In a sign that European defense companies may be stepping up activities to rationalize their product portfolio, Rheinmetall and EADS’s Cassidian unit have agreed to a joint venture (JV) covering tactical and medium-altitude unmanned aircraft and cargo loading systems.

Cassidian will control 51% of the JV, although Rheinmetall appears to be providing the bulk of the technology content. In return, Rheinmetall is due to receive an undisclosed cash consideration once the deal closes, which is expected mid-year pending anti-trust authorization.

At a time of declining defense budgets and ample unmanned aircraft suppliers within Europe, Rheinmetall decided the growth prospects for the UAS and cargo-handling activities would be stronger under Cassidian’s leadership. The deal also could allow Rheinmetall in on activities it considers more core.

“First and foremost, our goal is to strengthen the Airborne Systems product unit in a sustained way, providing it with new opportunities for marketing its state-of-the-art products in years to come,” Rheinmetall Chairman Klaus Eberhardt said in a statement announcing the deal. “And of course we also want our employees to have a secure future in Bremen, a traditional center of German high-tech excellence that will continue to host our Defense Electronics and Simulation and Training divisions.”

One uncertainty in the arrangement is what it means in terms of Germany’s future medium-altitude, long-endurance UAS program. Cassidian has been pushing the developmental Talarion system, whereas Rheinmetall has teamed with Israel Aerospace Industries to offer the German air force the Heron-TP. Rheinmetall is already the contractor for the German Heron UAS now flying in Afghanistan.

An industry official notes the issue of how to proceed will come down to the customer, and that there may be potential for both. Talarion is not expected to emerge until the end of the decade, so Heron-TP could serve as a bridging solution as the German air force looks for a Heron replacement.

The Talarion concept so far has failed to win German air force backing, with the service focused on ensuring that the Heron replacement program is funded.

Meanwhile, General Atomics also has its eye on the Heron replacement program with the Reaper UAS.

In a statement, Stefan Zoller, Cassidian’s CEO, notes that “as Europe’s leading provider of unmanned aerial systems, we see this as a logical step toward expanding our present UAS programs. We can offer our global customers a full product range of customized solutions, including tactical UAS and UAS for medium and high altitude.”

Around 160 employees will be part of the joint venture, working not just on Heron, but also the tactical KZO UAS that Rheinmetall has developed and deployed in Afghanistan.

Although lower profile, the cargo loading systems also are a significant revenue source being shifted into the JV, particularly with the ramp-up of A400M production. Rheinmetall provides a cargo-loading system for the German A400M and the commercial A380 and other Airbus airliners.