Politicians are banking on arms as an economic driver. But security requirements, supply chains and cultural clashes make this major restructuring a risky gamble. Can Germany’s industry really be saved this way?
Germany’s industry is caught in a downward spiral: car manufacturers in crisis, crumbling supply chains, thousands of jobs hanging in the balance. But there is also this: full order books at arms manufacturers, because billions from new debts taken on by the federal government are ending up here. So can the special arms programme save the industry from further decline?
German arms manufacturers recorded a substantial 36 per cent increase in sales to 14.9 billion dollars last year, according to the latest report from the Stockholm Peace Research Institute (SIPRI). Ground-based air defence systems, ammunition and armoured vehicles are in high demand due to the threat posed by Russia
So there is hope. The magic formula is called ‘dual use’. The vision is as follows: car factories are to be converted into arms factories, and tanks are to roll off the production line instead of Passats. This sounds like a lifeline for the ailing industry. Can it work?
Tanks instead of Passats
In Berlin, it seems as though the question has already been answered. There, this fantasy is already being treated as reality. The Minister of Defence, the Minister of Economics, the Chancellor’s Office – everyone is talking about ‘turning points,’ “resilience” and ‘industrial sovereignty.’ Industry is expected to deliver.
Volkswagen is repeatedly held up as a blueprint: why not transfer part of the automotive industry to armaments? Federal Defence Minister Boris Pistorius sums up the political pressure: ‘The current threat situation requires us to promote key technologies in Germany.’ Sounds logical, but it’s a gross oversimplification.
Friedrich Merz also thinks openly in military terms. His statement says it all: ‘We plan to invest 1.5 per cent of economic output in infrastructure that can be used for military purposes.’ Merz is thus setting the political course: roads, bridges, factories – everything should be fit for war in case of doubt.
Programmes are of little help
But the factory floors look different from the political slides. Daniel Norpoth knows the automotive industry inside out. He was responsible for human resources at VW for 17 years and is now a partner at the personnel consultancy Hager Executive Consulting. His assessment is sober: ‘There are many obstacles to persuading an industry that is in decline to hire former soldiers.’
Norpoth points to existing programmes that have had little effect so far: soldiers who join companies can already receive a year’s salary from the state. Companies also receive up to €15,000 in integration assistance.
The state is therefore offering financial incentives. However, the reality remains tough: only 17 per cent of soldiers who leave the armed forces to enter the economy end up working in industry. The vast majority go into public service.
Remodelling is progressing slowly
Yes, there have been initial attempts at combining industries: crisis-stricken gear manufacturer ZF is involved in military projects. Swabian engineering company Voith builds ship propulsion systems for frigates. Truck manufacturers are testing military variants. Start-ups are developing autonomous systems for the German Armed Forces. But the transformation has not really got off the ground yet. Where is the sticking point?
The core problem for companies is that armaments are not simply another product line, but a different world altogether. ‘The security requirements for arms manufacturers are completely different from those for civilian companies. The factories cannot be open. It is completely unthinkable for suppliers to come and go as they please. But that is standard practice for car manufacturers,’ says Norpoth. Car factories operate like market halls, arms manufacturers like high-security wings.
The disruption to supply chains is even more severe. “Supply chains are completely different. In the defence industry, everything is built in-house, down to the last screw,” reports Norpoth. The automotive industry, on the other hand, thrives on global networks, just-in-time delivery and suppliers from all over the world. Here, mass production reigns supreme, with every second counting; there, precision work is carried out under constant pressure. Anyone who wants to transfer one system to the other is not simply converting it, but radically rebuilding it.
Industry needs planning security
Added to this is a risk that hardly anyone in Berlin talks about: planning security. A car manufacturer produces one model while already planning the next and can roughly estimate how many it will sell. An arms manufacturer needs government contracts. Once these have been fulfilled, production ends. ‘The current investments in defence equipment will also be used up at some point. What happens then?’ asks the personnel consultant. Cars are sold on the market. Weapons are ordered by the state. And when the state stops, the factory stands still.
Norpoth’s conclusion is like a bucket of cold water thrown in the face of all those romanticising the transformation: ‘I am sceptical. I don’t believe that a leading industry in Germany can be completely transformed. There has never been anything like it before. It will take a huge effort to completely compensate for today’s automotive industry.’
There are other critical voices. Christian Growitsch, for example, from the Hamburg Institute for Innovation, Climate Protection and Circular Economy. He considers the political ideas to be dangerously naive. ‘Since 1990, we in Germany have only managed the issue of defence and have not developed it dynamically.’
That is why the situation is significantly different from that in the United States or Israel, for example, where the military, science and industry have been closely intertwined for decades. Military projects there have given rise to things like the internet. Germany, on the other hand, has looked the other way and squandered its ‘peace dividend’.
The paradox of the arms industry
Growitsch addresses another taboo: ‘Market-driven companies are generally more innovative than those that depend on government contracts.’ The arms industry depends on the budget committee, not on competition. And it follows a paradox: ‘From an economic point of view, the arms industry is schizophrenic: it manufactures goods with the aim of ensuring that precisely these goods are not needed.’
True value only arises when technologies from the defence industry spill over into the civilian world. ‘To achieve this, however, we need a target vision in Germany, which we do not currently have.’
Universities ban military research
And then there is science. More than 70 universities in the country have committed themselves to the so-called ‘civil clause’ and thus banned themselves from conducting research that could be used for military purposes. This is precisely what politicians are now challenging. Research Minister Dorothee Bär (CSU) openly demands: ‘I am fundamentally in favour of rethinking the so-called civil clauses at universities – in order to secure peace today, we cannot afford to restrict ideas and research.’
Bär is thinking ahead politically, while research and industry are stuck in reality. Germany cannot simply convert its civilian industry into a war economy because security requirements, corporate cultures, supply chains and planning logics are too different. The conversion will be slower, more expensive and smaller than many promise. It will therefore not save the millions of jobs that are at stake today. The uncomfortable truth is that dual use is not a panacea, but a risky balancing act. Anyone who believes that an entire leading industry can simply be relabelled is confusing industrial policy with wishful thinking.
More about Daniel Norpoth.
An article by Oliver Stock | Published in Focus online and Business Punk
