Rheinmetall's Kassel Crossroads: Negotiating for Alstom's Plant While the Order Book Diversifies

Rheinmetall in talks to acquire Alstom's Kassel plant, plans defense hub, secures new Bundeswehr orders, but shares fall 43% from high.

The defense contractor's expansion strategy in northern Hesse is taking shape on multiple fronts at once. Rheinmetall has confirmed it is in talks to acquire Alstom's locomotive works in Kassel, with chief executive Armin Papperger disclosing that a meeting with his counterpart at the French rail group is scheduled within the next four weeks. The potential takeover carries significant weight for the roughly 900 employees at the storied locomotive site, where Papperger has indicated the workforce could be absorbed as part of any deal.

The discussions are not new — the two sides first explored a solution back in June, though those talks ended without result. They have since been revived, and Alstom says it expects clarity within weeks. Labor representatives are already preparing for a fight: both the works council and IG Metall have announced protest actions, reflecting deep unease among workers about a possible shift from locomotive manufacturing to arms production.

A widening pipeline beyond armored vehicles

While the Alstom negotiations capture attention, Rheinmetall has been quietly stacking up new orders that underscore how far its business now extends beyond traditional combat vehicles. Within the span of a few days, the group announced two fresh contract wins with the German military. On Tuesday, it received the first call-off for a modular camp under the G-CAP II SU program destined for Bundeswehr forces in Lithuania. Days earlier, on August 17, Rheinmetall disclosed an order for additional mobile rescue stations — 149 protected and unprotected systems in total, carrying a gross value of more than EUR 500 million.

These contracts fit a pattern that has been emerging for weeks: the company is increasingly generating revenue from field camps, medical supply chains, and logistical infrastructure rather than purely from main battle tanks. The planned Kassel hub — which Reuters has characterized as a future center for tank production and drone testing — belongs to the same story of a defense group broadening its value chain around military infrastructure.

For shareholders, the significance lies in widening the order base at a moment when the company is working to fill a hole in its books. Early August brought a downward revision to the annual forecast following the collapse of the frigate program F126. Rheinmetall now expects 2026 revenue between EUR 13.7 billion and EUR 14.2 billion, trimmed from the previous range of EUR 14.0 billion to EUR 14.5 billion. The Lithuania and rescue-station contracts offer at least isolated data points suggesting other divisions could partially absorb the shortfall.

Kassel's transformation into a defense cluster

The possible Alstom acquisition dovetails with a broader build-out plan for the Kassel site. Rheinmetall has already announced the construction of a Defence Hub in northern Hesse — an investment exceeding EUR 260 million in logistics and training infrastructure, including a drone testing center, backed by a double-digit million-euro subsidy from the state of Hesse.

Business Insider, citing Handelsblatt, has also reported on the so-called Arminius project: Bundeswehr orders worth nearly EUR 40 billion are intended to secure utilization of the Kassel tank plant through 2040. The Boxer program alone is funneling EUR 12.4 billion in a first tranche for more than 1,500 vehicles, with a framework agreement of EUR 14 billion to EUR 26 billion for over 5,000 Boxer vehicles considered possible.

The workforce at the site is slated to grow from 2,200 today to 3,000 by the end of 2028 — up from just 1,000 in 2022. Production capacity could reach 500 Boxer vehicles per year, with the plant's revenue climbing from EUR 1.5 billion to roughly EUR 5 billion. A decision on next steps is expected in the coming September week, with a proposal covering EUR 25 million scheduled for December 9.

Not everyone in the region is cheering. While political and business leaders largely back the expansion, the Greens have criticized annual subsidies of EUR 20 million for Kassel-Calden airport, the Left party warns of militarization, and the alliance "Kassel Airport stoppen" is mobilizing against the plans.

The market remains unconvinced

Despite the flurry of activity, the share price tells a more cautious story. On Friday, Rheinmetall closed at EUR 1,152.40, down 2.1 percent on the day. The stock now sits 43 percent below its 52-week high of EUR 2,007, which was marked in early October, and has lost 26 percent since the start of the year.

Analysts have been recalibrating their views. On August 8, mwb research cut its price target to EUR 1,050 and downgraded the stock from "Hold" to "Sell" — a move that primarily reflected the guidance reduction rather than the subsequent string of new orders. Morningstar, by contrast, sees the shares as significantly undervalued, assigning a fair value of EUR 2,380, more than double the current trading level.

The investment decisions in Kassel signal that Rheinmetall is betting on sustained high order volumes from the defense sector even as its share price struggles. Whether the Alstom acquisition materializes should become clear in the coming weeks — and with it, a clearer picture of whether this diversification can offset the F126 gap when the next quarterly figures arrive.