German defence company Rheinmetall discusses potential Volkswagen factory conversion

Wednesday saw shares of Rheinmetall (ETR:RHMG) AG leap following earnings results and comments from the company’s CEO regarding the potential conversion of Volkswagen (ETR:VOWG_p)’s Osnabrueck factory for military production. As Volkswagen explores options for the future of the site, Rheinmetall’s interest in repurposing or acquiring automotive plants under the right conditions has come to light.

Armin Papperger, CEO of the German defense contractor, discussed the suitability of the Osnabruck site for military production, noting that tank factories require specific infrastructure such as heavy-duty cranes and load-bearing capacities. He suggested that significant orders, like those for the Lynx infantry fighting vehicle, would be a prerequisite for investment in new locations.

Rheinmetall’s shares surged nearly 10% on the day, buoyed by the announcement of robust full-year earnings for 2024 and a substantial backlog. Despite a backlog of €55 billion and new nominations worth €27 billion falling short of the company’s previous forecasts of €60 billion and €30 billion to €40 billion, respectively, investor sentiment remained positive.

The spike in Rheinmetall’s stock value is part of a broader trend, with an 88% increase since the beginning of the year. This growth underscores the company’s strong position in the defense sector and the market’s reaction to potential expansion opportunities.

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