Signed in June, the Treaty of Versailles prohibits the German Reich from manufacturing large calibre weapons, initially depriving Rheinmetall of a substantial share of its livelihood. With the majority of its share capital in state hands by 1925, Rheinmetall responds to the new situation by moving increasingly into non-military production. In the years that follow, steelmaking at the Rath mill is substantially augmented with a view to assuring the production of civil-sector products.
During the first half of the 1920s, farming equipment and heavy steam ploughs, railway carriages and locomotives are being built in the Rhineland, while light-engineering products (typewriters and calculating machines), grinding machines and automotive components are manufactured at Sömmerda in Thuringia. By 1929, the latter plant has developed into the biggest manufacturer of cardan shafts in Germany.
The Allies permit Rheinmetall to recommence production of medium calibre weapon systems on a small scale.
Belgian and French troops occupy the Rheinland, including Rheinmetall's Derendorf plant. With orders short, civil-sector production in Düsseldorf is soon making a loss and — apart from the company's profitable line of steam ploughs — is gradually phased out.
The German Reich acquires a controlling stake in Rheinmetall through Vereinigte Industrieanlagen AG
Well into old age, Heinrich Ehrhardt continues to apply his creativity energy to the development of military technology. Not until 1921, at the age of 81, does he step down from the Supervisory Board to go into retirement in his Thuringian homeland, where, on November 20th 1928, he dies at the age of 88.
In April, Rheinmetall acquires August Borsig GmbH, a company facing liquidation but still one of the most important manufacturers of locomotives in the German Reich at the time. Rheinmetall thus gains possession of a large plant in the Tegel district of Berlin.
Rheinmetall and Borsig merge to form Rheinmetall-Borsig AG.
Since the mid 1930s, Rheinmetall-Borsig AG — as was true of many other industrial enterprises at the time — has been developing and manufacturing weapons and ammunition on behalf of the Reich War Ministry. These range from machineguns, automatic cannon and antitank guns to "Minenwerfer" mortars, field howitzers, antiaircraft artillery and railway guns.
The subsidiary Alkett is founded in Berlin for the production of tanks and other weapons.
Rheinmetall-Borsig AG moves its headquarters from Düsseldorf to Berlin.
Outbreak of the Second World War. In the very first year of the war, all German arms factories are brought under the direct control of Wehrmacht agencies.
Rheinmetall-Borsig AG is absorbed by the state-owned conglomerate Reichswerke AG Hermann Göring. Since the outbreak of war, Rheinmetall-Borsig's Executive and Supervisory Boards have been appointed by the directors of what has since become Germany's largest industrial concern, leading to the complete control of Rheinmetall-Borsig by the German state. The previous Executive Board, which still managed the company as a private-sector enterprise, is replaced.
As the war progresses, the Nazi regime demands ever greater efforts on the part of industry to step up arms production. The requirements of the German Army, Navy and Luftwaffe for technical innovations force the development departments of Rheinmetall-Borsig to push ahead at full speed, too. By July 1944, the company has developed some twenty weapon systems that have been fielded by the Wehrmacht.
Rheinmetall factories are hit hard by Allied air raids and production is severely disrupted. As a consequence of a heavy air attack, numerous production departments of the Düsseldorf factories are relocated to territories in central Germany and to the eastern provinces of the Reich, e.g. Guben, Apolda und Breslau. The Berlin and Sömmerda factories likewise absorb relocated production facilities. In November 1944, British air attacks inflict severe damage on the Derendorf and Rath factories.
Following the end of the Second World War, most of the Rheinmetall-Borsig factories are destroyed. The sites in western Germany — Düsseldorf, Berlin and Unterlüß — come under the control of the western Allies and trusteeship. Some of the factories are totally dismantled by the victorious powers; assets in the areas occupied by the Red Army are lost. Up until 1950, there is a complete ban on production.