German companies leaving civilian business for defense, this will be big problem for Russia

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More German companies are moving into military equipment and services, breaking the taboo on arms supplies after Russia's invasion of Ukraine.
Shares in engine maker Deutz jumped more than 20% last week after it said it would build tank engines alongside its motorcycle business, the Financial Times reports . The engineering group is among those reviewing or ending its ban on defence contracts.
Some German businesses have long avoided ties to the defence sector due to the legacy of industrial collaboration with the Nazi regime. But since February 2022, some key players in the country's mechanical engineering supply chain, such as laser maker Trumpf and components firm Hawe Hydraulik, have set their sights on military contracts.
Katherine Kluver Ashbrook, a political scientist and former director of the German Council on Foreign Relations, said long-standing attitudes toward the defense sector are changing rapidly.
"After three years of war on the European continent with huge economic losses, Germany seems ready to make a historic shift," she said.
The change in attitude comes after Olaf Scholz announced, shortly after Moscow's invasion of Ukraine, a €100 billion fund to bolster Germany's defences and modernise its armed forces. He plans to send an armoured brigade to Lithuania - the first permanent overseas deployment in the country's modern history - and is reintroducing compulsory military service.
"Russia's war of aggression against Ukraine has undoubtedly heightened awareness in our society that freedom must be defended by military means if necessary," said Daimler Truck, which last month announced a new contract to supply 1,500 trucks to the Canadian military.
Karl Hausgen, chairman of engineering company Hawe Hydraulik, which lifted its ban on defence orders in 2022, said Russia's invasion of Ukraine and further push for Europe to increase its military spending had reduced the stigma around the defence sector.
"A lot of the defence supply chain has a very different image than it did three or four years ago," he said.
The company previously had a rule not to supply products to the defence sector, but now its board-level committee evaluates orders for valves and pumps that could be used in military equipment, including vehicles and ships.
The change also comes as German industry struggles to recover from slumping demand from China. In contrast to the booming defence sector, the country's auto industry has been forced to announce massive job cuts amid a tough transition to electric vehicles.
Germany faced a situation opposite to Europe immediately after the Cold War, when companies were faced with the need to convert military production to civilian production, said Christian Melling of the German Council on Foreign Relations.
"You're rethinking how you can use civilian manufacturing capabilities, technologies and procedures to become more effective in the military world," he said.
Continental, one of the world's leading suppliers to the automotive industry, has announced major job cuts but recently launched a scheme to transfer hundreds of its staff to German defence contractor Rheinmetall.
Peter Sebastian Krause, Rheinmetall's chief executive, said at the time that Continental employees would bring "very valuable" skills to the company.

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