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Monday, September 14, 2020
The decision was a turning point: after nearly six decades, the Bundeswehr changed the supplier of its assault rifle. In the future, the weapon will come from Thuringia. Former equipment supplier Heckler & Koch made the decision at an inopportune moment.
The Defense Ministry wants to buy the new Bundeswehr assault rifle from Thuringian manufacturer CG Haenel de Suhl. The Defense Ministry informed the Bundestag politicians about the outcome of the selection process. As a result of the tender process, the long-standing supplier Heckler & Koch (Oberndorf am Neckar) did not have the opportunity to order 120,000 new weapons worth almost 250 million euros.
Haenel is already supplying the Bundeswehr with a sniper rifle. The company belongs to the Merkel Group, which is part of Tawazun Holding (United Arab Emirates). In 2008, CG Haenel resumed its operations as a start-up. Former founder and namesake Carl Gottlieb Haenel established industrial weapons production in Suhl from 1840 onwards.
In the bidding process started in 2017, the Thuringian company submitted a weapon that, in extensive testing, was somewhat better suited to the requirements of the military and also proved to be economically advantageous, according to military circles.
Heckler & Koch have been delivering for almost 60 years
An issue had developed around the G36 supplied by Heckler & Koch in 2012, which started with indications of precision issues. According to subsequent official investigations, these occurred after long sequences of fire or under the influence of heat. The weapon is valued by soldiers to this day.
For Heckler & Koch, the Berlin decision is a severe setback at an inopportune time. The company is heavily in debt: its financial obligations of € 249 million are roughly as high as annual sales. After two years of losses, H&K finally became profitable again. However, the situation remains tense with the debt problem still unresolved.
In 1959, the company delivered its first assault rifles to the Bundeswehr, the G3 at the time. It had been founded ten years earlier by former Mauser-Werke engineers. In the 1990s, H&K was awarded the contract for the G3’s successor rifle, the G36. With modernized G36 machine guns, grenade launchers and rifles, the company will continue to do business with the German armed forces, but in Oberndorfer’s parade discipline, the assault rifle, H&K will no longer stand a chance with the new model.
Power struggle between two large shareholders
A power struggle between two major shareholders of the company sparked riots. Majority shareholder Andreas Heeschen had to hand over a large bundle of shares to a Frenchman and his Luxembourg financial holding CDE due to a long-standing pledge transaction, CDE has been in charge since July.
For H&K, however, it is not the first time that a foreign investor has determined fortunes: until 2002, H&K belonged to the British defense company BAE Systems. 910 employees work at the company’s headquarters in Oberndorf in the Black Forest, and another 85 work in the US, where H&K has a handgun assembly plant. The US market has recently grown in importance and now accounts for a quarter of consolidated sales. Germany still accounts for a third of the company’s revenue, with a downward trend. In addition to the main customer, the Bundeswehr, the police receive weapons.
A third bidder, Sig Sauer from Eckernförde, had withdrawn from the current tender. Sig Sauer complained of unequal treatment and also claimed this due to limited access to test ammunition, which Heckler & Koch had at their disposal due to and could benefit from other supply relationships.
