Lithuanian government owns the Giraitė Armament Factory (GAF) that would face few mid and long-term challenges despite current profitability. The article details the challenges and proposes ways to deal with them.
The Giraitė Armament Factory
GAF is a state-owned joint-stock company, located in Kaunas district, Lithuania. GAF is producing high-quality ammunition of two types (5.56×45 mm and 7.62×51 mm) and ammunition components. Ammunition has been produced since 2000, which is used by NATO armies, sportsmen, and hunters. The products are exported to EU countries, Ukraine and the U.S. GAF sales revenue in 2020 was € 9.18 million and net profit was € 0.53 million.
Current and future challenges
GAF is classified as important for national security, so its ability to attract investment is determined by law. Therefore, investors wishing to contribute to the increase of GAF production capacity must obtain the approval of the Parliament or the Government, and what is more to meet the requirements of the investor set by the law.
According to the Director of the Defense Resources Agency of the Ministry of Defense (MoD), ammunition required for the Lithuanian Armed Forces (AF) is procured through the NSPA, as EU legislation does not favor a direct contract given to local manufacturers.
The U.S. military has been intensively testing an intermediate 6.5 mm (Creedmoor) caliber round that could replace the currently used 5.56 mm or 7.62 mm caliber round at the infantry squad level.
GAF’s products do not meet contemporary market requirements, such as the .30-06 Springfield and .300 Winchester Magnum ammunition, which are popular with hunters. Snipers in many countries have recently changed their weapons and are using .338 Lapua Magnum-type ammunition as it has a greater impact compared to the currently used 7.62×51 mm ammunition. The Lithuanian AF has AXMC sniper rifles with replaceable barrels and can use a more powerful .338 Lapua Magnum type ammunition.
Furthermore, most small arms ammunition manufacturers in Visegrad countries are currently upgrading their factories to start producing NATO standard 5.56 mm and 7.62 mm ammunition.
There are only a few factories in the world that produce capsules for ammunition. The production and supply of capsules is a “bottleneck” in the ammunition market.
What to do next?
Firstly, to exploit current GAF capabilities, by active marketing in Lithuania, the EU, the U.S., and other countries. Immediate focus should be given to the U.S. market where the great demand is for 5.56 mm and 7.62 mm ammunition.
Thirdly, to include representatives from the MoD into the GAF Board of Directors, or to consult with representatives from the Lithuanian AF, as that would help to have better situational awareness on the demand and shifts in the international arms market.
To add more, build a capability to produce 12.7 mm and 30 mm type ammunition as demand in the region would be high. An offset mechanism and the goodwill of a strategic partner would be a great benefit in maturing this capacity.
Additionally, consider developing a regional ammunition capsule production factory with neighboring EU / NATO countries, as this is the “bottleneck” within the ammunition industry.
And lastly, consider attracting investors if the Government is not prepared to invest heavily in the development of GAF in the most promising directions. Different investment strategies could be brought forwards, allowing the Lithuanian defense industry to mature and expand production and R&D capabilities.
Major Donatas Palavenis is a junior researcher in the Baltic Institute of Advanced Technology (BPTI)