show gun In the Crosshairs

German weapons maker Heckler & Koch is battling to protect its reputation after the government said the G36 assault rifle, the standard weapon of the German armed forces, is inaccurate when it gets hot.
The defense company's fortunes have sunk pretty low.

If your rifle stops shooting straight when you need it most, you’ve got a problem.

If the German defense ministry is to be believed, that is what happens with the G36 assault rifle used by the Bundeswehr armed forces as well as armies and police forces in more than 40 other nations.

Its manufacturer, Heckler & Koch, was quick to deny the surprise accusation leveled by the ministry this week. In a statement released on Tuesday, the company said it was “appalled” by the claim and ruled out paying any compensation.

 

“The G36 has been in use for almost 20 years and has proved its effectiveness in many missions is more than 35 countries,” the company said. Each one of the 178,000 G36 rifles delivered to the German military to date had gone through quality checks by Bundeswehr technical experts and been approved, it said.

The company added: “We find it highly regrettable that the ministry didn’t seek talks with Heckler & Koch before making a public statement with far-reaching consequences for our technical reputation.”

The potential damage to the image of the venerable defense company, founded in 1949 and based in the small south-western town of Oberndorf, is indeed huge.

Defense Minister Ursula von der Leyen caught Heckler & Koch unaware when she told the press on Monday that the G36 “appears to have a precision problem in high temperatures or when it's heated from firing.” A ministry spokesman said the problems had been confirmed in independent tests.

Heckler & Koch, which has a workforce of 700 and generated sales of €171.8 million, or $185 million in 2013, isn’t the first weapons contractor to suffer a public dressing-down from Ms. von der Leyen. Determined to get a better deal out of companies in future procurement talks, she has criticized aircraft giant Airbus for delays in the delivery of the A400M military transport plane and is considering seeking compensation from tank builders Rheinmetall and Kraus-Maffei Wegmann for delays in the supply of Puma armored fighting vehicles.

 

Minister Ursula von der Leyen is taking a closer look at the defense ministry's contracts.

 

She’s convinced that an intransparent web of interests has been spun between the Bundeswehr and its suppliers over the decades, and that this has led to an array of supply problems. She wants to put a stop once and for all to the days when generals and chief executives agreed new weapons deals over an evening schnapps and a handshake.

“The interests of the Bundeswehr as the customer and industry as the supplier must be clearly separated,” said the ministry.

Ms. von der Leyen also wants politics to be kept out of arms procurement, a stance that has thrown down the gauntlet to fellow lawmakers accustomed to the age-old tradition of keeping voters sweet by securing lucrative deals for companies in their constituencies.

While the entire arms industry is feeling the heat from the ambitious minister’s assault on past privileges, the impact on Heckler & Koch could be disastrous. For one, it stands to lose its most important customer, the Bundeswehr. The defense ministry said it would review whether the troops “must be equipped with a different assault rifle in the medium term.” If the Bundeswehr turns its back on the rifle, other countries might follow suit.

Video: Heckler & Koch G36 on fully automatic.The lightweight rifle, made from glass fiber, can fire at a rate of 750 rounds a minute. “The G36 is ideally suited for dismounted infantry operations,” Heckler & Koch says on its website. “For optimal handling, weight, and rate of fire in close-quarters battle, and for rapid, accurate and penetrating single fire in long-range combat.”

Even at an outside temperature of just 23 degrees Celsius the plastic parts became less firm, making the weapon more inaccurate, the army’s testers concluded.

It has been in use since 1996 and Bundeswehr soldiers have been complaining about precision problems since 2002. In 2011, one of the army’s weapons inspection offices warned that the rifle had a spread of 50 to 60 centimeters at a range of 100 meters once it was hot from firing.

Even at an outside temperature of just 23 degrees Celsius the plastic parts became less firm, making the weapon more inaccurate, the army’s testers concluded.

But the ministry went on ordering the rifle. Just a year ago, the ministry said: “The G36 rifle is technically reliable and without faults.”

Heckler & Koch on Tuesday insisted that as the Bundeswehr’s own quality control office had approved every single one of the rifles it purchased, “any considerations about compensation for faults are factually and legally unfounded.”

Some lawmakers have criticized the company for being too secretive in the past. “Heckler & Koch is the great unknown in Berlin,” said Tobias Lindner, defense policy expert for the opposition Greens party. “While other companies seek out contact with us and are ready to answer critical questions, the company hardly ever makes an appearance.”

Rainer Arnold, defense expert for the center-left Social Democrats, junior coalition partners to Chancellor Angela Merkel’s conservatives, said Heckler & Koch had repeatedly misinformed him, for example regarding an investigation into alleged illegal arms deliveries to Mexico.

The Stuttgart state prosecutor’s office is investigating a possible breach of Germany’s tight weapons export rules after it emerged that G36 rifles were supplied to Mexico, where some police forces are accused of having ties to drug cartels.

The G36 problems come at a bad time for the heavily-indebted company which is mired in a management crisis. Niels Ihloff, a former co-managing director and the firm’s chief strategist, was dismissed in February and has taken legal action against the firm. The company also dismissed staff responsible for the exports to Mexico.

Rating agency Moody’s downgraded the company from Caa2 to Caa3 last year. Heckler & Koch has to pay €14 million interest every six months on a €295 million bond.

As Martin Lemperle, another member of the management team, recently told a local newspaper: “The rosy days are over.”

 

Handelsblatt's Till Hoppe covers foreign policy, Michael Braecher writes about finance and Hans-Werner Buchenau covers companies and markets. To contact the authors: [email protected], [email protected][email protected]