21 Jan 19. Rheinmetall and BAE Systems today announced that they have signed an agreement to create a joint UK based military vehicle design, manufacturing and support business. The new Joint Venture will be headquartered at BAE Systems’ facility in Telford, England and will sustain over 400 jobs in the UK, as well as preserve key technology and engineering skills.
Rheinmetall will purchase a 55% stake in the existing BAE Systems UK based combat vehicles business, with BAE Systems retaining 45%. The establishment of the new Joint Venture is subject to regulatory approvals which are anticipated to be completed in the first half of 2019. Once the approvals have been completed, the Joint Venture will be known as Rheinmetall BAE Systems Land (RBSL).
In addition to managing and growing the existing combat vehicle support business, the intent is for the new Joint Venture to play a major role in the delivery of the British Army’s new Mechanised Infantry Vehicle (MIV) and other strategic combat vehicles programmes.
While initially focused on these major UK programmes, RBSL will also form an integral part of Rheinmetall’s Vehicle Systems Division and will participate in and contribute to various global military vehicle pursuits and contracts. The combination of Rheinmetall’s military vehicles technology and products with the additional capabilities and products brought to the Joint Venture by BAE Systems, such as Trojan, Terrier, Warrior, military bridging and the AS90 self-propelled artillery system, will create a European market leader in the military vehicle sector. RBSL will have the potential to create hundreds of additional UK jobs, both in Telford and the wider supply chain.
Ben Hudson, Global Head of Rheinmetall’s Vehicle Systems Division, said: “We are excited about the potential the new Joint Venture holds for Rheinmetall, BAE Systems and ultimately our customers. The combined capabilities of our two great companies will offer our customers a comprehensive portfolio of military vehicles and associated technologies both now and into the future. We are proud to invest in the UK and expect to substantially grow the current business and the Telford manufacturing facility over the coming years.”
Jennifer Osbaldestin, Managing Director of BAE Systems Land UK business, said: “We are committed to evolving our combat vehicles business so that we better serve our customers’ future interests. Joining forces with Rheinmetall in the UK provides renewed purpose for our vehicles business and allows us to deliver products, services and technology that help land forces excel in their vital roles. We look forward to working together to ensure the Joint Venture is a trusted supplier to the British Army and our international customers.”
Under the agreement Rheinmetall will pay £28.6m for a 55% stake in BAE Systems UK based combat vehicles business.
Rheinmetall Defence is a leading supplier of military vehicles and systems. Rheinmetall’s businesses in the UK include Rheinmetall Defence UK (RD UK) and Rheinmetall MAN Military Vehicles UK (RMMV UK), and are well-established suppliers to the UK Ministry of Defence (MOD). They support the British military in a number of areas, including vehicle systems, ammunition and technical assistance.
BAE Systems has had a combat vehicle manufacturing and support business in the UK for many decades. Under predecessor companies it manufactured and built the Challenger 2 Main Battle Tank and the Warrior, Terrier and prototypes of the BOXER vehicles. The current business helps the MOD and British Army maintain and upgrade a range of military vehicles and bridging systems. It has annual revenues of c.£60m and employs around 400 people, who are based largely at the company’s Telford facility, as well as at sites in Washington, Filton (Bristol) and Bovington.
The proposed Joint Venture does not include BAE Systems’ munitions and weapons systems businesses or its holding in the CTAI Joint Venture with Nexter.
BATTLESPACE Comment: Albeit not in the exact form predicted by BATTLESPACE last year, the formation of RBSL has been on the cards for some time. Rheinmetall was rumoured to have tried to buy all of BAE’s Land Systems business some years ago but BAE baulked at the price given the write-off requirements on its balance sheet and the inclusion of the strategic and sovereign ammunition business. RBSL gets away from both these problems and forms a very powerful post-Brexit UK land systems business with jobs and IP in the UK. It is good news for the MoD as well as it streamlines and speeds up the Challenger 2 Life Extension Programme (LEP) Programme as it now narrows both bidders into one bid process which saves DE&S money and time. What the final design for C2 LEP will be is not known but it is likely to be more of based on the Rheinmetall solution rather that the BAE, GDUK, Leonardo proposal. Sources suggest that the final solution will be based on utilising the existing Challenger 2 turret with an enlarged bustle to meet the one piece charge requirements for the smooth bore gun, rather than the 2 piece charge currently on Challenger 2, rather than a Leopard 2 A5 solution. A three-man crew, with an autoloader, is believed to have been ruled out due to exiting crew duties and the commander’s workload. Sources suggest that with enhancements made to the existing gearbox and running gear Challenger 2 could well have a life well into 2035.
The perceived losers in this JV are GDUK which had a 33% workshare on the BAE C2 LEP bid and also made an unsolicited bid for an M1A2 SEP V3 turret solution for C2 LEP, Leonardo, who were the sensor provider and Nexter who were looking to supply the smooth bore 120mm to BAE Systems. Another perceived loser is Babcock who were hoping to continue the C2 Support Contract through its Bovington facility, this is likely now to go to the RBSL Telford facility. Pearson Engineering in Newcastle looks well placed to win the turret lift work given their legacy Challenger engineering capability.
On issues of other UK Land Systems Programmes and Army support policy RBSL and Telford now look to be a Centre Of Excellence with MIV being the next target for manufacture and support creating jobs and IP for the UK and an export platform for other Boxer export sales. Other Programmes likely to benefit are the BR90 bridging replacement contract where KMW and BAE were competing. It also brings Rheinmetall into the Warrior WCSP Programme where BAE is running the Safety Case. Another Programme on the cards is the mobile 155mm artillery programme being eyed by Nexter in particular. The Viking Royal Marine replacement vehicle is another programme on the cards.
What happens next? It is likely that, given the BAE does not like JVs, that once C2 LEP and MIV are under the belt of RBSL that BAE will sell the remaining 45% at an enhanced price to the price paid today, of the JV and exit the UK Land Business where it has had a torrid time at great expense to BAE Systems Plc shareholders after the 2004 £309m Alvis Vickers acquisition. Will Haaglunds be next to be bought by Rheinmetall or would that be a consolidation too far?
This JV cements Rheinmetall’s position as the most powerful armoured vehicle companies in Europe and the world, creating a big rival to GDLS.
See also on BATTLESPACE Features on www.battle-technology.com:
Important BAE Systems/Rheinmetall JV….PLUS.. Mirror Article on Side-Lined RAF Aircraft Capacity
By Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.