Collaborate, Not Compete

That seems to be the message from DSEi 2017

A FORCE Report

ExCel, London: Changes, big changes, are afoot in the global defence industry. While the signs have been in the air for a while now, at DSEi 2017, evidence was presented in the form of press conferences, announcements and displays. The changes are driven by two prongs of increasing costs of research and development, and subsequent technologies on the one hand, and greater expectations of the buyers, especially when it comes to value for money.

As the result, even as the markets continue to grow, howsoever sluggishly, multilateral competition has become financially debilitating for the original equipment manufacturers (OEMs). Hence, the way forward is collaboration and not competition. Former rivals across nations are becoming partners and are dividing the markets among themselves so that they do not indulge in wasteful expenditure of running competitive campaigns in the same region — South America for you, Middle East for me; South Asia for you and Far East for me and so on.

At the joint press conference, held on the second day of the Show, German company Hensoldt and British company Kelvin Hughes announced that the former was buying out the latter. The acquisition process would be completed in the coming weeks. Addressed by head of strategic business development, Hensoldt, Celia Pelaz, and CEO of Kelvin Hughes, Russell Gould, the press conference was aimed at conveying the message that the buy-out would, by enhancing the overall radar and sensors portfolio of Hensoldt, create a formidable global entity in the radar and sensors domain which will be more competitive and versatile than its rivals.

Specific to India, Pelaz said, “We have created a legal entity in India and are looking at opportunities in trans-simulation, situational awareness of helicopters and coastal surveillance.” Gould added, “Kelvin Hughes has 30 years of experience working with Bharat Electronics Ltd (BEL) in India. Now, we will have the critical mass to invest in a major way in India.” India apart, Hensoldt’s immediate focus would be the upcoming programmes in United States and France. Incidentally, Hensoldt was created earlier this year when Airbus divested its defence electronics business, focussing instead on aerospace.

Elsewhere in the show, another evidence of consolidation and collaboration was presented through the unified display by former rivals — French Nexter and German Krauss-Mafei Wegmann (KMW). Last year the two companies, specialising in land systems, announced their decision for a progressive merger. Hence, at Eurosatory 2016, there was a small KNDS (KMW-Nexter Defence System) pavilion flanked by two large Nexter and KMW pavilions. Though all were interconnected, each company’s product range was displayed in its respective pavilion.

However, at DSEi 2017, for the first time, there was one KNDS stand, on either side of which were parked Boxer (KMW’s armoured personnel carrier) and VBCI 8x8 (Nexter’s infantry combat vehicle). Both Nexter and KMW are now subsidiaries of the parent KNDS, which has two chief executive officers at the moment, Frank Haun and Stéphane Mayer, both of whom issued a joint statement on the eve of the Show saying that they are, “very proud to represent the European defence leader and to promote a dynamic and ambitious German-French industry.”

Of course, it is never easy for erstwhile rivals to become friends. Nexter representatives still reference themselves through the French company, but they are gradually practising to identify themselves by their new entity KNDS. While once upon a time they ran down each other’s platforms, at DSEi it was amusing to see a Nexter representative praise Boxer, which is competing in the British Army programme for infantry vehicles. VBCI is not participating in that competition.

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