CV90 will move our Army into a new era, the share of the Czech defence industry is still under discussion
The 7th Mechanised Brigade will finally get new infantry fighting vehicles. After tough negotiations, the Ministry of Defence, led by Jana Černochová, managed to conclude a contract that is unprecedented in terms of armament of ground forces due to its financial complexity and complicated specification. By delivering CV90 vehicles, we will not only meet the so-called Capability Targets required by our NATO allies, but we will also move the capabilities of our ground forces into a new era. In addition, the Department has decided to exercise an option for 36 additional vehicles over and above the planned 210 vehicles to secure the best possible price, in the face of significantly rising defence industry prices linked to demand from allied nations as a result of the war in Ukraine, as well as increases in energy, commodity and labour prices.
Negotiations with the Swedish manufacturer BAE Systems-Hägglunds have been long and tough from the start. From the outset, a high share of the state-owned enterprise VOP CZ was envisaged as a strategic state-owned enterprise fully controlled by the Ministry, as confirmed by the contract with the Swedish manufacturer. The basic requirement to locate at least 40% of the contract value in the Czech Republic should then be even surpassed, according to the statement of the Ministry of Defence of 25 May 2023. We have previously written about the effect of the contract on the Czech economy and the need to control the general calculation of the share of domestic companies, including the servicing of vehicles during their life cycle.
The CV90 IFVs have a good reputation on the market and existing users include Sweden, Finland, Denmark, Norway and the Netherlands, but contracts have also been signed with Slovakia and CV90 combat vehicles are also to be delivered to Ukraine. The Czech Republic is thus acquiring an established vehicle with completed and proven development and parameters, including participation in a global customer club with the possibility of exchanging information and experience, and the possibility of Czech companies joining global logistics chains.
An unprecedented result is the transfer of the vehicle licence to the Czech Ministry of Defence, which has been achieved for the first time in history. Every intervention in the platform, integration of a new weapon system, or in general the provision of service support for the vehicle during its life cycle will thus be managed by the Ministry of Defence itself. A substantial part of the industrial cooperation should be covered by the state-owned enterprise VOP CZ, where this activity should be controlled and enforceable under certain sanctions against BAE Systems. Thus, the Ministry's management is not relying only on memoranda or promises in this project.
So far, contracts have been signed with five key partners that will participate in the CV90 project for the Army. These are the already mentioned state enterprise VOP CZ, as well as Excalibur Army, VR Group, Ray Service and Meopta. In total, the number of Czech cooperators should reach about thirty companies, with specific implementation contracts to be executed by the end of this year. Despite the fact that the Czech arms production is currently busy with deliveries to Ukraine and restocking of our army, the companies consider the Czech CV90 project to be pivotal and sufficient production capacity will be allocated for it.
We were interested in what the recent signing of the contract for the purchase of CV90 IFVs for the Czech Armed Forces means for the companies and whether they will cooperate with the Swedish manufacturer BAE Systems beyond this project, or what the specifics will be.
"We are glad that the Ministry of Defence, under the leadership of Minister Jana Černochová, did not succumb to the long-standing pressure and negotiated maximum support for the Czech defence industry, including our state enterprise. Immediately after the contract was signed on 24 May, our work on this historically largest military contract began and a group of our specialists went to Sweden to work on the joint development of various variants of the CV90 vehicle," said Marek Špok, director of the state-owned company VOP CZ.
In addition to its share in the CV90 production, VOP CZ is also expected to manage a network of Czech and international defence industry partners, including STV GROUP. The latter signed a memorandum of cooperation with VOP CZ before the actual conclusion of the contract between the Czech Republic and Sweden. The cooperation between VOP CZ and STV GROUP is logical, as both companies are strategic in their capabilities to provide production, repair and service support for the heavy combat equipment of our army. Among other things, VOP CZ maintains a fleet of our existing T-72M4 CZ main battle tanks or infantry fighting vehicles. STV GROUP repairs howitzers vz. 77 DANA (formerly also BVP-2) for the army, but also fulfils contracts for combat vehicles, rocket launchers and tank equipment for export markets, including deliveries to Ukraine. The cooperation between VOP CZ and STV GROUP is long-standing and concerns not only the CV90 project, but also other platforms. Both for Czech users and for export markets.
David Hác, Chairman of the Board of STV GROUP, commented on the cooperation with BAE Systems as follows. They also visited our production facilities in Polička. I believe that we have convinced them that we have extensive experience not only in the production of ammunition, but also in the repair and modernization of heavy military equipment, including services for the Ministry of Defence. However, we have not yet reached a concrete proposal for cooperation, with the promise that we will return to the negotiating table in the coming weeks after the signing of the purchase agreement. I believe that BAE will live up to its promises and we will find some direct cooperation, whether on the Czech Republic project or other projects. I appreciate the toughness of the MoD team that persisted and enforced the obligation of significant involvement of domestic industry in the contract. We consider cooperation with VOP CZ to be essential. We are pleased that we have maintained excellent relations over the long term and can support each other on many projects. It's not just about the business side of things, but about building long-term competencies for the entire defence industry. CV90 in particular opens the door to modern technologies and manufacturing processes and we will be happy if the project is successful. The other side of the sheet is then the life cycle of the vehicles for the next thirty years at least. I don't just mean repairs, but the whole package of supplies and services associated with the CV90."
Meopta's marketing director Jiří Coufal gave us the following response: "This is a significant order for the Meopta Group, the volume of which is in line with our expectations. We will be involved in the production of the unique UTAAS (Universal Tank and Anti-Aircraft Fire Control System) targeting technology for BAE Systems' CV90 infantry fighting vehicles (IFVs). This involves providing the entire production and testing of the complete UTAAS system for SAAB, the subcontractor for this system. In addition to the cooperation on the Czech CV90 project, we are very pleased that we were also able to negotiate a strategic cooperation with Saab and BAE Systems Hägglunds. We are currently in intensive negotiations for further projects beyond the Czech CV90 over the next 10 years."
Richard Kuběna, Excalibur Army's Sales Director, responded to our inquiry, "We are negotiating with BAE Systems for a combat turret assembly project and have already signed a framework agreement to that effect. Although in the context of the current orders we are fulfilling, it is still a rather small-scale project, we hope that there is potential for gradual expansion of cooperation thanks to this reference contract for the Czech Army."
Jakub Gabriel, General Manager of Ray Service, responded as follows. Therefore, in the coming weeks, nothing will prevent the preparatory work from starting. "When asked whether the company will cooperate with the Swedish manufacturer BAE Systems beyond this project, Jakub Gabriel replied, "Yes, we will, specifically the CV90 project for the Slovak army."
VR Group, a.s., a subsidiary of the state enterprise LOM PRAHA, through its Chairman of the Board of Directors, Vít Ryška, concluded a contract with BAE Systems Hägglunds at IDET for the delivery of a complex simulation system for the CV90MkIV vehicle intended for the Czech Army. "For our subsidiary VR Group, a.s., or the entire LOM PRAHA s.p. group, this contract represents a major milestone in our operations to date. The development of the simulation solution for the new MkIV platform using current advanced modelling and simulation technologies will bring new competencies to the Czech Republic and through the established industrial cooperation will ensure their long-term development in the future," said Jiří Protiva, Director of the state enterprise LOM PRAHA, s.p.
The war in Ukraine clearly demonstrates how critical it is to have a strong and developed defence industry that must pull together to ensure its own defence capability. Although the management of the CV90 project will undoubtedly be challenging for the Czech Armed Forces (e.g. in terms of proper implementation of all contractual provisions), the project will be beneficial for both the Czech Army and the Czech defence industry.