 00:07:47,680 --> 00:07:50,600 Speaker 4: common bonds issued in order to make sure that this 152 00:07:50,680 --> 00:07:52,240 Speaker 4: ramp up is ultimately delivered. 153 00:07:52,560 --> 00:07:56,960 Speaker 3: I think it's important that the defense industry have the same. 154 00:07:56,680 --> 00:08:01,080 Speaker 2: Sort of possibilities to attract cat or as any other 155 00:08:01,160 --> 00:08:01,960 Speaker 2: type of business. 156 00:08:02,000 --> 00:08:04,520 Speaker 3: So what I would welcome is of course that the 157 00:08:04,600 --> 00:08:09,840 Speaker 3: big funds is also investing in defense industries and a 158 00:08:09,920 --> 00:08:12,920 Speaker 3: big signal would of course be if the European Investment 159 00:08:13,000 --> 00:08:16,520 Speaker 3: Bank would change their policy in terms of not only 160 00:08:16,560 --> 00:08:20,920 Speaker 3: investing in dual use technology but also in defense technology technology. 161 00:08:21,000 --> 00:08:24,800 Speaker 3: That would send the big signals to the large funds 162 00:08:25,120 --> 00:08:27,760 Speaker 3: to also put the capital into the defense industry. 163 00:08:27,760 --> 00:08:28,400 Speaker 2: I would like that. 164 00:08:28,640 --> 00:08:32,040 Speaker 4: Do you think this RISKS represents something similar akin to 165 00:08:32,360 --> 00:08:35,360 Speaker 4: we should think of it like what is happening with climates? 166 00:08:36,440 --> 00:08:39,880 Speaker 4: Europe has become very good at thinking cross border when 167 00:08:39,920 --> 00:08:42,719 Speaker 4: it comes to the climate story. What lessons do you 168 00:08:42,760 --> 00:08:44,680 Speaker 4: think they need to be learned from that? In terms 169 00:08:44,720 --> 00:08:47,240 Speaker 4: of thinking about how we deal with the new defense threats. 170 00:08:47,520 --> 00:08:50,520 Speaker 4: We're in a different era, a different post Cold War era. 171 00:08:50,960 --> 00:08:52,600 Speaker 4: What do you think we need to be doing differently 172 00:08:52,640 --> 00:08:54,439 Speaker 4: in terms of the way that we think about Europe 173 00:08:54,800 --> 00:08:57,920 Speaker 4: and its defense industry and how it is ultimately financed. 174 00:08:58,320 --> 00:08:58,480 Speaker 2: Well. 175 00:08:58,520 --> 00:09:00,280 Speaker 3: I think then we have to realize that this is 176 00:09:00,320 --> 00:09:03,360 Speaker 3: a paradigm shift. I mean, we come from a peace 177 00:09:03,400 --> 00:09:05,800 Speaker 3: perspective of things, and we have lots to do to 178 00:09:05,840 --> 00:09:10,520 Speaker 3: increase the torrens, inciliens and stock files. I think the 179 00:09:10,559 --> 00:09:15,079 Speaker 3: incentives that are being placed now by Europeen Commission are 180 00:09:15,120 --> 00:09:18,080 Speaker 3: absolutely right. I mean, we're not the United States of Europe. 181 00:09:18,080 --> 00:09:21,199 Speaker 3: There's a national sovereignty when it comes to defense and security, 182 00:09:21,760 --> 00:09:24,280 Speaker 3: and it has to be a balance. But if countries 183 00:09:24,360 --> 00:09:27,800 Speaker 3: can come together to line requirements and there are some 184 00:09:27,880 --> 00:09:31,160 Speaker 3: money available to support that from all the Members states 185 00:09:31,200 --> 00:09:35,320 Speaker 3: into this EDIP fund, of course that will drive alignment. 186 00:09:35,720 --> 00:09:39,440 Speaker 3: It will drive us possibly also consolidation in Europe going forward, 187 00:09:39,720 --> 00:09:40,800 Speaker 3: and that's the way we should go. 188 00:09:40,920 --> 00:09:43,319 Speaker 2: I think that's. 189 00:09:43,120 --> 00:09:46,679 Speaker 3: The These are the right initiatives, surely. 190 00:09:46,840 --> 00:09:48,600 Speaker 4: Michael, great to see you. Thank you for joining us. 191 00:09:48,640 --> 00:09:52,320 Speaker 4: Really useful conversation. Michie Johansen, the CEO of SAP, and 192 00:09:52,400 --> 00:09:56,040 Speaker 4: of course our thanks to Oli Kruk joining us from Brussels.