By Karol Badohal
WARSAW (Reuters) -Northrop Grumman is exploring producing 120 millimetre tank ammunition in Poland as the U.S. ally surges defence production capacity, the company's chief told Reuters on Thursday. Countries geographically close to Russia like Poland, Finland and Germany have been exploring deals to build U.S. weapons in Europe, negotiating new deals to buy arms and looking to speed up existing contracts as the war in Ukraine reshaped thinking on the volume of munitions needed in future conflicts. "We are looking at co-production opportunities for 120," Kathy J. Warden, Northrop Grumman (NYSE:NOC) CEO, told Reuters.
She said that while talks were advanced the company still needed to "find the right industrial partners and the right contract structures. But all of that work is underway".
Poland's Mesko, which belongs to state-owned PGZ armaments group is in the final stages of negotiating the deal, the ammunition maker's deputy chief executive told Reuters.
"We are currently preparing for the transfer of technology and for the production together with Northrop Grumman of a wide range of 120 ammunition," Przemyslaw Kowalczuk said.
The deal would see Mesko's production of 120mm ammunition surge to a minimum of 50,000 to 70,000 rounds annually from the current several thousand, according to Kowalczuk.
He added he expected the comprehensive offset agreement, which falls under Poland's purchase of Abrams tanks, also to include production of 30 mm and 40 mm rounds for Bushmaster guns mounted on armoured personnel carriers, and that it should be signed in late December or early January.
Offset agreements are meant to compensate the country buying arms from abroad in the form of mandatory cooperation between the supplier and domestic companies.
"This is a comprehensive deal for (producing) all ammunition types used by the Polish army now or in the future, as well as for export to Northrop's markets," Kowalczuk said.
Poland has been on a buying spree as it fulfils its vow to spend 4% of its gross domestic product on defence and more than double the size of its army to deter any possible attack after Russia's invasion of Ukraine last year.
Poland agreed to purchase more than 360 Abrams tanks from the United States last year.
Northrop is looking to expand its European business not just in Poland and but also other nations with similar product lines, Warden said.
"Germany, Norway, we already have a significant presence in the UK today, we have presence in Italy and France, so really a broad based European business."