INDUSTRY NEWS: JUNE 2005

By Robert M. Hausman

Colt Defense Acquires Diemaco

This month, a review of international events affecting the small arms industry is presented. To begin, Colt Defense LLC, a leading American defense contractor of small arms, has announced the execution of an agreement with Heroux-Devtek Inc. for the acquisition of its Logistics & Defense Division.

Based in Kitchener, Ontario, Canada, Diemaco is a world-class defense manufacturer, with a reputation for providing innovative, state-of-the-art small arms solutions, for military and law enforcement. Designated by Canada as its Small Arms Center for Excellence, Diemaco has been the Canadian contractor for the government of Canada since 1984 to manufacture the equivalent of M16 and M4 arms under license from Colt. Arms manufactured by Diemaco have been supplied to the military troops of NATO countries as well as to Canadian armed forces.

“The acquisition of Diemaco is part of a larger strategy at Colt Defense to strengthen its leadership in the area of transformational technologies that support the forward and rapid deployment of modern professional armies,” said Colt Defense president and CEO Lt. Gen. Wm. M. Keys, USMC (ret.). “In addition to expanding our market share in Europe, the acquisition of Diemaco and its engineering expertise will enhance Colt Defense’s research and development capabilities,” he added. Diemaco will be operated as Colt Canada Corporation, a wholly-owned subsidiary of Colt Defense.

“We are looking forward to creating even stronger ties with the Canadian government through Colt Canada,” said Colt Defense executive VP & COO Maj. Gen. James R. Battaglini, USMC (ret.). “The acquisition will complement our West Hartford operations and help us to secure major contracts abroad as well as enable us to further enhance our present weapons platform and develop significant new Colt Defense products,” he added.

Colt Defense produces the M16 rifle, M4 carbine, M203 grenade launcher and other weapons in its Connecticut-based ISO 9001-2000 factory. The Diemaco facility employs 100 workers. The transaction is subject to customary regulatory and governmental approvals.

Company Profiles

Colt Defense LLC traces its origins back to the company founded by Samuel Colt in 1836. Its products are in use in 80 countries worldwide. Colt is the owner of the technical data packages for the M16 and M4 families of weapons. The M4 carbine is the mainstay of the U.S. Armed Forces, particularly in Iraq. Over 7 million M16 and M4 weapons have been installed all over the world. Colt Defense is a privately held company.

Heroux-Devtek, Inc. specializes in the design, development, manufacture and repair of aerospace and industrial products. The company’s head office is in Longueuil, Quebec. It operates nine business units grouped under four divisions: the Landing Gear division, the Aerostructure Division, the Gas Turbine Components Division and the Logistics and Defense Division. Some 75% of the company’s sales are made outside of Canada, mainly in the U.S. Heroux-Devtek’s shares trade on the Toronto Stock Exchange under the symbol: HRX.

New Gun Restrictions Promised in Belgium

Belgium’s justice minister has pledged to implement a tough new law on the possession of firearms.

Laurette Onkelinx, justice minister, has told the federal parliament she intends to propose new rules to ensure no one in Belgium owns a gun without a license. “Permission will only be given if there’s a legitimate motive,” Onkelinx told MPs.

She said at present there were 641,781 personal guns owned in Belgium and 27,492 military guns, an official total of 669,273 guns. But those figures don’t take into account a huge number of guns which have not been registered, including a large number of hunting arms. Experts say that in reality Belgium has around 2 million guns in circulation.

Some parties such as the Flemish left-wing liberals Spirit, want to see a total ban on the possession of guns in homes, arguing that 367 people a year on average die from gunshot wounds in Belgium. Some of the deaths are suicides while others are victims of shootings. On the other side, the Flemish Christian Democrats (CD&V) and the Flemish right-leaning Liberal VLD party want to see a liberalization of Belgium’s gun laws. They want to give citizens the right to use guns to protect their property.

Under Belgium’s current legislation, a person can shoot someone to protect themselves or another person from an attack or an imminent attack, though the defense must be appropriate to the attack.

Swiss Arms Exports Rise

Swiss arms exports have reached a 16-year high. Sales of Swiss arms surpassed the SFr (Swiss Franc) 400-million ($329-million) mark in 2004 for the first time since 1988.

The total volume of sales was up 6.2 per cent over the previous year at SFr402.4 million, due particularly to an increase in orders for armored vehicles. This was the fourth consecutive annual increase in weapons exports. Armored vehicles made up nearly half the arms exports in 2004. But arms sales accounted only for 0.27 per cent of Switzerland’s total foreign trade in 2004, the State Secretariat for Economic Affairs said.

The biggest customer was neighboring Germany (SFr66 million) ahead of Botswana (SFr60.8 million), Spain (SFr43.1 million), the Irish Republic (SFr42.5 million) and the United States (SFr34 million). The United Arab Emirates was also among the top ten importers of Swiss armaments. Sales to Saudi Arabia, on the other hand, were down by around 50 per cent. Swiss parliamentarians have been calling for a ban on weapons exports to Saudi Arabia amid allegations of human rights abuses.

Officials said the government had rejected 18 requests for arms exports worth SFr1.5 million from ten different countries last year. In total 2,193 requests were submitted to the federal authorities. Armaments sales, including arms systems, ammunition, explosives and weapon components from Switzerland are subject to approval by the government. Under Swiss law, exports to countries in conflict zones are banned.

New Collectors’ Group Formed

The Swiss Gun Collectors Association is a U.S.A. based organization composed of individuals interested in Swiss firearms and the Swiss lifestyle. Through the Association’s quarterly English language newsletter, Die Hellebarde (The Halberd), advertisers of new and surplus Swiss firearms and related items can reach an audience of readers with great interest in their products. Members receive discounted pricing on firearms reference books as well as Alpine lifestyle shooting clothing and other benefits. For more information, check out the Association’s web site at: www.swiss-guncollectors.com

HK and General Dynamics in Joint Venture

General Dynamics of Falls Church, Virginia and the German firearms maker, Heckler & Koch, have signed a joint venture agreement with the purpose of producing the HK model XM8 rifle for the U.S. military.

The responsible partner is General Dynamics European Land Combat Systems, consisting of three European-based subsidiaries of the U.S. concern, all of them operating in the law enforcement arena. The companies are: MOWAG AG in Switzerland, General Dynamics Santa Barbara Sistemas, Spain and Steyr Special Vehicles in Austria. The XM-8 rifle system may replace the current M16 military rifle and the M4 carbine. General Dynamics employs 71,600 persons worldwide.

SK Celebrates 175th Anniversary

The oldest German producer of sporting guns and ammunition, known simply as “SK,” celebrated its 175th anniversary this past September. Situated in Schoenebeck in eastern Germany, the firm is now owned by the Finnish company, Lapua Oy, being part of the Nammo Group. SK is now the largest European producer of .22 LR ammunition.

Since September 2004, SK’s official name has been changed to Lapua GmbH. The name change is focused on the company’s extension of the recently founded Rimfire Competence Center, one of the most modern testing, service and shooting centers worldwide.

S. African Gun Law Destroying Local Dealers

Rossouw Botha, leafed through his list of customers at Redneck Tactical Supplies, dismay in his eyes, contempt in his voice, as he repeated two words. “Turned down,” he spat out, and leafed another page or two. “Turned down.”

This is the result since South Africa’s new gun control law took effect last summer, The New York Times reports. Since the law took effect, Redneck Tactical Supplies, one of two firearms shops in this white-picket-fence type of beach town, has applied to the government for ownership certificates for about 250 prospective buyers. “So far, we have yet to receive one certificate,” Botha said.

Firearms sales, once 15,000 a month, have fallen to near zero, due to the law’s imposing regulatory hurdles and the glacial government bureaucracy that oversees them.

“Not a single license has been issued for a firearm that the association is aware of,” said Andrew Soutar, the chairman of the South African Arms and Ammunition Dealers Association. “Dealers who were selling 400 firearms a month have now dropped to 2 or 3,” he said. “A lot of people see it as nothing more than a deliberate disarmament process.”

On the other hand, advocates of gun control are delighted. “Obviously, we’re making an impact,” said Judy Bassingthwaite, the national director of the leading lobby for curbs on gun ownership, Gun Free South Africa.

Bassingthwaite said her organization did not seek to put gun shops out of business, and attributed some of the substantial decline in weapons sales to what she called “teething problems” in the police agency that is carrying out the new law. In fact, the agency has a large backlog of applications and has wrestled with shortages of items as basic as printed explanations of the law.

The situation is the same in Johannesburg, where Jan Jansen, the owner of a shop called Gun City, said he had 3,000 arms in his vault – 80 percent of which had been bought by people who were awaiting licenses. Jansen said that his gun sales had dropped by about 80 percent in recent months, and that he was busy refunding money to buyers whose applications for licenses were rejected.

By some mid-1990’s estimates, one of every two white households owned at least one firearm, and ownership among nonwhites has rapidly risen in the past decade. Blacks were forbidden to own guns under apartheid. The police report that 4.5 million firearms are legally registered; illegal firearms are estimated to number at least 500,000. Within five years, all those guns must be registered, so that sales of both new and used guns are controlled.

Unlike pro-gun groups in the United States, however, those in South Africa were powerless to stop Parliament from enacting stiff firearms restrictions, because guns are not mentioned in the nation’s Constitution. The law, approved in 2000 but taking effect only last year, limits most citizens to one weapon for self-defense and a maximum of four others for other uses, like hunting.

But getting any gun at all, critics say, is the big task. Guns are to be automatically denied to drug or alcohol abusers, spouse abusers, people inclined to violence or “deviant behavior” and anyone who has been imprisoned for violent or sex-related crimes. The police interview three acquaintances of the applicant before deciding whether he is competent to own a gun. Prospective gun owners must pass a firearms course. They also must install a safe or strongbox that meets police standards for gun storage.

More important, applicants also must prove to the police that a gun is “needed” – a requirement, called “motivation”, which is vague and hard to satisfy.

In Thembalethu, a poor black settlement on the southern coast about seven miles southeast of George, Vuyani Dingiswayo, 25, says he applied for permission to own a gun. The reason: he manages his family’s tavern and must carry thousands of dollars in receipts to the bank. His application was rejected. “Insufficient something,” he said. “They said I don’t have good reason.”

That is a bit disingenuous, said Noel Stott, a small-arms specialist at the Institute for Security Studies in Pretoria. “The police aren’t saying what a good motivation is, since it would come to be like a template,” he said.

Botha, of Redneck Tactical accuses the government of hurting the very people it liberated from apartheid in 1994. “Ninety-nine percent of my firearms customers are black,” he said. “They live in traditional areas where crime is out of control. I sell 200, 300 cans of pepper spray a week,” he said. “Maybe people are scared.”

The chairman of the year-old Black Gun Owners Association, Abios Khoele, says the law is so strict that it is having the opposite of its intended effect. “Most of the people have already started buying illegal firearms.” He has signed up 5,000 members and represents far more.

Gun owners should not forget, said Stott, that their plight could be worse. In neighboring Botswana, the government agrees to process a bare 400 applications for gun ownership each year, and the applicants are chosen by lottery. By that standard, he said, “this is still quite a liberal law.”

The author publishes two of the small arms industry’s most widely read trade newsletters; The International Firearms Trade, which covers the world firearms scene, and The New Firearms Business, which covers the domestic market. He also offers FFL-mailing lists to firms interested in direct marketing efforts to the industry. He may be reached at: FirearmsB@aol.com