Arms firm defuses criticism amid sinking profits

Ruag says overseas arms sales provide cash for research Keystone

The Ruag technology group, recently targeted by anti-war demonstrators, has reported a significant fall in net profit for 2002.

Ruag’s products have been under increasing public scrutiny of late as a result of the United States-led invasion of Iraq.

The state-owned group, which specialises in weapons manufacturing, said net income had fallen by 60 per cent to SFr44 million ($32.36 million).

The company blamed the Swiss franc/dollar exchange rate and financing costs of an acquisition for the sharp decline in profit.

Ruag has recently been criticised for a number of arms deals, such as the sale of Swiss-made used parts for tanks in the United Arab Emirates.

Also controversial has been a contract to supply grenades to the British army, precision parts for US F/A 18 warplanes and its production of “cluster munition” – small explosives which scatter on impact.

Much of the debate has focused on whether the company has violated Switzerland’s law relating to the export of war material and whether it should be manufacturing cluster munition.

Critics claim such munition should not be used because – like cluster bombs dropped from aircraft – not all the explosives detonate on impact. They argue that this leaves civilians vulnerable to the unexploded ordinance once a conflict is over.

Violated

Ruag chief executive officer Toni Wicki told swissinfo that the company had not violated any Swiss regulations governing the export of war material.

And he dismissed the claims against the cluster munition. “We do not produce any cluster munition which is dropped by planes,” he said.

“We are producing some cluster artillery rounds for the Swiss army but they are equipped with special fuses, which will be inert a few hours after they have been dropped. And then they will not explode if someone touches them,” he added.

He did not rule out future sales of the munitions abroad. “For the time being, no business has been concluded but it may be that we will export such munitions within Europe,” Wicki told swissinfo.

Consequences

Ruag has made it clear to its critics that if the company were not able to supply its defence systems abroad, there would be serious consequences.

“This would mean that we would be cut off from certain business relations with our partners and that we would have to reduce our staff substantially.

“We would also lose technology know-how for the Swiss armed forces,” Wicki warned.

Commenting on its business performance, Ruag said it achieved a “respectable result” in 2002 under difficult economic conditions.

Sales to the Swiss armed forces continued to decline in 2002, representing 60 per cent of the group total turnover of SFr1 billion.

Spending

The long-term downward trend is the result of cutbacks in the size of the armed forces and reduced national defence spending.

To counter the loss of orders from the Swiss defence ministry, Ruag has been increasingly looking to third party business. It is, for example, active in aviation, semiconductors and the automotive industry.

Ruag, which cut 76 jobs in March in its ammunition, electronics and metal processing divisions, has warned that 220 further positions are at risk.

The group expects an “unfavourable” overall economic development this year but has said that the level of orders at the end of 2002 – around 85 per cent of annual sales – permitted a “healthy degree of optimism”.

It expects a similar result in 2003 as for last year.

swissinfo, Robert Brookes

Key facts

Ruag profit tumbled by 60 per cent to SFr44 million in 2002.
The firm has been criticised for supplying weapons material and making cluster ammunition.
It announced in March that it was cutting 76 jobs from the 5,800 workforce.
Ruag said it expects its financial result in 2003 to be about the same as for last year.

In brief

Ruag was established from the defence companies owned by the Swiss government and has been a private stock corporation since 1999.

The firm makes ammunition, maintains aircraft, produces large assemblies for the Airbus family, and supplies simulation and training equipment.