GDR 99 - European Issues

AFV Firms
React to Troubled Times


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The Fennek, a joint production between SP Aerospace and Vehicles and Kraus Maffei & Wegmann

GDR editor Tim Ripley reviews the current state of the western European armoured vehicle manufacturing industry.

Since the fall of the Berlin Wall and subsequent demise of the Soviet Union, western defence manufacturers have had to face up to rapidly declining procurement budgets, ranging from 25 per cent to almost 50 per cent in some cases. One of the worst-hit has been armoured vehicle manufacturers, and main battle tank prime contractors are facing uncertain times.

Over the past year the first round of consolidations have taken place in the armoured vehicle manufacturing sectors and many observers are predicting a more rapid pace of events on this front in 1999.

Near-term orders
This year competition is expected to be fierce for a number of significant orders. Greece is running a high-profile competition for modern main battle tanks that is likely to lead to several thousand vehicles being procured over the next decade. It is likely, however, that they largely will be built in Greece. Turkey has been in the market for similar purchases but its time- table has slipped on several occasions and looks likely to follow behind any Greek order.

Spain and Germany are in the final stages of negotiations for a contract to produce more than 200 Leopard 2A5 tanks, to be co-produced in Spain by Santa Barbara. Switzerland and Finland are running competitions for new infantry fighting vehicles (IFVs), with approximately 300 units being talked about for each order. Britain's Warrior, Sweden's CV90 and Germany's Marder with an E-4 turret are the front-runners in these orders.

Export orders farther afield are more problematic. Traditional Middle East customers, such as Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, are experiencing economic problems because of the collapse of the oil price. They have long-standing requirements for new armoured vehicles but they have been put on hold. The only exception to this is a Qatari requirement for 40 new main battle tanks that is due to be decided in late 1999. Britain's Challenger 2, France's Leclerc and America's M1 Abrams are the front-runners.

Long-term crisis


The French Leclerc MBT: production for the French Army is to end in 2005. What will its future be?

But these near-term contests are not providing the leaders of Europe's armoured vehicle manufacturing sector with much comfort. They face more worrying problems in their core home markets. The main battle tank prime contractors that include Vickers Defence Systems in the UK, GIAT Industries in France, Kraus Maffei in Germany and Oto Breda in Italy, are in the final throes of delivering their current production models of vehicles to their national armies. When orders are complete in one or two years' time, there will be nothing to fill the gap on production lines except for upgrade work and limited manufacture of small numbers of special engineer vehicles.

The British, French and German armies have no firm requirements for new main battle tanks. A number of concept studies exist but they have not been funded. Recent defence reviews by these governments did not give due attention to main battle tanks and few observers expect any serious money to be spent on researching or building new tanks until the second decade of the next century.

In the light armoured vehicle sector, the prospects are not so bad. The UK/USA Tracer/ Future Scout and Cavalry System (FSCS) offers the prospect of development and then production work for the British light armoured vehicle sector from 2003 onwards. European companies also are likely to benefit from work on the European multi-role armoured vehicle programme from 2001. There remains some dog-fighting between the French and Germans over the programme, but at least a requirement exists and money is allocated, so something will happen.

Future shape of the industry


Above & Below: The Leopard 2 A6 produced by Krauss Maffei, one of Europe's main MBT prime contractors

Few observers doubt that major restructuring will take place over the coming year. The main pressure is on tank manufacturers, where lack of work and empty factories are likely to propel managements into taking drastic action.

Vickers Defence Systems already has announced that it intends to close its Leeds production line. The company lost out in the European multi-role armoured vehicle programme and its participation in the Tracer bid of British Aerospace and Lockheed Martin is its last hope of a significant new UK MoD programme. Some observers think its parent, Vickers plc, may soon make a decision to pull out of the military market, either by selling off its military vehicle production facilities or closing down its rump operations.

France's GIAT Industries is in a strong position, with production of its Leclerc tank to end for the French army in 2005. Its products are technologically very advanced, but economically the state-owned company is supported only by regular injections of government aid. It is unclear how much longer the government will continue to support the company once tank production ceases. The future of both British and French production capabilities will rest with their governments, but future funding seems unlikely.

In Germany, Krauss Maffei already has made moves to diversify from tank production, merging with self-propelled artillery manufacturer Wegmann. Dutch outfit SP Aerospace and Vehicles are teamed with Kraus Maffei & Wegmann to build the Dutch-German equivalent of Tracer/FSCS, the Fennek. While the European self-propelled artillery market has been identified as one of the few growth areas by Kraus Maffei & Wegmann, future tank work is likely to be limited to upgrades and co-production with foreign partners.

The European IFV and light armoured vehicle markets are likely to remain buoyant for the next five to ten years, thanks to the upgrade work on Warrior, CV90 and Marder as well as new-build projects such as Tracer/FSCS and the European multi-role armoured vehicle. British specialist light vehicle manufacturer Alvis has positioned itself in this market following recent mergers with GKN Defence, makers of the Warrior IFV, and Sweden's Hagglands, makers of the CV90 IFV. Kraus Maffei & Wegmann was part of the winning team for the new European multi-role armoured vehicle and so has a stake in perhaps the biggest joint European land system project in the next decade. An Anglo-German link-up or partnership to participate in the programme also cannot be discounted.

The future of Europe's armoured vehicle industry does not lie in main battle tank production. To keep their production lines busy, Europe's armoured vehicle producers must turn to lighter multi-role vehicles that meet national requirements and are likely to fit into niche export markets.