Price slide, sales warning, delivery problems: Rheinmetall's growth story is reaching its limits. Did Papperger overestimate himself?

RHEINMETALL: Cracks in the armor miracle

Armin Papperger is in a hurry. It's June in Paris, it's hot and the Rheinmetall boss now has to rush to the Croatian stand at the Eurosatory arms fair. "They're already waiting," his assistant warns him. Papperger had sat together with Jens Plötner, State Secretary in the Ministry of Defense, and exaggerated. "All right, then let's run over quickly, it's only a few meters," says Papperger, already on the way out of the Rheinmetall pavilion. "You're not going anywhere," a man dressed in black with a button in his ear stops the 63-year-old. He is one of Papperger's bodyguards. „We have to take the car.“ Papperger pauses briefly: "Really now?" he asks, but quickly realizes that any discussion is pointless. „Yes, that has to be the case.“ Papperger gets into the armored limousine that takes him to the Croatian stand, less than 500 meters away.

One of Germany's currently most influential CEOs cannot move freely – even at closed trade fairs like Eurosatory: After Russian attack plans against the Rheinmetall boss became known in 2024, he will be protected like Federal Chancellor Friedrich Merz, 24 hours a day, 365 days a year, at home, on the go, everywhere. "Pinching doesn't apply in this area," said the head of Germany's largest arms company recently. „The jobs have to be done, and anyone who gives in doesn't belong in a job like that.“ And giving in is really not Papperger's thing.

The Rheinmetall boss is thoroughly „systemically relevant“ – if you will. Quite comparable to the big banks during the financial crisis, those institutions that were too big for the state to let them go bankrupt without endangering the system. Papperger and the company he leads are systemically relevant in terms of security policy. Since Russia attacked Ukraine and ex-Chancellor Olaf Scholz declared a turning point, his company has been supplying the Bundeswehr, numerous European NATO allies and Ukraine with weapons. That's exactly why he was targeted by Russian assassins.

Four years ago, when German politicians were looking for companies that could re-equip the Bundeswehr, which had been cut short for decades, to something close to what is usual internationally, Papperger was there. As he sees it, he no longer runs a simple industrial company, but rather a corporation for the defense of the free West.

This narrative is not entirely wrong in view of the changed geopolitical reality in which Russia's ruler Vladimir Putin has chosen the military as a means of his politics of interests and in which US President Donald Trump not only relies on the classic power politics that was long believed to be outdated, but also repeatedly questions the promise of support in the fifth NATO article. But Pappberger linked it to his own interests like no other.

Germany alone could invest more than 600 billion euros in armaments by 2035. A large part of the expenditure goes to the DAX group, which supplies the Bundeswehr with ammunition, tanks, satellites, drones, parts of fighter jets and defense software. The company is having one record year after another. The share has risen by more than 1,000 percent since 2021 and the market capitalization is almost 51 billion euros. That is well below the DAX heavyweights Siemens and SAP (around 200 billion euros each), but also well above the four billion euros that Rheinmetall was worth on the stock exchange before the Ukraine war.

By 2030, sales are expected to increase tenfold to 50 billion euros, profits to increase twentyfold and the number of employees to double. Papperger wants to expand in the USA, he is developing the business at sea and in space. By the end of the year, the order book will swell to over 100 billion euros. While the auto industry publishes new bad news and new layoff programs every quarter, Rheinmetall acts like an oasis of growth in a crumbling Germany. This created a problematic relationship of dependency: Germany is dependent on Rheinmetall – and Rheinmetall from Papperger.

With his very own management style, the native of Lower Bavaria transformed a small, medium-sized armaments company into a European armaments champion within a very short space of time. „He can achieve such a high growth rate because he knows the store inside and out. There is no comparable CEO in the DAX with such in-depth knowledge of the company," says someone from within the group. He doesn't have to spend a lot of time discussing internally whether decisions for Rheinmetall are right or wrong. He also has excellent connections to the Ministry of Defense. That's why Rheinmetall is currently outperforming the sometimes sluggish and more cautious competition in Germany.

But as is usually the case when someone gets too close to the sun: there are also burn marks. The Papperger method reaches its limits. Handelsblatt has spoken to insiders, managers and competitors over the past few months. All of them confirm Papperger's specialist knowledge, meticulousness and his boundless drive, but they also warn of problems in the company that are closely linked to his person. Anyone who looks behind all the orders and billions at Rheinmetall will find a company with structures and processes in need of reform. In addition, operations are no longer running as smoothly as the impressive growth figures had long suggested: Because a frigate order from the Bundeswehr that was believed to be safe was stopped, Rheinmetall had to lower its sales forecast for the current year in June. There are delivery delays in some important tank orders for the Bundeswehr. Defense Minister Boris Pistorius seems increasingly annoyed because of this. The original growth targets for the joint tank joint venture with the Italian defense company Leonardo are also said to be shaky due to tight Italian state coffers.

The share price has fallen by more than 30 percent since the beginning of the year. According to the US bank JP Morgan, there are increasing uncertainties in the medium term. The changed forecasts for the order backlog would also indicate lower sales between 2027 and 2030. Rheinmetall's growth still depends disproportionately on German defense spending. Over 60 percent of all orders currently come from Germany. There are no alternative sales markets of a similar size. The company still earns most of its money from tanks and ammunition, which will play a smaller role in Western defense planning in the future.

It is now coming to fruition that Rheinmetall's growth strategy depends entirely on the skill of its long-standing CEO, who records all important information about the company in an A4-sized notebook – handwritten with fountain pen? There is no real number two in the company. A possible successor to Papperger would be strategically developed with René Gansauge, currently Chief Operating Officer on the board. But Gansauge hardly seems to be involved in the really big strategic and trend-setting decisions, says an influential decision-maker in the company. „He remains in Papperger's shadow. And because Papperger gets all the big deals, he is untouchable internally.“ Some would also call him the „Sun King“ called. The company believes this representation is exaggerated. “The Rheinmetall Board of Directors makes its decisions jointly and by consensus,” the company said. There are regular lively discussions and Mr. Papperger is convinced by good arguments, says a spokesman. „Here decisions are not made according to the landlord style.“

Insiders sometimes see it differently: „Papperger's management style means that Rheinmetall does not have a modern management structure. Everything depends on him. The remaining board members sometimes spend their time on banal things, such as choosing a type of concrete for a new location, says an influential person with knowledge of the processes. Papperger also gets involved in personnel decisions, to the chagrin of Human Resources Director Vera Saal, who is having a hard time in the current structure, according to people close to the company. A Rheinmetall spokesman contradicts this. Accordingly, there would be no such interference in Papperger's personnel issues. „This could end in an operational nightmare,“ says one decision maker. „How should this company be managed if Papperger is no longer CEO?“

New era

When Papperger started working at Rheinmetall in 1990 after studying mechanical engineering, the system enemy collapsed. With the collapse of the Soviet Union and the Warsaw Pact, the existential threat to the West and NATO disappeared virtually overnight. There was no longer any reason for gigantic military spending. With the financial resources freed up in the budget, more sensible projects could be implemented from an economic perspective. The so-called „Peace Dividend“ caused a gradual decline in the Bundeswehr – and at Rheinmetall. From 2013 onwards, Papperger had to manage this shrinking process as a corporate board member. The company's fate depended on the automotive supplier business, which has since been sold. A disgraceful task for the self-confident Lower Bavarian, as his long-time companions say: „In the automotive supplier business, Papperger was dependent on the car manufacturers who dictated the conditions to him. That goes against his nature.“ In the arms business, however, Papperger speaks with the most important decision-makers in different countries. „He is not a supplier, he is a manufacturer of complete systems – and he can dictate the terms.“

For Papperger, rearmament in Europe is therefore a unique opportunity. The peace dividend becomes a war dividend and he can finally implement his armaments vision for Rheinmetall. He wants to turn the arms company into a so-called „one-stop shop“ transform. Anyone who orders from Rheinmetall should receive the entire package straight away: frigates with associated Rheinmetall weapons, anti-aircraft, transport, armored personnel carriers and main battle tanks, reconnaissance and communications satellites, ammunition, cruise missiles, kamikaze and long-range drones.

The problem: A large part of the products that Rheinmetall still offered at the beginning of the new era came from the Cold War era. Tanks and ammunition were the dominant divisions.

Germany had too little of both. Papperger used his good contacts in the Bundeswehr and offered himself as a rescuer in an emergency. As a result, Rheinmetall received billion-dollar orders from the Bundeswehr for artillery ammunition and tanks as well as military transport vehicles. Rheinmetall has now become the world's largest producer in the artillery sector. Further billion-dollar orders, such as for the Skyranger anti-aircraft tank and the Boxer wheeled tank, will follow. Papperger had new ammunition plants set up at Rheinmetall's most important location in Unterlüß in Lower Saxony, in Bulgaria and Romania. At the end of July, Papperger was celebrated in Aschau am Inn for the opening of Europe's largest powder factory, which produces propellant and nitrocellulose for grenades – so far a bottleneck in the production of ammunition.

A month later, Papperger announced additional investments at the Kassel location. According to their own statements, the largest tank factory in Europe is being built there. In addition, he is also saving the Kassel-Calden provincial airport, which has slipped into insolvency several times, for the state government of Hesse, where Rheinmetall is planning a drone and logistics center with funding from the state by the end of 2027. Hesse's Prime Minister Boris Rhein also took the opportunity to drive tanks with Papperger.

The wealthiest CEO in DAX history

Rheinmetall was admitted to the DAX in 2023. It quickly became clear how different Papperger is from the other DAX board members. He is not a CEO mercenary. While all active DAX board members associate high board remuneration and bonus payments with their companies and an even higher severance payment at the end, Papperger is more invested in the company he leads than any other German corporate board member. His private and financial fate depends on the company. He describes Rheinmetall as his “second family”. If Rheinmetall loses money, Papperger loses money. But because Rheinmetall is currently raking in money and the stock has increased in value by almost 7,000 percent since his first investments over 20 years ago, Papperger is probably the wealthiest DAX board member in history. According to estimates, his stock assets amount to a three-digit million amount.

In the company, the Rheinmetall boss uses the income from traditional business to develop new business areas. The company now also supplies the Bundeswehr with kamikaze drones and radar satellites. In Weeze, Rheinmetall produces fuselage parts for Lockheed Martin's F-35 fighter jet. Together with the satellite company OHB and Airbus, Rheinmetall is planning to develop communications satellites for the Bundeswehr. New to the company's offerings in the future will also be surface drones and long-range cruise missiles.

In this „new“ In the defense world, Papperger has to compete with start-ups like Helsing, Quantum Systems or Anduril, whose bosses, at least to the outside world, seem younger and more innovative to investors than Papperger, who likes to appear at official appointments in a three-piece suit and pinstripe suit. The Rheinmetall boss is trying to polish up the company's outdated image. He primarily relies on joint ventures. With them, Rheinmetall is tapping into technology that it does not master.

The Dax group cooperates with the Finnish start-up Iceye on radar satellites, with Boeing Australia on drones and with the Dutch start-up Destinus on cruise missiles. The company does not develop numerous new defense technologies itself, but Rheinmetall is usually faster than the competition.

This is particularly clear in the satellite sector. Until a year ago, Rheinmetall had no contact with this matter. The DAX group only founded the joint venture in November 2025. Instead of laboriously developing the technology itself, Rheinmetall used the time and converted the originally civilian automotive supplier plant in Neuss into a defense location within a few months. Instead of car parts, Rheinmetall in Neuss is now building satellites for the Bundeswehr together with Iceye. The first satellites manufactured there are scheduled to be sent into orbit for the Bundeswehr at the beginning of next year. During the same period, most competitors have not even left the concept phase.

The enormous pace that Papperger is setting also has to do with the latent fear that the financial blessing will dry up. Germany will not continue such high military spending indefinitely. At best, until 2035. If Ukraine and Russia make peace or if Russia's dictator Vladimir Putin capitulates, it will probably end sooner.

The hope of politics

At the end of March, Papperger told the US magazine „The Atlantic“ an interview in which he described Ukrainian drone production as more of a „playing with Lego bricks“ referred to, whose production is sometimes done by „housewives“ be done in the 3D printer. "Anyone who makes such statements shows that they have understood nothing, absolutely nothing, of the dramatic changes in modern warfare that we can see in Ukraine, but now also in the Gulf," said KNDS Chairman Tom Enders. „Software, robotics, AI are playing an increasingly important role.“

Others in the industry see Papperger's communication as more nuanced, but many think he is too forward. Business partners and investors know that Papperger's announcements always have to be subtracted from a fair bit of exaggeration, says an industry manager who is well disposed towards Papperger. Others find the Rheinmetall boss's rhetoric too arrogant.

But with the exception of Enders, there is little open criticism of Rheinmetall and Papperger, not internally anyway. Group insiders report that there is rarely any contradiction on the supervisory board. Given a profit margin of over 17 percent in the first half of the year and annual sales growth of more than 30 percent, there is little reason for criticism. Externally there is usually applause for Papperger when he opens a new factory in Germany. In Kassel, Hesse's Prime Minister Rhein even spoke of a "job machine" that the company would create.

The projections made by politicians, for example, on the hopeful Papperger, who will create new industrial jobs with his investments in Germany, sometimes blind the decision-makers in Berlin, say critics. His promises are simply too tempting. He even has the confidence to save the auto industry – at least partially. The Rheinmetall boss calculates that the industry, in which massive job cuts are currently being cut, has a good 660,000 employees and its suppliers. By the end of the decade, including suppliers, up to 300,000 people could be working for the defense industry thanks to Rheinmetall's growth. „We can't compensate for everything, but we can compensate for a lot,“, says Papperger, – and the country's politicians are happy to believe him.

Broken promises

The conversation with State Secretary Plötner in Paris was also said to have been about how arms production in Germany can be ramped up more quickly. Impatience in the Defense Ministry is growing. Even four years after Russia's attack against Ukraine, the Bundeswehr still has to wait a long time for new equipment. The anti-aircraft defense system is still full of holes, the introduction of digital radio is a drama, and the Bundeswehr is still dependent on analog, easily intercepted radio devices. The Bundeswehr is also only poorly equipped with drones and drone defense; there are no long-range cruise missiles with a range of over 500 kilometers. Meanwhile, Defense Minister Boris Pistorius (SPD) is also openly expressing his criticism, for example regarding the delivery delays for the so-called heavy infantry weapon carrier from Rheinmetall. „The industry simply did not deliver some vehicles, eight in number, on time. We will remind the industry of our agreements again," said Pistorius during a visit to the troops in Lohheide, Lower Saxony, in mid-July. In addition to the heavy infantry weapon carrier, there are also said to be delivery delays for Rheinmetall's recovery and engineer tanks.

At the Defense Ministry, the question of who can deliver something is no longer the most important question, but rather when and in what quantities, says one person with information. But the German arms industry is still a long way from mass production. Rheinmetall is no exception. „At Rheinmetall, too, work is still predominantly done like in a factory. They celebrate when two robots stand in a small area and, for example, apply the Rheinmetall logo to a component. “This is almost silly compared to the automation in the auto industry,” an insider tells Handelsblatt.

There is also no talk of comprehensive automation in Rheinmetall's central tank production in Kassel, where the Boxer wheeled tank is manufactured for the Bundeswehr. The factory continues to weld and screw by hand. In the future, only a single step in the welding work will be automated by a robot arm. From the company's point of view, a comparison between mass production in the automotive industry and production in the defense industry would be wrong anyway. The number of units in the automotive industry is significantly higher than in the defense industry.

There is still no clear and comprehensive plan to industrialize arms production more, says an insider. According to informed circles, Rheinmetall has already had to pay its first fines because it did not implement arms orders in the required time. The company counters: „Rheinmetall is pursuing a comprehensive and systematic approach to industrializing its production.“ Among other things, the production of artillery ammunition has been more automated. Starting next year, the company will produce 1.1 million shots of the 155 millimeter caliber. This year around 140,000 shots will be produced in the new factory in Unterlüß. Production of armored vehicles will also be significantly scaled up. Rheinmetall does not comment on penalties due to delivery delays.

Boris Pistorius' Defense Ministry is now increasing the pressure on industry. Last Sunday, Chancellor Friedrich Merz (CDU) also announced in a summer interview that armaments projects to modernize the Bundeswehr would be “much more cost-efficient.” to want to do. Ukraine shows how it can be done much more cheaply. The Chancellor now wants to review the entire procurement procedures and procurement projects together with Pistorius. And Papperger's vision for growth is now beginning to have its first cracks.

The frigate debacle

Rheinmetall's suppliers also experience the pressure to deliver first hand. Last year, Rheinmetall invited the international press and politicians to the opening of the artillery factory in Unterlüß. What is not known, however, is that there is already a „pre-opening“ to which only the plant's suppliers were invited. They should be presented with the partially automated production, which Papperger is particularly proud of.

But the presentation didn't go as expected, and some automation steps didn't work. Papperger then threw a tantrum in front of the crowd. This is what participants in the presentation say. The emotional outburst is hardly surprising. The rapid ramp-up of production capacities in the artillery sector and the income from this business are the core of Rheinmetall's growth strategy.

Papperger's end to the F-126 frigate project came completely unexpectedly. The costs and schedules of the Dutch general contractor Damen got massively out of control. Rheinmetall wanted to take over the project and had presented a plan for its continuation. Last year, Papperger took over NVL, the marine division of the Lürssen Werft, specifically for this purpose. The takeover is said to have gone completely in his style, with a handshake mentality with the owner Lürssen family, including a special price of around 1.5 billion euros.

The plan was as simple as it was tempting: After the takeover, Rheinmetall would have received the F-126 order, which would have been more than ten times the takeover price. With Rheinmetall's rescue plan for the frigate, the costs would have risen to 18 billion euros. The ships would not have been launched until 2031 and not in 2028 as planned. Despite the immense costs, Papperger was sure that he could implement the project, say people close to the company. "The end of the F-126 caused real shockwaves at Rheinmetall, Papperger didn't expect that," says people close to the CEO.

The Rheinmetall boss actually wanted to get into the marine business much earlier. He originally had his eye on the submarine manufacturer TKMS, which was still part of Thyssenkrupp at the time. However, the two alpha managers met each other, Papperger on the one hand and Miguel Lopez from Thyssenkrupp on the other. Neither of them really liked each other. In the end, emotions prevailed over reason, say people familiar with the events. TKMS was spun off and went public. A short time later, billion-dollar submarine orders from Germany and Canada followed. Another order could come from India. TKMS is currently what Rheinmetall was before: the darling of the stock market.

Something similar is happening with another prestigious procurement, the so-called fighter-bomber drone. After it was said that the Air Force would need a first contingent of autonomous drones flying in conjunction with Eurofighters and the F-35 as quickly as possible, Papperger initially had the right instinct. He sought cooperation with Boeing Australia, which has already developed such a drone as part of an Australian drone program over the past eight years. Here too, Papperger was sure that the initial order would be worth almost a billion euros. But he probably won't come. The authorities want to wait for offers from competitors such as Helsing and Airbus, whose autonomous drones will probably not be available until 2035, and then decide.

Rheinmetall also had to wait longer than planned to procure the Boxer wheeled tank as part of the “Arminius” project. The first contingent will not be ordered until the end of the year, with Rheinmetall having an order value of 12.4 billion euros.

For some close to the company, these are consequences of Papperger's ego trip. The management level below the board, which carries out the day-to-day operational work, is virtually invisible because Papperger wants to keep an eye on everything and ultimately decides everything himself, says a high-ranking decision-maker at the company.

With Head of Technology Klaus Kappen and Head of Digital Timo Haas, there are only two managers with a little more visibility in the company. The remaining managers and board members, on the other hand, are largely pale. „At most, they only get involved in decisions that affect individual locations. But they don't really run the entire group together.“

From Rheinmetall's perspective, this representation is not correct. „In fact, Rheinmetall basically follows a “one-voice policy” in its media work. In addition, it is in line with the Group's guidelines that the Executive Board is responsible for strategic issues. The operational business is managed by the division heads. This division has proven to be very effective, says the company.

However, Rheinmetall's long-term success depends on whether it can implement the large volume of orders at the appropriate speed. With a clear distribution of tasks and responsibilities, this would probably be easier in the current phase. In Berlin politics, Rheinmetall's role as the main supplier to the Bundeswehr is being viewed more and more critically. Any further delay in delivery could therefore jeopardize Rheinmetall’s growth.

„I believe that there are greater risks in Rheinmetall than assumed. If things go really badly, the federal government could take more time than Papperger would like to activate orders for Rheinmetall worth several billion euros, says someone who has been observing the industry for decades.

This refers to the orders that Rheinmetall lists in its balance sheet under the name „Nomination“ recorded. These orders only exist on paper. These are framework contracts where it is not clear when they will be called up. At the end of the second half of the year, the value of these contracts was over 24 billion euros.

„If the war in Ukraine ends tomorrow, then the pressure will be off. Then the federal government will certainly no longer be in such a hurry to order ammunition from the framework agreements. The orders would then be on ‚hold‘.“ The company does not share this concern. According to Rheinmetall, the Bundeswehr's procurement is essentially derived from NATO's defense plans. „The need to replenish stocks and increase forces within the alliance is undisputed.“

In any case, Papperger is convinced of that. He was asked at the laying of the foundation stone of the powder plant in Aschau whether Rheinmetall would be able to cope with this growth. Papperger is by no means dismissive. „Anyone who grows at 40 percent is delivering. We don't have to hide.“ Of course, you can't really blame him for the latter. ?

QUOTES FACTS OPINIONS

Anyone who makes such statements shows that they have understood nothing, absolutely nothing. Tom Enders, Chairman of the KNDS Supervisory Board Anyone who gives in doesn't belong in a job like this. Armin Papperger, Rheinmetall boss, has a market capitalization of 51 billion euros. Source: own calculation Rheinmetall's share price was at times 1000 percent higher than before the Ukraine war.

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happened on September 4th, 2026

web address: https://kontrapolis.info/18635/author/group: Fasse, Markus and Tyborski, Roman (Handelsblatt issue 170/2026)feed date: Thursday, September 10, 2026 - 08:31