Chief Executive Officer, Hensoldt
Germany's Special Defense Fund Plan Shows 'Paradigm Shift,' Hensoldt CEO Says
Oliver Doerre, the CEO of German defense company Hensoldt, discusses Chancellor-in-waiting Friedrich Merz's announcement that could see the European nation unlock hundreds of billions of euros for defense and infrastructure investments. Speaking on Bloomberg Television, Doerre says Hensoldt has production capacity it can draw on "immediately" and "orders can come in very quickly."
00:00 - Germany to unlock hundreds of billions of euros for defense and infrastructure investment
01:32 - Hensoldt CEO on capacity, investment, Pegasus program
03:27 - Oliver Dörre on spending in Europe, EU, German...
About Oliver Dörre
Oliver Dörre, who became CEO of the defense technology company Hensoldt in spring 2024, discussed the changing public perception of the defense industry in a November 2024 podcast interview. He stated that the industry had previously been seen as "a bit of the black sheep" and recalled that during his time in the Bundeswehr, his wife sometimes felt ashamed buying bread in a new town. Dörre said that the societal attitude toward the defense industry has shifted, with people now recognizing its importance for national security. Dörre also outlined his strategic priorities for Hensoldt, which specializes in radar and optoelectronic systems and has around 7,000 employees and annual revenue of about €1.85 billion. He noted that the company is about 70% dependent on the Bundeswehr and said he has initiated an internationalization strategy to make the business more resilient. This includes expanding beyond core sensor products into services such as training, simulation, and the operation of data infrastructures.
Transcript (12 segments)
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Guy0:00
Oliver Dörre joins us now. He is the CEO of the German defense company Hensoldt. Great to see you once again, all of you. What did you make of the announcement? How quickly does this money get spent? Germany is talking about 500 billion. How quickly do you think that money comes?
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Oliver Dörre0:16
Of course, we all know that what the main future coalition parties, the Socialists and Conservatives have agreed yesterday needs to go through the parliament, so we need a two thirds majority. I think they have a rash plan on going through this next week. Then the next step will be the capability list. Clearly we see a paradigm shift in Germany. The past decades have been more or less ruled by the principle of design to budget. Now we are designing our armed forces, our defense to capabilities. That is what we need to work out. And I would say we can be very quickly on bringing this up.
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Guy1:03
We are designing for capability now. Clearly there is a need for significant amounts of kit for the armed forces if they will be a credible deterrent. In terms of how long that will take, there is a needed now to do that, but it takes a while to get German defense companies spun up, to get the training done, to get the factories built. We talked about this last time. Is that process accelerating at how quickly is the rate of change developing?
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Oliver Dörre1:34
I would see a spiral approach. Looking at Hensoldt, as I told you last time, we have invested one billion recently. We took responsibility, so the commitment whatever it takes, is very rewarding for us. With what we have done building a new plant, building a logistical center, with all of that I think we scaled a bit above the current demand in anticipation of a 3% to 3.5 percent spending, so we have 50% additional capacity that we can bring immediately into this game. In that regard, we will take the next step on investment. Coming back on this spiral, I think we have a couple of programs where we go into framework contracts. Very quickly based on the budget availability now, we can order these additional, looking at the 20 Euro fighters we have a program called Pegasus where we produced 3, or we have the option of maybe 6 aircraft, so those orders can come in quickly. There is a new portion, as there will be a mix of classical conventional which is tanks, aircrafts and ships. There will be also a portion of innovative things. Going into space, not relying anymore on the U.S., innovation with regards to AI building data networks, also here we are well prepared. And we have to work those capabilities out.
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Anna3:15
Is there, I am trying to get a sense of how much European and German money will stay in Europe, and how much might go elsewhere? In the short-term will there be a need to pay Americans for arms?
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Oliver Dörre3:33
First of all, we see a very strong alignment between what Germany says releasing the debt brake now for the defense budget, which I think is a very strong commitment not putting a ceiling. Then we have E.U. with the rearm plan of Ursula von der Leyen and I have been to Brussels on Monday and what I hear is definitely there is a lot of buying Europe, of course, the German plans are to reinforce the economy buying in Germany. But on the short to midterm, clearly also operationally, we do depend on the U.S., also Germany has heavily invested under the first extraordinary budget into U.S. technologies, but I think we will have a strong call, we will work with the players and have sustaining capabilities through German and European partners.
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Anna4:32
Will you be thinking about adding other product lines? Because your focus is around electronics and things related to defense in that area. When Ursula von der Leyen was talking yesterday about ammunition, drones, vehicles, how does this change your business?
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Oliver Dörre4:51
I am a big fan of strengthening strength. In that regard, I think also with our Meet Now to deliver at scale, we will remain focused on sensors. Force, we broaden the sensor landscape, we are also looking at M&A's on a couple of topics, but the more important thing is going to smart and connected sensors. Be more software and data centric, that is what our strategy Northstar is about, and that is where we will invest and focus as we go forward, because that is the innovative part of now spending budgets, as we will never cope with a spiral of a war economy bringing platforms and so on. It is really about smart arming and here I think Hensoldt will give if you place. That is not about entering additional ranges.
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Lizzy5:48
Good morning, Lizzy here. I will be optimistic and ask you however far away it may seem now, if we do get peace in Ukraine, if there is a truce, how do you expect that would affect European defense spending? Do you think this commitment to an era of rearmament would be there?
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Oliver Dörre6:07
Everything what we see at the moment is very sustainable. I think the budgets that are under consideration is a plan for the next decade to rearm Europe. And I think in Germany it is the same. Looking at the Hensoldt business, our exposure is in a single low digit percentage to Ukraine. Again, peace in Ukraine will not erase the Russian threat. That means clearly Europe has to continue on that path. It is a great risk if we stop investment just for the sake of a ceasefire in Ukraine.
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Guy6:50
This document of this year at 35, now at 66, we got a volatility interruption this morning, the stock has soared. Should you sell stock at this point to fund the enhancements you need to make to the business? Very briefly.
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Oliver Dörre7:06
I think it is premature to really look at that. This all has to go through parliament first. We were prepared. We have invested, so there is no need for quick capex and so on, so in this regard we do our math now based on the decisions of the German parliament, and as we discuss with analysts, we will revisit.