Government Scraps Panther, Deals Blow to Defense Industry

The German government has decided to scrap a potential 2 billion euros call for bids to build its "Panther" tank.

The decision deals a major blow to the country's defense industry. "The call for redevelopment of our defense forces must be deferred to vehicles available by 2004," the ministry wrote in an internal letter dated July 10.

The two front runners for the project, defense group Krauss-Maffei Wegmann and engineering giant Rheinmetall AG, had proposed delivering the first round of tanks by 2008. A KMW official said an earlier delivery was not feasible. Rheinmetall declined to comment on the letter, but KMW signaled its surprise at the government's move by saying it still expected a final green light for the project at a meeting of the German parliamentary budget committee on September 12.

Key to modernization and consolidation

The deal, which would have been one of the industry's biggest in years, was seen as a key to moving forward modernization and consolidation in the sector, which the government has said it wants to foster.

It's now feared that the large-scale contract, originally aimed at building the tank from start phase to completion, will be replaced by a truncated version involving German companies on a smaller scale.

Paul Breuer, defense specialist for Germany's opposition center-right Christian Democrats, said the government's about-face would have a significant effect on Germany's defense industry, particularly if the government decided to grant the contract to foreign bidders who could deliver the tank sooner.