The French State refuses to hand over the majority of KNDS to Rheinmettal

During an eventful hearing by the Defense Committee of the National Assembly, in particular due to very controversial and approximate biases of certain parliamentarians on the subject of French arms exports to Saudi Arabia and the United Arab Emirates, the minister armies, Florence Parly, met the requirements of the Rheinmetall company about the control of the KNDS Company.

As a reminder, the KNDS Company, which brings together the French Nexter and the German Krauss Maffei Wegman, is 50% co-owned by the French state, and 50% by the Baude family, which owned KMW. The second German player in the armored vehicles market, Rheinmetall, has approached the Baude family to take control of KMW, and thereby integrate the KNDS group. However, if Nexter and KMW are substantially equivalent groups in terms of turnover and structure, the group resulting from the acquisition of KMW by Rheinmetall would be much more imposing than its French counterpart, representing more than 3 times its financial and industrial volume. . The French authorities did not want to intercede in the process of German industrial consolidation, until Rheinmetall demanded to hold the absolute majority of the KNDS group, so as to reflect, according to it, the distribution of powers in accordance with the industrial power of the two groups.

The Minister of the Armed Forces informed the German group, which also seems to prefer communication through the press, that France did not intend to modify the distribution of powers in the KNDS group, whether Rheinmetall buys KMW or not. If the French government is in favor of European industrial consolidation, it does not seem ready to give in to German sirens, especially since German groups have, on several occasions, demonstrated their propensity to use these methods to eliminate competition. (the Swedish Kockum shipyards remember this..).

Beyond the control problems of the KNDS group, the entry of Rheinmetall could have significant consequences on the French subcontracting network. Unlike Nexter, Rheinmetall has a very extensive network of subcontracting companies controlled by the group. In fact, it would have every legitimacy to, if not impose, in any case direct subcontracting contracts towards its own network, by acting on the market award criteria for example. Indeed, the subcontracting companies of the French BITD[efn_note]Defence Industrial and Technological Base[/efn_note] are often SMEs with a weak financial scale, a characteristic that Rheinmetall subcontractors naturally do not have. , being able to rely on the group.

However, the subcontracting network accounts for more than 40% of the economic and budgetary efficiency of Defense investment for the State. By dividing the use of French subcontractors by 2, the number of jobs created/maintained per million euros invested would be reduced from 27 to 19 jobs, and the economic and budgetary efficiency coefficient would increase from 145% to 90%, according to the Positive Valorization Defense model.

In fact, the State must therefore not only be vigilant on the control of KNDS, but also on the conditions of award of subcontractor contracts, whether for the MGCS[efn_note]Main Ground Combat System or System of ground combat of the future[/efn_note] as for the FCAS[efn_note]Future Air Combat System[/efn_note] program, and all programs in cooperation with our German and European partners. In this respect, it would be welcome to take the example of Rheinmetall or Leonardo, and also consolidate our national BITD around the large French groups, so as to have the same financial scale on the European and global markets.

To be continued …

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