The economy of war: second seminar between observations and the first potential – FOB

French defense industrialists and officials from the Ministry of the Armed Forces met last Tuesday for a new seminar on the war economy. The first step to note ” a great deal was done in a short time » and go back to initial findings and areas for improvement.

A” great job »

Launched by the President of the Republic in June, the interdepartmental war economy project maintains its main objective: to create a defense industry capable of meeting the needs of armies in terms of arms, ammunition supply and support in the context of a major commitment. . In other words, the French BITD should be able to produce more and faster.

It’s been eight weeks the first round table was organized on September 7. The second brought together the same actors for the first time, bringing together for the first time the Richelieu Committee, the main representative of many innovative SMEs, chaired again by Minister for the Armed Forces Sébastien Lecornu. This will allow you to take action A great deal of cold-blooded work between DGA, EMA and industrialists “During the last two months, yesterday, the ministry’s entourage gave an explanation during the briefing.

” A number of issues have already been decided “, – reminds the Cabinet of Ministers. Among them, the choice to concentrate efforts on priority materials. Not ten, but twelve weapon systems, equipment and ammunition were selected due to the high wear rate or expected high consumption rate during the conflict. These are CAESAR weapons and their 155 Essentially a land-based capability, like its 40mm ammunition, the Jaguar’s 40mm rounds and some individual NRBC protections will also be at the MoD checkpoint.

By September, the parties had agreed to a number of commitments. Efforts on the part of the Ministry aim to adopt ” a new way of implementing armaments programs with an emphasis on simplifying them. Currently, for some of them, this will mean, for example, a 20% reduction in document requirements. What is allowed to shift the expression of need to less complex and more standard weapons without degrading performance. And thus, avoid the five-legged sheep that collect transaction points, which are costly in terms of time and money.

On the industrial side, the main demand is related to the need” brought the production function back to the center of their companies “. The last 30 years have been marked by a priority given to technological competition and skill retention, the firm emphasizes. To produce more and faster, the war economy involves re-examining production cycles and subcontracting chains to identify their weaknesses and suggest areas for improvement.

Bottlenecks and Dependencies

A clear picture of the health of the BITD, which is still weakened by the health crisis, material shortages and inflation, is needed to make progress. These analytical works they have already made good progress “, the Ministry of Armed Forces emphasizes. ” The possibilities for acceleration in the supply chain are endless “, he notes. More than a hundred of the 4,000 companies that make up the French BITD are at production standstill and will therefore create a bottleneck if production rates increase. Each will be the subject of an action plan led by the DGA.

Other dependencies relate to supplies produced abroad. Although few are in the defense sector, some are in key areas. This is the case of the powder used for the large-caliber ammunition of the French armies. While France can rely on national supplier Eurenco for its modular cargoes, the latter sources its raw materials mainly from Nitrochemie, a joint venture between Germany’s Rheinmetall and Switzerland’s RUAG MRO. Supply is not under threat today, but the DGA is evaluating the possibility of moving production capacity to France to avoid the consequences of demand saturation.

The same story for semiconductors, which have been missing for several years. France, and thus the Ministry of the Armed Forces, supports the European initiative to promote the sector on a continental scale. this” EU Chips Act Grenoble could benefit from a French landscape with some assets such as its ecosystem.

Finally, the war in Ukraine will cause certain certainties to be reconsidered. For example, the sea serpent of the French small-caliber ammunition industry is now approached from a different angle. For DGA, it is necessary to check whether finding a market with access guaranteed by multiple sources, which is actually considered to be overcapacity, is still valid in the case of a large commitment. And to ask the same questions as dust about the feasibility of maintaining this excess capacity and acquiring fully or partially sovereign capacity.

Solutions to accelerate

Reducing cycle times and increasing production rates prioritize long-term delivery of raw materials and parts supplies. This step alone sometimes represents more than half of the production cycle. Manufacturers and authorities have been working on several support mechanisms for some time. The problem of storage primarily involves control of supply chains. In addition to the relocation of certain industries, the ministry announces that it is studying the mechanism already adopted by the United States. This system would allow military orders to be prioritized over civilian orders if the situation warranted. In other words, referring to the sovereignty argument ” priority grill in turn.

” In fact, 95% of companies already do this “, explaining how to apply to him, the minister emphasizes his surroundings” a certain number of emergency contracts, especially the filling of CAESARs “. However, a legal basis is essential to have a truly binding instrument. So one of the vectors through which this rule could be inserted would be none other than the next military programming law 2024-2030. Whether it is the BITD or the less defense-focused first exchanges on the subject, with groups of industrialists quite favorable reactions.

Actors also put forward the concept. global team “. The principle? The state will undertake to order a certain volume for a certain period of time, for example, for LPM. If the producer provides the workload, in return, he undertakes to create the required reserves to estimate production when the whistle blows, if the situation requires it. ” This is the modus operandi we have found with manufacturers and will do with almost all Top 12s “, announces the firm. It also promotes the desire to converge references to rationalize stocks. In other words, it is necessary to agree to harmonize needs and combine certain parties. “This is an ongoing work with discussions among industrialists”.

Reducing production time is one thing, compressing order times is another. The real challenge is that speeding up ordering would involve not only simplifying the expression of need, but also the provision. commitment letters “. Halfway between intent and contract, they are designed to provide enough visibility to industrialists to enable procurement and initial work without contract negotiations or formal notification. To do this, they need to quickly reach a level of understanding sufficient to initiate the industrial process. the main contractor needs to be integrated into the cycle as soon as possible. The LPM 2024-2030 has yet to be presented, discussed and adopted, but ” no matter what », the effort will be tied to the Top 12’s gear, and will certainly come to fruition with those popular commitment letters.

Who will pay the bill?

The Minister of Armed Forces noted that various actors “have done a great job in a very short time”. However, “everything is not quite finished” and the idea will be to maintain the accepted format and rhythm of a workshop about every two months. It is enough to create a regular report and not lose sight of future projects.

Among the next major areas of progress, financing. Collect supplies, hire workers, complete the production tool, and there will be costs that not all companies can bear on their own. Otherwise, it risks eating away at margins and threatening core investments, starting with R&D.

At first glance, any additional ministry growth seems out of the question for now. The answer will probably be found in the next LPM, which promises to complicate financial arbitrage. ” All this involves financing from banking players or through funds “explains the firm. At a time when the banking world is increasingly wary of supporting the defense sector, it is not so simple. According to the ministry, SGDSN has stepped in to finance exports, a key market for companies’ financial health, but threatened by new banking barriers.

The reluctance of traditional actors will have at least this positive aspect, prompting the emergence of other financial mechanisms. ” On the one hand, there are a certain number of Parisian actors who are in the process of creating funds specialized in sovereignty. “. These are investment vehicles such as funds or company-founded ones such as Ace Aéro Partenaires aimed at aerospace SMEs and ETIs. Protection of Angels. Others are under construction.

Another positive trend is the willingness of some individuals to invest part of their savings to develop French sovereignty. Hôtel de Brienne launched with its colleagues in Bercy. find vectors matching this popular request “. Still at an early stage, the idea will be discussed in more detail at the end of the next workshop scheduled for January.