Industrial policy in the defence sector must become a priority
Since the merger of Krauss-Maffei Wegmann (KMW) and Nexter in 2015, the Franco-German tank manufacturer KNDS has gradually become a French-dominated company. Ownership is split by half between the French state and the German KMW owner families, Bode and Braunbehrens.
But a state on one side and two private families on the other make for a very uneven balance of power. In Paris, a defence company stake like the one in KNDS is a matter of highest priority, managed directly from the Élysée Palace. In Germany, by contrast, the issue has so far been handled rather reluctantly – and only by second-tier members of the federal government.
German owner families looking to cash in on their stake
KNDS is increasingly shifting even more towards the French side. Since April, the CEO has been French. And the German owner families are looking to cash out their shares later this year, either through an IPO or by selling to an investor, or even to the German government.
The timing is certainly favourable. The company is currently valued at around 20 billion euros, a figure that would have been nearly unthinkable just four years ago. This shift was never part of the original plan. In fact, Germany – or German industry – was meant to take the lead on developing the next European battle tank, officially known as the Main Ground Combat System (MGCS). In return, France was granted leadership over the much bigger development project for the next-generation European fighter jet.
On behalf of the Wegmann shareholder committee, negotiations with the French government over the planned withdrawal from KNDS are being led by Chairwoman Ingrid Jägering, who also sits on the KNDS board and serves as CFO of chainsaw manufacturer Stihl. On the German government’s side, the matter is being handled by Levin Holle, head of department in the Chancellery and former CFO of Deutsche Bahn, and Jens Plötner, the current State Secretary for Defence Procurement, and a former top advisor to Chancellor Scholz.
Power structure out of balance
The German government is considering stepping in because the withdrawal of the owner families from KNDS would upset the German-French power balance. After all, whoever calls the shots at the tank manufacturer also decides where new jobs are created, especially in an era of defence budgets in the hundreds of billions annually. KNDS already employs 11,000 people, with many more to come. In 2024, the company recorded a 40% increase in orders, reaching 11.2 billion euros.
State influence in the defence industry is on the rise. The German government already holds a 25.1% stake in stealth technology firm Hensoldt via state-owned development bank KfW, and has recently secured a right of first refusal on shares in Thyssenkrupp’s submarine subsidiary TKMS, which is preparing for an IPO. KNDS itself owns 25.1% of Renk, a manufacturer of tank transmissions based in Augsburg.
But defence industrial policy must become even more of a top-level priority. France, the UK, and Italy are showing how it’s done. The European fighter jet project is currently paralysed by German-French disagreements. The beneficiary: British defence firm BAE, working in partnership with Italy’s Leonardo and Japanese partners on a competing next–generation fighter jet with a faster deployment timeline.
The upbeat tone from BAE and their talk of „excellent progress“ stands in contrast to the troubled German–French–Spanish efforts. The two main contractors – France’s Dassault, and Airbus whose defence business is based near Munich – are locked in a power struggle over control of the FCAS program. A similar scenario is now unfolding in the tank sector: Rheinmetall is developing the Panther with Leonardo, a competitor to the MGCS that promises quicker delivery. But the jobs are being created in La Spezia, Italy.
