German Defense Companies Breaking Taboos to Enter Arms Industry... "Historic Turning Point"

Increased Defense Vigilance Since Russia's Invasion of Ukraine
Scholz's 100 Billion Euro Defense Fund Takes Off

German small and medium-sized enterprises (SMEs), which have long tabooed investment in the defense industry, are expanding their entry into the military equipment and services sector. This is interpreted as a response to the heightened awareness triggered by Russia's invasion of Ukraine.

According to major foreign media on the 1st (local time), Deutz, a world-renowned German engine manufacturer, announced last week that it plans to produce tank engines alongside its motorcycle business. Daimler Truck, which developed the world's first truck, signed a contract last month to supply 1,500 trucks to the Canadian military.

Engineering company Hawe Hydraulik, which had previously adhered to the principle of not supplying products to the defense industry, has started receiving orders for valves and pumps for military equipment such as vehicles and ships. In addition, Trumpf, a laser manufacturer with ASML as a client, is also considering lifting its complete supply ban on the defense sector.

[Image source=EPA Yonhap News]

Most of Germany's SMEs (Mittelstand), responsible for the German economy, have long avoided contact with the defense industry due to industrial cooperation with the Nazi regime and a sense of responsibility as a former aggressor nation. However, since Russia's invasion of Ukraine in 2022, awareness of the weakening of national defense has spread, and as German Chancellor Olaf Scholz established a special defense fund worth 100 billion euros (approximately 135 trillion won) for military modernization, corporate attitudes have begun to change.

Kathrin Kl?ber Ashbrook, former director of the German Council on Foreign Relations, said, "Germany's long-standing attitude toward the defense sector is rapidly changing," adding, "After fighting a war on the European continent for three years and suffering enormous economic losses, Germany seems ready for a historic transformation."

Karl Hausgen, chairman of Hawe Hydraulik, explained, "Since Russia invaded Ukraine, Europe has been urged to increase military spending, reducing the stigma on Germany's defense industry and creating a completely different image compared to three to four years ago." According to a survey by global accounting firm PricewaterhouseCoopers, about 70% of respondents supported an increase in Germany's defense spending.

Susan Bigandt, CEO of tank parts manufacturer Renk, said, "If technology advances through the synergy between Germany's private companies and the defense industry, it benefits both sides," diagnosing that "innovation starts in the military world and leads to civilian applications, and vice versa."