Europeans attending last month’s Munich security conference were left reeling when a blistering speech by US vice-president JD Vance laid bare the perilous state of transatlantic relations — but one man remained unfazed.
“It’s good for the business,” said Armin Papperger, chief executive of German arms maker Rheinmetall, whose shares have soared as the new administration in Washington launched Ukraine peace talks without Kyiv and threatened to end decades-long security guarantees for Europe.
Speaking to the Financial Times on the sidelines of the tumultuous conference, the 62-year-old Bavarian said Europe had no choice but to dramatically boost its defence capabilities — and that “this is a company that can make it happen”.
Few businesses have profited from the war in Ukraine and the growing strains in US relations with Europe as much as Rheinmetall, a 136-year-old maker of munitions and armoured vehicles that has emerged as a rare success in a German industrial landscape plagued with decline.
The company is expected on Wednesday to report sales last year of roughly €10bn — almost double the €5.7bn it made in 2021, the last year before Russia’s full-blown invasion of Ukraine. The company is targeting a figure of up to €40bn by 2030.
Rheinmetall shares have surged as European investors shed their ethical aversion to arms stocks and are now more than 10 times higher than before the invasion — and up almost 140 per cent since Donald Trump’s US election victory in November.
“Over the last 12 months we got more contracts than over the last 15 years,” said Papperger.
The surge in demand is set to continue after a seismic shift in German policy following Friedrich Merz’s election victory last month. The chancellor-in-waiting last week announced plans — pending approval by the German parliament — to tear up his nation’s curbs on borrowing to allow virtually unlimited defence spending, and promised to do “whatever it takes” to defend freedom in Europe.
It is a mantra gradually being adopted across much of the EU, with European Commission president Ursula von der Leyen also announcing a plan to mobilise €800bn for defence.
Soaring public expenditure on arms — and the companies profiting from it — may be unpalatable to some in Europe, where many states that have long enjoyed a “peace dividend” have scrimped on their militaries in favour of education and health.
But defence experts say a huge drive to expand production must succeed if European nations are to have any hope of meeting the double challenge of stepping up support to Ukraine and re-arming their own militaries in the face of a looming US retreat.
If the scaling-up is successful “it can help provide Europe, Germany and others with defence equipment that it desperately needs”, according to Ben Schreer, head of the European security and defence programme at London-based think-tank the International Institute for Strategic Studies. Rheinmetall, he said, was “well placed to play a major role in re-arming Europe.”
Papperger, an engineer by training with brushed-back white hair and a penchant for silk scarves and hunting on the company’s land, joined the weapons maker in 1990 and rose to become CEO in 2013.
He was paid €3.6mn in 2023, according to the most recently available figures, but he will have benefited from the company’s meteoric rise as he has continued to buy stock. A roughly €250,000 share purchase last month alone has already risen in value by about €140,000.
While arms executives often prefer to stay in the shadows, the Rheinmetall boss has chosen a different tack since Vladimir Putin launched his assault on Ukraine.
Days after chancellor Olaf Scholz proclaimed a “watershed moment” in German defence and security policy and unveiled a €100bn special fund for re-arming the neglected Bundeswehr, Papperger went public with a list of Rheinmetall products he suggested could use up €42bn of the new pot.
He has since become a fixture on television screens and newspaper pages, issuing warnings about European complacency on Russia, the sorry state of national arms depots and the need to raise defence spending.
His rising profile comes at a personal risk: Nato diplomats said last year that US intelligence had uncovered an alleged Russian plot to assassinate him. Asked whether he was still under threat, Papperger told the FT: “Yes, it does not stop, but the government takes care of me”.
Rheinmetall is not the only European defence contractor to have benefited from surging European military spending, which reached $457bn in 2024 — up 50 per cent on 2014, according to IISS figures.
Peers including the UK’s BAE Systems, Sweden’s Saab and Italy’s Leonardo have all enjoyed booming sales, as have several of Germany’s privately owned and more discreet businesses such as missile and munitions maker Diehl Defence and Krauss-Maffei Wegmann, the company behind the Leopard 2 tank.
But Rheinmetall has played a key role in Europe’s drive to increase production of the large calibre 155mm ammunition that Ukrainian forces are burning through in grinding trench warfare along the 1,000km frontline.
Over the past three years the company has boosted its production capacity of 155mm shells 10-fold to 700,000 rounds through the €1.2bn acquisition of Spanish rival Expal, expansion of its main production site in Unterlüss and the launch of new facilities in other countries.
While the EU missed its target of delivering 1mn rounds of 155mn ammunition to Kyiv by the end of 2023, Rheinmetall aims to exceed that figure on its own at the end of next year, with Papperger noting that the “huge scaling effect” has cut production costs by up to 30 per cent.
Aside from munitions, the company is also behind the Marder infantry fighting vehicle as well as gun barrels for Leopard 2 tanks and for Panzerhaubitze 2000 self-propelled howitzers, all of which have been sent to Ukraine.
Bank of America analyst Benjamin Heelan said Rheinmetall had been unusually “willing to invest their own capital into scaling production”, in some cases before governments had placed orders.
A decision last year to invest €300mn in Unterlüss was based solely “on a handshake deal between the chancellor and myself”, said Papperger. A new plant at the site, due to open next month, will eventually have annual capacity of 200,000 shells a year.
“At the moment we have 10 factories being built simultaneously . . around the world,” he added, referring to sites under construction in countries such as Romania, Hungary and Lithuania.
Camille Grand, a former senior Nato official now at the European Council on Foreign Relations, said Rheinmetall had been smart by avoiding a “blame game” between defence companies and officials about Europe’s sluggish rearmament — “They have been quite bold and moving at pace and not entering this conversation.”
Alexander Wahl, analyst at Stifel, said he knew of no other manufacturing company that had “grown so quickly in so little time”. Over the past two years Rheinmetall has spent almost €8bn to boost capacity.
The expansion includes plans to build factories in Ukraine in a bet that European governments will continue to prop up the country’s army. Volodymyr Zelenskyy, who has repeatedly met Papperger, most recently last month in Munich, has praised the CEO’s “dedicated and sincere” support for Kyiv.
Yet the company has not always been so staunchly anti-Putin. It struck a notorious deal in 2011 to help Russia’s army develop a training facility that became the base for a huge military exercise involving 200,000 troops conducted months before the full-scale invasion of Ukraine.
That deal was halted by the German government after Russia’s annexation of Crimea in 2014, prompting the company to downgrade its profit outlook and sue Berlin for €120mn.
But Papperger quickly grasped how Russia’s invasion of Ukraine would change the dynamics not just for European security, but his industry. “He’s good at shifting with the changing winds,” said one Rheinmetall insider.
Papperger’s frequent public announcements have at times irked officials in Germany’s defence ministry, according to the insider, although they added that he had forged close relationships with defence minister Boris Pistorius and with Merz.
Potential employees have also taken a positive stance on the company, which last year entered the top 10 most attractive employers for young engineering professionals, according to a survey.
In another sign of shifting attitudes in Germany — a country with a deep pacifist streak — Rheinmetall last year announced a sponsorship deal with Bundesliga football club Borussia Dortmund. Some fans voiced unease but the region’s Green economy minister, Mona Neubaur, rallied to the company’s defence, saying the Ukraine crisis had made it clear that “we need companies like Rheinmetall to be able to defend our democracy and our freedom.”
Rheinmetall has also been quick to adapt to the shifting tides in Washington, positioning itself as a beneficiary of the new transactional order that is reshaping transatlantic defence ties. In December it completed the $950mn takeover of Michigan-based Loc Performance, which will allow it to bid for lucrative US army contracts, making the US a key market for its future growth.
While many European officials have derided Trump’s approach to Ukraine and European security as unpredictable and erratic, Papperger has described it as pragmatic and rational.
“I know that the Trump administration is afraid that if they are not rough enough, that the Europeans again do nothing” to boost defence spending, he said in Munich, fresh from a meeting with Nato secretary-general Mark Rutte.
Papperger noted that Angela Merkel, who was German chancellor for 16 years until 2021, had promised to spend 2 per cent of GDP on defence — “and nothing happened”.
Now, he said, the world had entered a new era. “The Americans will no longer pay the bills.”
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