Rheinmetall says ramping up ATACMS output will take time as US rebuilds stocks

By Matthias Inverardi

DUESSELDORF, Germany, Aug 7 (Reuters) - Rheinmetall said on Friday it would take time to ramp up planned ATACMS missile production with Lockheed Martin, underscoring the challenge the United States faces to replenish weapons stockpiles depleted by the war with Iran.

Reuters reported this week that the U.S. Army had used up much of its global stockpile of long-range precision missiles during the five-month conflict with Iran, raising concerns about military readiness for future crises.

President Donald Trump on Thursday played down concerns over weapons shortages, saying the U.S. had an almost unlimited supply of some munitions while acknowledging stocks of others were tighter. He added that U.S. defence companies were expanding production capacity.

Rheinmetall signed a memorandum of understanding with Lockheed last month to jointly produce Army Tactical Missile Systems, or ATACMS, at Rheinmetall's Unterluess plant in northern Germany. Production facilities are due to be set up next year.

"Naturally, there will also be sufficient capacity to replenish the U.S. military arsenals depleted by the conflict involving Iran," CEO Armin Papperger told Reuters in an interview conducted on Thursday but published on Friday.

"That won't happen in two years. It will take much longer."

Defence companies across the world are racing to meet a surge in demand as governments step up military spending amid conflicts in Ukraine and the Middle East, and U.S. pressure for Europe to take more responsibility for its own security.

HELPING BUILD EUROPE'S DEFENCES

Rheinmetall has been among the biggest beneficiaries of Europe's drive to raise defence spending.

Europe's largest ammunition maker has pursued partnerships and acquisitions to rapidly expand production capacity to meet growing demand.

The ATACMS joint venture still requires approval, but Papperger said the process was well advanced and had the backing of the U.S. government.

The partners intend to target the global market for ATACMS missiles, he added. "There will be a market for missiles for the next 15 years."

Rheinmetall expects the joint venture to generate its first revenue in 2028, the CEO said.

TALKS NEEDED WITH NEW LEONARDO CEO

Papperger said Rheinmetall remained interested in acquiring Iveco's military truck business from Italy's Leonardo, but future talks would depend on new CEO Lorenzo Mariani.

"I had a handshake agreement with his predecessor," said Papperger. "Mariani can decide on new terms, and we will see if they remain attractive to Rheinmetall."

The deal is not at risk, Papperger added, saying he hopes to meet Mariani after the summer break.

BOXER CONTRACT EXPECTED BY YEAR-END

Rheinmetall, which on Thursday cut its sales outlook after Germany cancelled its F126 frigate programme, also expects a multibillion-euro contract to supply Boxer armoured vehicles to the German military to be signed by year-end, Papperger said.

"There is absolutely nothing standing in the way," he said. 

Rheinmetall's share of the contract would be worth €12.4 billion ($14.3 billion), while the total value, including partner KNDS, is expected to reach about €25 billion.

($1 = 0.8681 euros)

(Reporting by Matthias Inverardi, Writing by Miranda Murray. Editing by Thomas Seythal and Mark Potter)