Rheinmetall CEO sees faster growth as pressure on Europe to boost its defences mounts

By Sabine Siebold

MUNICH (Reuters) - German arms maker Rheinmetall expects to keep growing even faster than earlier thought, its CEO said, given U.S. President Donald Trump administration's calls on Europe to boost defence spending and take responsibility for its own security.

Trump has called on European allies to crank up defence spending to as much as 5% of GDP, though no NATO member right now is close to that threshold.

German Defence Minister Boris Pistorius on Friday called the NATO defence spending target of 2% of economic output insufficient, urging changes to the EU's Maastricht debt rules to give the alliance's EU members more leeway in boosting military budgets.

Asked about possible consequences for Rheinmetall after Trump's administration announced talks about a ceasefire in the Ukraine war and said Europeans needed to do more for their security, its CEO Armin Papperger said:

"For our company that means that we have to grow even more than previously thought.

"Trump has clearly said that Europe needs to grow up and the United States will not have to deal with European security," Papperger told Reuters on the sidelines of the Munich Security Conference.

He said an increase of the German defence budget from the current 2% of national GDP to 2.5% or 3% would translate into 60 billion euros to 70 billion euros annual defence investment.

The group was also considering acquisitions but would only act after consulting Germany's new government.

"We will make acquisitions, we will invest, invest heavily. We will talk about it whenever the time comes," Papperger said, adding that the company was expanding its capacities in electronics, expecting more investments in the coming months.

Asked about key areas for European military investment, Papperger pointed to ammunition, noting that no European state was meeting NATO's requirement for a 30-day combat stockpile.

"In the case of ammunition ... we gave Ukraine almost everything ... Putin knows this, of course, and that's why we need to act," he said.

Rheinmetall also plans to at least double the capacity of its powder plant in Bavarian Aschau as gunpowder is the biggest bottleneck at the moment, Papperger said, adding that the company would reach production of 12,000 tons to 14,000 tons per year from 2026.

The company was aiming to complete the construction of a powder and an ammunition plant in Ukraine in 2026, with serial production of the Lynx IFV expected to start in 2027, he added.

Asked about a potential closer cooperation with KNDS, Germany's other big maker of military equipment and solutions designed for ground-based operations, Papperger said there were no talks currently about a consolidation, neither with KNDS Germany nor KNDS France.

Papperger also said Rheinmetall had submitted a non-binding offer for Thyssenkrupp's warship division TKMS at the end of 2024, but the sales process had been stopped as Thyssenkrupp prefers a spin-off of the subsidiary.

"That means all interested parties are out," he said.

(Reporting by Sabine Seibold, writing by Riham Alkousaa; Editing by Tomasz Janowski)