Advertisement

You will be redirected to the page you want to view in  seconds.

U.S. Budget Cuts Hit Norwegian Defense Sector

Apr. 5, 2013 - 07:52AM   |  
By GERARD O’DWYER   |   Comments
  • Filed Under

HELSINKI — Norway’s rapidly globalizing defense industry is facing a worrying falloff in military exports, with the decline compounded by cuts in the U.S. defense budget, according to government statistics and defense industry leaders.

Moreover, Norwegian defense firms await new government initiatives that would tighten arms export rules and impose new controls on the types of weapons that can be sold to certain countries.

The scaling-back of orders and production is already affecting several leading local defense groups, including Kongsberg and the Raufoss-based munitions supplier Nammo, which plans to lay off an initial 30 personnel this spring.

“The U.S. budget cuts are affecting us in the short term, and there is no guarantee that the number of planned layoffs will not rise above 30,” Nammo CEO Edgar Fossheim said. “Given that the U.S. is our most important market, we can’t ignore that our turnover in this market will fall this year.”

Nammo, which employs 2,000 worldwide, is forecasting a 20 percent drop in exports to the U.S. in 2013. This is expected to reduce the value of exports, in what is the company’s biggest customer market, by up to $44 million.

Fossheim said the company will grow its business and strengthen its sales performance in the U.S. over the long term. One-third of Nammo’s total exports in 2012, or $540 million, were to U.S. customers.

“Even with the latest cuts, the U.S. defense budget is still around twice as large as the combined defense budgets of the rest of the NATO and other countries we are dealing with,” Fossheim said “We will work to further strengthen our position in the U.S. despite these developments.”

Nammo, which is 50 percent owned by the Norwegian government, hopes to increase exports to the U.S. on the back of several major contracts, including the production of 25mm APEX armor-piercing projectile ammunition being developed for the F-35 Joint Strike Fighter’s GAU-22/A Gatling cannons.

The negative impact of U.S. budget cuts on the domestic defense sector is unwelcome, particularly in light of the deepening industrial contacts between Norwegian and U.S. companies through the F-35 acquisition program, said Trond Giske, Norway’s trade and industry minister.

“This government has made it clear that we will work in close cooperation with Norway’s defense industry to expand its reach in the United States,” Giske said. “Hopefully, the setback we are seeing in exports [to the U.S.] will be temporary.”

The downturn in Norwegian weapon exports to the U.S. comes after a long period of sustained growth in orders that began in the aftermath of the war in Afghanistan in 2001.

It remains to be seen what impact the Norwegian government’s planned tightening of arms export controls will have on the domestic industry.

“We are seeking to create a new arms export-control regime already this year,” said Snorre Valen, deputy chairman of the Storting’s (national parliament) Foreign Affairs and Defense Committee.

The new rules will place greater constraints on defense producers, tightening controls as to which countries, and weapon systems, they can export. Such controls will be heavily weighted against prevailing tenets in potential customer nations, such as the international human rights instruments employed, media censorship, respect for humanitarian laws, civil and political rights, and if military equipment might be used in violation of basic human rights.

“The rules will be much stricter for the sale of weapons to countries, and areas, at war or facing the threat of war,” Valen said.

Military weapons and support systems worth $10.4 billion were exported to the U.S. from 2001 to 2012, according to figures produced by Statistics Norway (SN), the state data collection organization.

However, Norwegian exports to the U.S. have been on the slide since 2009, when the value of weapons, munitions and other military materiel delivered to U.S. customers amounted to $291 million, 55 percent of Norway’s military gear exports that year.

By contrast, Norway’s exports of mainly niche weapon and munition systems to the U.S., such as Protector remote weapon stations, amounted to just $84 million in 2012.

SN’s figures show that the value of Norway’s global military equipment exports decreased by $17.1 million, or 4 percent, to $428 million in 2012. Weapon systems and parts accounted for $223 million, while other materials, including missiles and grenades, contributed $141 million.

Exports to the U.S. accounted for about 20 percent of total Norwegian military equipment exports in 2012, after hovering between 40 percent and 56 percent from 2004 to 2010. In 2011, the percentage was halved to a little more than 27 percent, and the decline continued in 2012.

Although Norwegian arms exports to the U.S., Germany and Sweden declined in 2012, new markets, including Brazil, Chile, Poland and Asia, were opening up more for Norwegian producers. Weapon exports to Chile amounted to $51.3 million in 2012, and to Poland, $42.8 million.

Kongsberg hopes to expand its export reach in South America, following the company’s $42.5 million contract in October to supply Penguin anti-ship missiles and support gear for the Brazilian Navy’s newly acquired Seahawk S-70B helicopters.

More In World News

Start your day with a roundup of top defense news.

Subscribe!

Subscribe!

Login to This Week's Digital Edition

Subscribe for Print or Digital delivery today!

Exclusive Events Coverage

In-depth news and multimedia coverage of industry trade shows and conferences.

TRADE SHOWS:

CONFERENCES:

Defensenews TV

  • Sign-up to receive weekly email updates about Vago's guests and the topics they will discuss.