Defence

Leonardo and Rheinmetall sign tank alliance

The two groups signed the final agreements sealing the German-Italian alliance in land armaments outlined in a Memorandum of Understanding on 3 July

by Gianni Dragoni

3' min read

3' min read

Leonardo and Rheinmetall at the wedding for tanks. The two groups signed the final agreements sealing the German-Italian alliance in the land armaments outlined in a Memorandum of Understanding on 3 July.

Stock market rallies

Sole 24 Ore's anticipations of 12 October are confirmed. Leonardo shares rose 3.24% to EUR 21.06 on 14 October. Those of Rheinmetall rose 3.83% to EUR 485.3, almost six times the value at the end of 2021 (around EUR 84). Leonardo also had a strong growth in the stock market since the end of 2021, the value of the shares more than tripled, the current capitalisation is 12.3 billion.

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Fragmented sector

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Land armaments are the most fragmented sector of the European defence industry, to which, in the aftermath of the Russia-Ukraine war, substantial public resources will be allocated to increase military capabilities. Cingolani signed the agreements with Armin Papperger, CEO of the German giant.

Army orders worth 23.2 billion are on the way

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The ideal location for an announcement kicking off a reorganisation of the European defence industry. A 50:50 joint venture is to be established, based in Italy.

The mainstay of the agreement in the first instance is the future supply to the Italian Army of 280 tanks (half combat, the other half support vehicles) and over a thousand light infantry tracked vehicles, known as Aics or Aifvs. Two maxi-contracts for a value estimated by the DPP (Documento programmatico pluriennale della Difesa - Multiannual Defence Planning Document) at EUR 23.2 billion, over a period of 10-15 years. The JV will have to manage future contracts (not yet signed) with the Italian Defence, it will have personnel but no production plants. Production will be done in the factories of the two groups.

Rheinmetall has the products that the top management of the armed forces considers suitable to replace the old Ariete tanks and Dardo light armoured vehicles, as General Luciano Portolano told Il Sole 24 Ore, when he was still Secretary General of Defence and National Armaments Director (he has been Chief of Defence Staff since 4 October). Products that Leonardo, the supplier of the Army's old vehicles, does not have, however, because its company operating in the sector, Oto Melara, has not developed new production of this type for about 30 years.

What the Panther and Lynx are

The choice fell on the Panther Kf51 heavy tank, which the Duesseldorf-based group has been developing for two years. Industrial production has not yet started. The other chosen vehicle is the Lynx, the light infantry tracked vehicle produced by Rheinmetall, whose launch customer is Hungary (and not Germany). The two vehicles will be 'Italianised', as Leonardo's co-director general Lorenzo Mariani said, there will be a substantial amount of work for the group and other Italian companies. The first Lynx vehicles should arrive in Italy from Germany by the end of this year, at least this is the hope expressed by General Portolano to assign the new vehicles to the operational departments. For the production of the heavy tanks, the Panther, it will take longer, they are expected to arrive in 2027.

What Leonardo will produce

In particular, through Oto Melara in La Spezia, the former Finmeccanica will build the turrets, supply the electronics and transmissions. The Germans will supply the weapon and the hull. The engine will also be German-made. The two companies said they will each have 50 per cent of the value of the orders. According to the joint MoU communiqué, the final assembly lines, vehicle homologation tests, deliveries, and logistical support will be carried out in Italy 'with an Italian share of 60 per cent'. Part of the work will also go to Rheinmetall Italia, a subsidiary of the German group led by CEO Alessandro Ercolani. Rheinmetall was assisted by the law firm Chiomenti.

The future European heavy wagon

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At a later stage, the aim is to export the products and participate in the development of the European 'main battle tank' (Mbt or Mgcs), the heavy tank. Last April, the governments of France and Germany signed a declaration of intent for the future European tank. The two countries' industries, Nexter for France, Krauss-Maffei Wegmann (Kmw) and Rheinmetall for Germany, joined the protocol. Kmw builds the Leopard, is united with Nexter by a common holding company (Knds) based in Amsterdam, but is a rival of Rheinmetall, which builds the barrel of the Leopard and the entire weapon.

The Franco-German plan cracks

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In signing the agreement with Leonardo, Papperger broke away from the Franco-German project and chose an Italian alliance for the future European programme. For Cingolani, it is the first international alliance of weight in his mandate, which has now reached its halfway point.

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  • Gianni Dragoni

    Gianni DragoniCaporedattore, inviato

    Luogo: Roma

    Lingue parlate: italiano, inglese, francese

    Argomenti: economia, finanza, industria aerospazio, difesa, industria ferroviaria, trasporto aereo, grandi aziende pubbliche, privatizzazioni, bilanci società di calcio, stipendi manager, governance società quotate, conflitti d'interesse

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