European military vehicle producer KNDS (KMW + Nexter Defense Systems) completed its restructuring in 2021, with a new streamlined governance structure put into place. The new structure aligns the firm in a more traditional corporate pattern with a single board of directors and a traditional executive hierarchy.
The old co-CEO management has been replaced with a standard executive layout: Frank Haun leads KNDS as CEO, with Nexter led by Nicolas Chamussy and KMW by Ralf Ketzel. The new structure aims to enable more efficient and coherent management of the KNDS companies.
Despite the managerial restructuring, KNDS’s two subsidiaries continue to maintain their individual corporate identity, capabilities, and products. Currently, KNDS’s top programs are Germany’s Leopard 2 (produced by KMW) and France’s Leclerc main battle tank (manufactured by Nexter), which the company is currently maintaining and upgrading. In addition, the company produces tactical vehicles such as the Fennek, Jaguar, Griffon, and Serval. Rounding out its portfolio are artillery systems, armored bridgelayers, and ammunition. All told, the operation is the third-largest military land systems contractor in the world, behind General Dynamics and BAE Systems.
As it goes forward, the company is looking to more fully integrate its subsidiaries via joint projects such as the Franco-German Main Ground Combat System (MGCS) program. The project to develop the MGCS, informally called the Eurotank, is an effort by France and Germany to replace their currently deployed Leclerc and Leopard 2 main battle tanks.
One place where the firm is acting with one voice is in the area of expansion. In late 2021, news reports indicated that KNDS was interested in acquiring cannon maker OTO Melara and torpedo producer WASS from Italy’s corporate defense giant Leonardo. According to Reuters, KNDS is looking to offer EUR650 million for the two units. However, Italian nationalist interests may stymie the deal as Italy seeks to maintain sovereignty over local defense production capabilities. The government may opt to allow state-owned Fincantieri to acquire the operations with a lesser offer in order to keep the assets under control. A final decision could be made in late 2022.
Financially the firm is performing well. For 2020, KNDS employed around 8,270 workers and had a backlog of approximately EUR10.6 billion, with turnover of around EUR2.4 billion (2019: EUR2.5 billion).
However, results going forward may not be as sanguine as the fallout from the COVID-19 pandemic begins to impact the firm. According to KNDS officials, defense budgets are getting cut somewhat as a consequence of the pandemic response. Further, as the budgets tighten, spending is getting triaged – with air systems getting the lion’s share. As a result, outlays for army-related programs are being reduced.
This will likely be a short-term event. With tensions in the world high, thanks to the ongoing conflict in the Middle East and in Ukraine, the opportunity for armored vehicle sales continues to generate interest. In addition, France, Germany, and a newly Brexited Britain (which is looking to gain observer status on the MGCS program) are investigating updates of their current armored systems. These long-term projects will put KNDS in a solid position to fulfill any new European requirements.
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