Armor: How Armin Papperger reaches his limits at Rheinmetall

Cracks in Düsseldorf's armaments miracle: Rheinmetall's growth story is getting scratched. At the center of the criticism is CEO Armin Papperger. Did he overestimate himself?

Paris, Kassel, Unterlüß, Aschau am Inn, Düsseldorf. 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 admonishes 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, it has to be.” 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 corporate bosses 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 Chancellor Friedrich Merz, 24 hours a day, 365 days a year, at home, on the move, 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 “systemically relevant” through and through – 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.

» Read also: Rheinmetall lowers forecast again – shares collapse by 17 percent

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 Papperger 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 creates a problematic relationship of dependency: Germany is dependent on Rheinmetall – and Rheinmetall on 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 deep 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.

Especially since things are no longer running as smoothly operationally as the impressive growth figures had long suggested: Because a frigate order from the Bundeswehr that was thought 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.

Is it now coming to fruition that Rheinmetall's growth strategy depends entirely on the skill of its long-time CEO, who records all important information about the company in an A4-sized notebook - handwritten with a 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 brings in all the big deals, he is untouchable internally." Some would also call him the “Sun King”.

Here decisions are not made according to the landlord style. Rheinmetall spokesman

The company believes this representation is exaggerated. “The Rheinmetall Board of Directors makes its decisions together and in agreement,” the company said. There are regular lively discussions and Mr. Papperger is convinced by good arguments, says a spokesman. “Here we don’t make decisions like landlords.”

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 selecting a type of concrete for a new location," says an influential person with knowledge of the events. 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 is 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 car 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 conditions.”

Papperger, Bavaria's Prime Minister Markus Söder: Armament as a huge opportunity. Photo: REUTERS

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 transform the arms company into a so-called “one-stop shop”. 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 - until now 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 personal 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.

Puma tank: Some things from Rheinmetall look old compared to the armaments start-ups. Photo: Michael Matthey/dpa

In this “new” world of armaments, 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 pinstriped 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 develops numerous new armaments tests