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Switzerland Seeks Defense Cooperation With EU in New Talks

Switzerland Seeks Defense Cooperation With EU in New Talks

Bloomberg4 hours ago

Switzerland wants to start exploratory talks on a defense partnership with the European Union as worries about a US retreat from the continent prompt a rethink of security policy in the traditionally neutral country.
Cooperation should take the form of a 'non-legally-binding declaration of intent,' the government in Bern said in a statement. A partnership of this kind is a prerequisite for any joint procurements in the defense sector, it added.

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European Defense Buildup May Cause Supply Chain Delays And Shortages
European Defense Buildup May Cause Supply Chain Delays And Shortages

Forbes

time41 minutes ago

  • Forbes

European Defense Buildup May Cause Supply Chain Delays And Shortages

French Air Force Rafale jet fighters patrol the airspace over Poland as part of NATO's response to ... More Russia's invasion of Ukraine. Photo by NICOLAS TUCATBy Sebastian Janssen and Ben Martin Reznik The surge in European defense spending that began in earnest two years ago may begin to disrupt industrial supply chains in aerospace and other sectors as military contracts compete for parts and materials with civilian industries. Europe's military expenditures are set to rise as much as 80% between 2024 and 2030, reaching between €650 billion and €750 billion. The increased spending is driven by countries like Germany, France, and the United Kingdom, but European Union member nations in general are increasing their defense budgets as part of the EU's 'Rearm Europe' plan. The 2024 spending was around €417 billion, while 2023's defense budgets were about €354 billion. Increases in European military spending began with the 2014 seizure of Crimea by Russia and rose significantly after the Russian invasion of Ukraine in 2022. While only about one-third of the total EU defense allocation will go for equipment, this rapid aerospace and defense expansion will still pose challenges for an already squeezed European industrial supply chain, which will likely struggle to keep pace with this new growth. Evidence of a squeeze on parts and material has already been seen in aerospace production shortfalls over the past several years. By the end of 2024, aerospace manufacturers rolled out fewer than 1,300 commercial airliners — 30% below its 2018 peak, based on Oliver Wyman's Global Fleet and MRO Market Forecast 2025-2035. Making matters worse, suppliers may be inclined to prioritize defense contracts over those from other industries as pressure from governments to rapidly ramp-up may prompt defense contractors to pay higher prices for the large quantities of parts and materials they seek. Government contracts like this are particularly attractive as they tend to be longer term programs. Since the 2022 Russian invasion of Ukraine, European nations have been beefing up their air forces ... More and militaries. The sectors that will feel the squeeze most Our analysis, based on publicly available data of more than 600 secondary suppliers predominantly focused on the European market, reveals critical vulnerabilities. Overall, we see significant overlaps between the supplier networks for defense contractors and various adjacent industrial sectors, especially involving electrical components, electronics, and mechanical parts. Some more complex components, such as pneumatic and hydraulic systems, may become scarce depending on the industry. In the industrial machinery sector, bearings, sensors, mechatronics, hydraulics, and simple system components emerge as having a high overlap with aerospace and defense manufacturers. These essential components, vital for the operation of machinery, could become increasingly scarce as suppliers begin to service, and potentially prioritize, defense applications. The rail industry faces a similar fate, with printed circuit boards and housing assemblies, semiconductors, microelectronics, and control units among the most vulnerable subsegments. In the automotive sector, the stakes are even higher. A potential shift in supplier priorities toward defense contracts — or even the simple addition of more demand from defense — could severely impact an already strained supply chain. Among the vital automotive components that may become scarce are simple electrical components, such as harnesses and cables and connectors, as well as sensors and hydraulic systems. The energy sector is also not immune. Key components such as wire harnesses, cables and connectors, and bearings are at risk of becoming harder to source[BR1] . Strategies to mitigate supply chain risks These findings underscore a pressing need for manufacturers like automakers, as well as machinery and rail manufacturers to proactively address these vulnerabilities. It remains uncertain how quickly parts and raw material suppliers can scale up production in response to the escalating demand from air, land, and naval defense contractors and governments. Understanding and mitigating the risks will be crucial for maintaining operational continuity and competitiveness in an increasingly volatile landscape. In recent years, supply chain departments have already faced numerous disruptions. These included the semiconductor crisis from 2020 to 2023, the Russian invasion of Ukraine, the COVID pandemic, and the recent threat of global trade wars and tariffs. Despite this decade of challenges, most supply chain departments still engage in reactive problem-solving rather than proactive planning. It is crucial for organizations to anticipate and mitigate supply chain risks, given already tight conditions for many parts and materials and the explosive outlook for demand. Among the tactics manufacturers can use: identify and qualify alternative suppliers to diversify the supply base, increase transparency with suppliers so end users can provide hands-on crisis management if necessary, and establish an internal, cross-functional task force that monitors the real-time marketplace, similar to a tactic used during the semiconductor shortage. Supply chain disruptions have become increasingly frequent and are now considered the new normal. Factors such as geopolitical tensions, natural disasters, and fluctuating trade policies contribute to an unpredictable environment, challenging the resilience of various sectors. To thrive in this landscape, companies must develop capabilities that allow them to proactively address and manage these disruptions. This includes investing in advanced data analytics for real-time visibility, establishing agile and flexible supply chain strategies, and fostering robust partnerships with suppliers to ensure continuity and adaptability. By enhancing their resilience, end users can not only mitigate risks but also seize opportunities for growth and innovation in an ever-changing world. Sebastian Janssen is a partner and the head of Oliver Wyman's global supply chain team, while Ben Martin Reznik is a principal in the firm's Transportation and Advanced Industrials practice. Nick Schlomka, an associate with TAI, contributed research and insights to this article.

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