San Francisco Frontiers - Mercedes Benz mulls diversification into defence

"The world has become more unpredictable, and I think it is quite clear that Europe needs to strengthen its defence capabilities," CEO Ola Kaellenius said in an interview with The Wall Street Journal published Friday.

"If we are able to play a positive role in this area, we would be ready to do so," said Kaellenius, a German-Swedish national.

His remarks come amid Germany beefing up its military capacity in response to Russia's invasion of Ukraine in February 2022.

The German defence industry has locked onto that trend, as illustrated by the rise of arms maker Rheinmetall in recent years, with the group recently pushing into the naval and dronemaking spheres.

In contrast, German automakers, such as Mercedes-Benz and Volkswagen, are battling crises, caught between tariffs and bitter Chinese competition.

In late March, the CEO of fellow German auto giant, Volkswagen, Oliver Blume, said he was "in contact" with defence companies, particularly those involved in missile defence, to convert a German factory to produce military transport equipment.

According to the Financial Times, discussions are under way with Rafael Advanced Defense Systems, the company that designed Israel’s Iron Dome.

Asked by AFP to comment on Kaellenius’s interview, a Mercedes-Benz spokesperson said the firm "has for many years been supplying chassis to specialised firms which equip and market them under their own responsibility and under their own brand for military applications".

“Our activities in the security and defence sector constitute a strategic development focus that we will continue to actively pursue, in collaboration with our partners," the spokesperson added.

In his Wall Street Journal interview, Kaellenius did not go into details on what kind of products Mercedes-Benz might manufacture.

He predicted that defence-related business would represent only a "minor part of Mercedes-Benz’s operations" compared with auto and van manufacture.

But he added defence could be "a rapidly growing niche that could also contribute to the group’s financial results."

N.Wilson--SFF