Rheinmetall CEO targeted Amidst Surge in Demand for Munitions
Recent events have brought renewed attention to Rheinmetall AG, a German defence company, and its CEO, armin Pappelger. The company, once facing a potential decline, is now grappling with an unprecedented surge in demand for its products, notably ammunition, fueled by the war in Ukraine and subsequent restocking efforts by NATO member states. This increased prominence has regrettably made Pappelger a target,reportedly leading to a Russian assassination plot.
Historically, Rheinmetall experienced a downturn in defense spending following the fall of the Berlin Wall. By 2013, sales in its defense division were lower than those of its automotive division, which manufactures components like pistons and exhaust systems. concerns even arose regarding the long-term viability of the defense sector, with some suggesting a shift to solely automotive production.The company also carried the weight of its past, having managed facilities connected to the Buchenwald concentration camp during World War II, a factor impacting investment from ESG-focused investors.Five years ago, industry analyst Francis Tusa of Defense Analysis magazine described Rheinmetall as a company “fully misplaced” in its focus, noting that ammunition production was seen as an outdated industry. Though, the landscape has dramatically shifted.
As of March, Rheinmetall’s order backlog reached a record high of €63 billion. Pappelger is actively working to expand production capacity and identify new facilities to meet this demand, though analysts have expressed concerns about the company’s ability to fulfill contracts on schedule. Expansion of a factory in Unterlüß, germany, has faced delays, and facilities intended for armored vehicle repair in Ukraine remain largely inactive.
Pappelger, who joined Rheinmetall in 1990 and became CEO in 2013, initially aimed to increase annual sales from under €6 billion in 2021 to €20 billion by 2027. Given the current order volume, this target is highly likely to be revised upwards. The company is also exploring the sale of its civilian goods division to seven potential buyers, allowing for greater concentration on defense production.
Rheinmetall’s market capitalization has now surpassed that of major German automakers like Volkswagen, Mercedes-Benz, and BMW, reflecting its newfound importance in the current geopolitical climate.
(Source: Bloomberg businessweek)