What will the alliance between Leonardo and Rheinmetall on tanks be like?
According to Il Sole 24 Ore, the Leonardo group is negotiating with the German Rheinmetall to start an alliance on tanks for the Army, with the aim of 20 billion euros of orders in 10 years. Facts, numbers and scenarios
New partner, also German, for Leonardo in the field of land armaments.
The Italian defense and aerospace giant – as reported by Gianni Dragoni in the Sole 24 Ore – is in very advanced negotiations with the German Rheinmetall group for an alliance in the land armaments sector. The agreement would lead to the establishment of an Italian-German joint venture to manage future contracts for the production of 280 heavy tanks (derived from the Panther) and more than a thousand armored infantry vehicles (derived from the Lynx) for the Italian army . The value of the contracts at stake amounts to 20 billion to be spread over 10 years, highlights the Confindustria newspaper.
The news comes less than a month after the former Finmeccanica group stopped negotiations for the alliance with Knds with the aim of reaching a collaboration for the supply of Leopard 2 tanks to the Italian Army for an order worth 8 billion EUR.
While waiting for confirmations and official announcements, the rumors triggered purchases of Leonardo's shares: this morning the stock achieved a +2.2%, the only one among the Blue Chips on Piazza Affari to report an appreciable performance.
All the details.
AFTER THE BREAKDOWN OF NEGOTIATIONS WITH KNDS…
As already mentioned, on 11 June Leonardo and the group born from the aggregation of Kmw and Nexter, two of the main European producers of military land systems based in Germany and France, abandoned negotiations to formalize a partnership "to define a configuration common for the Main Battle Tank program of the Italian Army and to develop a broader industrial collaboration".
But precisely on the definitions of technological strategies, i.e. the so-called Italianization of the wagon, the agreement has broken down. “The Germans at Kmw did not agree to give Leonardo what was requested, i.e. work to «Italianize» the Leopard 2A8s, for half the value of the order”, added Il Sole .
At the same time, Leonardo had confirmed "its commitment to providing the Italian Army with a high-performance, interoperable and updated solution, which meets current needs and remains well positioned for future developments towards the Main Ground Combat System [MGCS], also through cooperation with other qualified international partners".
…NEW ALLIANCE IN VIEW
In fact, the group led by Roberto Cingolani did not stand idly by and opened a dialogue with Rheinmetall, which is completing the development of the new Panther Kf51 battle tank.
On the other hand, the German defense giant itself has long positioned itself in the front row to respond to the challenge of renewing the land component and in particular the segment of our country's heavy and armored vehicles.
“We offer to build in Italy and together with the national champions of the Defense Industry the largest European land hub which will allow Italy to be a protagonist not only in the avionics and naval dimension but also in the land technological component”, Alessandro relaunched Ercolani, CEO of Rheinmetall Italia, at a hearing at the Chamber's Defense Committee on 29 November.
A JOINT-VENTURE BETWEEN LEONARDO AND RHEINMETALL
So Leonardo is now negotiating with Rheinmetall. “The agreement under discussion hinges on the establishment of an Italian-German joint venture to manage future production contracts for new heavy tanks (MBT) and new armored infantry vehicles (AIFV) for the Italian Army, which must renew the aging fleet of Ariete and Dardo”, continued Il Sole .
“According to what has been reported by authoritative sources, Rheinmetall is available to give space to Leonardo in the production of the Panther tank (or similar), as the work lots have not already been assigned to all suppliers as they are in the development phase. And even for the Lynx the Germans would entrust a significant share of the work to Leonardo."
“It is an industrial collaboration, the jv would not have contributions from industrial plants, but would manage the contracts with the Defense, therefore the work would be transferred to the companies”, specified Dragoni of the Confindustria newspaper.
THE ORDERS AT DANCE WITH EARTH LAW
The expected expenditure for future orders, no orders have yet been assigned, is estimated in the order of 20 billion euros in over ten years to produce 280 tanks (half in combat versions and half in support vehicles) and more thousand lighter tracked vehicles (Aifv).
In particular, in the 2023-2025 multi-year planning document, the Defense has provided for the Aics (Armored Infantry Combat System) program of the Italian Army centered on a combat platform (Armored Infantry Fighting Vehicle – AIFV) an allocation of 5.2 billion euros to be here to 2037 against an overall requirement of 15 billion euros. Thus begins the decade of the Army, with the Aics program which is in fact a "land law", an opportunity for growth for the national defense sector. “Here the AICS is worth more than twice the Naval Law,” of 2015, recently underlined Pietro Batacchi, director of Rid .
ITALY'S ENTRY INTO THE MGCS PROGRAM
But as already underlined by Leonardo herself, entry into the Franco-German program for the European tank of the future Main Ground Combat System (MGCS) is also imperative, as hoped for by the Italian Defense .
Starting in 2035, the Franco-German MGCS is expected to replace the Leopard 2 and Leclerc tanks, in service in the German and French armies respectively. The project risked failing due to differences between Berlin and Paris, which were never fully resolved. However, in April the two countries managed to unblock the dossier by agreeing on the distribution of industrial tasks. The signed protocol provides for an equal distribution between the companies participating in the project: Knds, a group made up of the French Nexter and the German Kmw, and Rheinmetall, based in Duesseldorf.
And the probable alliance with Rheinmetall also looks in this direction.
Even if it is still difficult to foresee the entry of the Italian industrial team on board the MGCS in the short term given that according to the French branch of KNDS, the corporate project between the defense companies KNDS, Rheinmetall and Thales for the development of a future tank battle for Germany and France will remain closed to other shareholders for now, as reported by Defense News .
ANALYSTS COMMENT
However, the agreement "would be positive as it would quickly resolve the impasse that had been created after the announcement on 11 June of the stop to ongoing negotiations with KNDS and because it would also allow Leonardo to enter the European MGCS project" , comment the Equita analysts who confirm the purchase recommendation and target price at 23.5 euros.
THE NEXT STEPS
Finally, according to sources interviewed by Il Sole 24 Ore , a preliminary agreement should be signed between the two groups, a Memorandum of understanding.
“After the MoU there will have to be negotiations to make the agreement operational. The first defense contract for the tanks could be awarded by the end of the year. Barring unforeseen circumstances" concludes the Confindustria newspaper.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/smartcity/come-sara-lalleanza-tra-leonardo-e-rheinmetall-sui-carri-armati/ on Tue, 02 Jul 2024 11:40:43 +0000.