From Asia Times, March 22:
Converting mass-production auto factories to mostly hand-built, lower-volume weapons output makes little industrial sense
The EU has proposed a Rearm Europe Plan that would raise more than € 800 billion ($866 billion) for defense, while Germany has just passed legislation that ostensibly will commit €1 Trillion ($1.08 trillion) to the defense sector.
While on the surface it looks like Europe is preparing for the next war, the truth of the matter is rather different: Europe is trying to cover up its deep economic problems by throwing cash into its economies by building armaments. But will this strategy work?
There are problems at different levels.
The first is economic. At the heart of the planning is the idea that civilian factories can be converted to produce armaments, especially heavy equipment such as tanks and armored fighting vehicles. The German company, Rheinmetall, for example, is considering buying a Volkswagen factory in Osnabrück, northern Germany, a facility that otherwise faces an economically uncertain future.
A similar idea has been promoted by Italy’s government, seeking to push Stellantis to start producing defense hardware in its auto factories.
Last year Stellantis https://www.reuters.com/business/autos-transportation/stellantis-italy-output-falls-475090-vehicles-2024-cars-lowest-level-since-1956-2025-01-03/ produced fewer than 500,000 vehicles in Italy (Fiat plus Alfa Romeo, Maserati, Lancia) compared with 751,000 in 2023. The 2024 figure was the company’s lowest in Italy since 1956.
The chairman of Stellantis, John Elkann, rejected the government’s demand to convert some factories to defense production, saying that his company did not believe “that the future of the car is the defense industry.”
A key problem is that the economic argument for converting high-volume production to low-volume defense equipment makes little industrial sense. While it is true that some car companies that produce trucks and other heavy equipment have cranes and lifts that potentially are usable for armored vehicles, even tanks, these plants are organized for mass production – not for mostly hand-built output.
In World War II the US halted most automobile manufacturing (except for vehicles needed for the war) and converted to defense manufacturing. The US output was staggering: 297,000 aircraft; 193,000 artillery guns; 86,000 tanks and 2 million trucks. Today the US produces only 250 fighter jets annually. In a five year conflict such as World War II, that would amount to a total production of 1,250 jets, nothing like World War II production.
Today Europe produces no more than 50 battle tanks each year. While that number is very low, it would take years to convert an auto factory to tank production, so the actual output of tanks in Europe can’t grow by much over the next five years. Moreover, a plant conversion to military hardware means a substantial redesign of an automobile factory. Fewer employees would also be needed, although Germany’s labor unions would have a lot to say about employment levels, compensation and social benefits....
....MUCH MORE
We too are looking at Europe's rearmament plan as economic stimulus rather than warfighting capacity.
From the introduction to March 5's "As Germany Positions To Be The World's Liquidity Pump.... ":
"The world's" may be a bit of hyperbole but combined with what China will have to do to achieve the 5% growth figure that was reaffirmed yesterday, we are looking at potentially maybe $2 trillion in deficit spending over the next six years between the two economies and though not enough to offset the shrinkage of the U.S. deficit—which shrinkage must happen to delay slow-motion but inevitable worldwide disaster—it looks like the global party could continue until sunrise and/or 2030.
The fact much of the German deficit spending will go toward armaments is all the better—it is the most inflationary bang-for-the-buck, so to speak, spending a government can do; you make stuff, you blow it up, you make more stuff. It may not add to a country's real national wealth but boy-oh-boy does it boost nominal GDP growth.
This is a really big deal. If you don't believe me, believe the German bond market....
