March 14, 2014

Corporate Battle Between SAAB and TKMS Over Kockums

The reality of corporate battles (Cartoon courtesy of CartoonStock.com).
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For the latest on this issue see June 11, 2014’s Australia's Future Submarine - Swedish vs German Claims http://gentleseas.blogspot.com.au/2014/06/australias-future-submarine-swedish-vs.html . It is unclear whether Germany or Sweden hold the strongest intellectual property rights to the Stirling AIP.

The current corporate confrontation between SAAB and TKMS underlines the need for Australia future submarine project (SEA 1000) to be (reasonably) technically self reliant and flexible enough to tolerate changes in the threat-strategic environment, corporate and broader international economic environment. Australia needs as much autonomy as possible in intellectual property, spare parts and test facilities. 

Connect the current escalation in corporate conflict between SAAB and TKMS over Kockums with:

- Kockums loss of its traditional Singapore customer to HDW – see Singapore Buying Two HDW 218SG Submarines – Sweden’s Loss of December 3, 2013http://gentleseas.blogspot.com.au/2013/12/singapore-buying-two-hdw-218sg.html , and

- German’s Sinking Kockum’s Swedish Sub-Maker of November 13, 2013 http://gentleseas.blogspot.com.au/2013/11/germans-sinking-kockums-swedish-sub.html .

ARTICLE

Birgitta Forsberg of affars Valdern (translated from Swedish) of March 12, 2014 reports http://www.affarsvarlden.se/hem/nyheter/article3811470.ece :

"Thyssen Krupp ask FMV stop Saab"

"Kockums German owners ThyssenKrupp ask FMV stopping Saab from recruiting top people from Kockums.

n a letter to Lena Erixon, Director General for Defence Materiel Administration, [known as]  FMV, asking the head of the German Thyssen Krupp Marine Division, Dr. Hans Atzpodien FMV stopping Saab from recruiting key personnel from Kockums.
Thyssen Krupp wholly owns Kockums but has for years thwarted Kockums from exporting submarines because the Germans also owns the German shipyard HDW where they would rather control the business. Recently, FMV enough of the Germans' delaying tactics when it came to ordering a Swedish Kockums and instead asked Saab to do a feasibility study on Sweden's future submarines.As a result of the Saab has recently recruited top people from Kockums and also went yesterday, Tuesday, issued a press release that the company seeking employees for its shipping division.
The letter writing Atzpodien addition to the Thyssen-Krupp
§  - will support the export of the planned Swedish submarine A26
§  - is willing to negotiate a contract to sell the A26 to Sweden
§  - is willing to offer Swedish authorities influence at board level in Kockums or at least greater  transparency in company
§  - want to invest in to let Kockums produce a small submarine (up to thousand tons)
§  is willing to develop Kockums
§  - wants Kockums and HDW cooperate closer without infringing on the patents FMV own

His Atzpodien and Lena Erixon has a meeting scheduled for 18 March and it's ahead of the meeting that Atzpodien written the letter.

But the offer of influence has come before, and that the Germans want the Swedes to focus on small submarines, while the German shipyard HDW may take the major orders, are also known. According to a source, who sees the whole thing as a way to get Kockums out of the way as a competitor, there is no bigger market for small submarines. In other words, it is doubtful whether FMV soothed by letter. 
The whole thing is complicated by other agreements between Kockums and FMV, including for servicing submarines." ENDS

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COMMENT

Joakim Wohlfeil on March 14, 2014 sent the following comment to Australia by the Indian Ocean:

"Breaking news update ;-) The Submarine war between Sweden and Germany escalates !!
SAAB has succeeded to recruit the full technical management team at Kockum, including the manager for the submarine division Per Nilsson and are now actively seeking to recruit the remaining ca. 230 engineers. (http://www.affarsvarlden.se/hem/nyheter/article3811470.ece ["Thyssen Krupp ask FMV stop Saab" see above].

According to local press in Malmö the engineers being feed up with ThyssenKrupp are joining SAAB en masse. As the Swedish government are the formal owners of the construction patent and drawings of all Swedish submarines SAAB could actually perform a hostile take-over without paying anything to ThyssenKrupp. (and this seems to happened with the blessing of the Swedish government).

2 days ago, ThyssenKrupp formally protested to the Swedish government ([the Defence Materiel Administration known as] FMV) and demanded they should stop SAAB´s hostile recruitment campaign.

In return Thyssen Krupp has offered.
- ThyssenKrupp will not block the procurement process of A26 and approve that it will be built in Sweden
- Thyssen Krupp will allow Kockums to market A26 for export (however it´s not said if the condition that HDW can see and approve Kockums export offerings will be lifted)
- Repeating the offer Sweden besides of A26 will be the new centre for small submarines (an offer that has earlier been rejected by Kockums employees and the Swedish government).

However, if Sweden suddenly seems to sit on the upside, ThyssenKrupp can answer with obstructing the upgrades and service of Swedish naval crafts that is contracted to the still ThyssenKrupp owned Kockums industriers (TKMD)"

Pete

14 comments:

Anonymous said...

Well done Swedes! About time someone stood up to the german mismanagement of the company.

Anonymous said...

Why should TKMS build another submarine in the size of Type 214 submarines? That would be an extreme kind of mismanagement.

Sweden can't expect 2 (TWO) A26 submarine at the costs of a Type 212/214 with more than 30 submarines on order. That is the main error Swedish politicians made. They looked at the price for Type 214 and expected the A26 for the same costs.

The next question is what Kockums could have offered to Singapore? The last Gotland-class was built in 1996. And why TKMS should have offered competing bids?

The SAAB A26 will cost at least twice the price of one Type 214 submarine. Finally the SAAB A26 will be much cheaper than the son of Collins and Sweden can afford it.

TKMS lost one contract against Kockums: Collins-class
This was a fiasco for all partners.

MHalblaub

Pete said...

Hi MHalblaub

Re "Why should TKMS build another submarine in the size of Type 214 submarines?"

Countries including Germany, others in Europe and elsewhere have submarine replacement programs or first sub programs that would see 1,500 to 2,000 tonne Type 214s as a competitive solution. Perhaps light 218s will be replacement options for 214s.

It appears Kockums was made to lose the Singapore competition by being given an artificially high price.

Yes, the Swedish Government may be willing to pay way above market prices for 2 A26s in order to maintain Sweden's submarine industry and Kockums.

I'm not as sure as previously about Collins' problems. Collins may be better than publicly assumed.

Regards

Pete

Anonymous said...

Dear Pete,

I think Collins class is not such a bad submarine now but it took far to much time due to political troubles to reach the final aim and it still costs far to much to keep them afloat.

In my opinion Kockums was to weak to deal with Australia. That was the problem for Australia. South Korea did listen to HDW.

I guess the 218 is just another Type 214 submarine but renamed due to linguistic reasons. (214 - sure to die vs. 218 - sure to prosper)

For first sub programs the small 1,000 t submarine would be perfect.

The problem for SAAB A26 on international market will be the price for a very small series compared to DCNS and HDW.

You may know that the Boeing 787 is a very modern fuel efficient aircraft. In contrary since the introduction of the 787 Airbus sold more A330 than before. There are several reasons for that. Technical problems with the 787 and the biggest one: the A330 is far cheaper and more reliable.

A major problem for Collins class was the divorce with Kockums. Australia should look out for a company that will stay in the business for the next 20 years and can offer help during the whole operational period. That will save a huge amount of money. According to this I have doubts about SAAB-Kockums.

Like the 787 the A26 might be somehow advanced but the final price might be far to high.

Regards

Matthias


P.S.:
According to several sources Airbus is going to build an A330NEO (New Engine Option) with more fuel efficient engines than on todays 787. Several airlines and engine makers beg Airbus to do build it. A cheap and reliable solution...

Pete said...

Hi Matthias

Thanks for your comments.

Yes the Collins yearly maintenance and down-time is high particularly due to continuing propulsion system problems.

Australia’s very short time (due to politics) to choose either HDW or Kockums to build the Collins also caused long term problems.

Singapore’s "218" rather than "214" might be just about the name in Chinese but I wonder why Singapore and HDW are keeping the 218’s features and tonnage secret. So I assume the 218 is new in major respects.

Perhaps SAAB would have an advantage in selling the A26 or a smaller submarine to the other Scandinavian countries (even Finland).

The long term support capabilities of HDW or DCNS might be best for Australia. But the surprise choice of Kockums for the Collins opens up the possibility that even small scale "newby" Navantia might be chosen.

Regards

Pete

andersanderson said...

"Why should TKMS build another submarine in the size of type 214 submarines."
Well, it's called development. The A26 will be wastly superior to the type 214. Higher shock resistance of the hull, less signature, cheaper to operate, increased options on special operations with embarked troops and underwater vehicles.
The Swedes is the country that has the longest experience in designing and operating AIP submarines.
The problems with Collins class is within the Australian part of the design/work, not the Kockums part.
There are many problems with the TKMS subs, some customers doesn't even want to pay for them because they have so many problems.

Pete said...

Hi andersanderson

If the A26 had actually been built claims as to its superiority over HDW submarines could be demonstrated.

It would be interesting if HDW supporters (or Germans generally) could rebut Swedish criticisms of HDW.

Regards

Pete

Anonymous said...

Hi andersanderson,

There have been problems with some subs for South Korea but these were fixed now. Greece was close to bankruptcy and therefore tried anything to avoid paying.

According to my knowledge Germany's first submarine with AIP was the V80 built in 1940. The V80 was powered by a Walter engine with hydrogen peroxide as fuel. After the war the first German submarine with AIP was the U1 (S180) with fuel cells in 1988.

Do you think the Type 214 build today in South Koreathe is still the same as Type 212 build in 1998? I think it is more an evolutionary process to enhance such a submarine step by step. HDW delivered last year the INS Rahav to Israel. Another submarine for Israel is under construction.

How many years ago did Kockums built a complete submarine?

SAAB is building the Gripen, a very fine fighter jet. The adds for the F-35 are fare better. Just the adds...

Regards,
MHalblaub.de

Joakim Wohlfeil said...

Standing with one foot in both the German and Swedish camp I think Matthias are on the right track. But I would turn the story around. Sweden historical neutrality always forced them into very sturdy and easy to support solutions. It's a fact that the Swedish dream building their fighter jets was a plane that the pilot could hide in his garage and service at the local car repair shop.
The same goes for the subs, while HDW have got stick in to complicated solutions, Kockums boats has been at sea gaining sea hours and have the most hours in the world under AIP propulsion.
The Gotland class is soon 20 years but they still steal the show at international exercises while the 21+ boats dwell at the repair yard. And look at the press they get!
There are also practical issues, Kockums had a strike of luck making extreme shock resistance a selling point, at the same time as the Siemens AIP struggles with the external tank dilemma.

However, let's face it. Defence business is not about competition, it's about politics. The decisions are based on counter export and industrial alliances.
Kockums can offer access to a markets of selling Swedish meatballs to 9 million inhabitants or Lego production to IKEA furniture.
Germany can offer counter business including access to one of the most attractive export markets in the world...this is what counts in defence business.
In the end the performance of the boat is irrelevant.

Pete said...

Hi MHalblaub

Yes. Its true overall that the HDW subs wouldn't be selling so well overseas and being built in S Korea if they weren't of a good standard. Greece still can't buy all it ordered.

Israel has been happy to receive discount price Dolphins - which has distorted market forces.

Early AIP was, of course difficult and dangerous to use but the various AIP technologies are now maturing.

If my garage was big enough I'd buy a Gripen and maybe a F-35 in 2025 when the faults are fixed.

Regards

Pete

Pete said...

Hi Joakim Wohlfeil

I agree Sweden builds good subs. Sweden also has to sell aircraft and subs on their merits without the big country market power or large domestic defence force buyers of Germany and France.

I’m not well informed on which is the best AIP but I imagine issues like “how well does the AIP integrate with the sub” and “what does the customer navies want to use AIP for – transit and/or lurking” are relevant.

I partially agree politics is important. Also important is efficiency of the sub and price and credit.

In some countries commissions-bribes to officials, politicians and other middle men is also important.

Regards

Pete

Joakim Wohlfeil said...

Hi Pete

Thanks for an intresting blog BTW.

Regarding your comments I actually feel the need to adjust myslef somewhat as you actually Point out some isses I normally love to remind others about as gravely undervalued.

Just as you say the overall operational cost is extremely important, for data-sheet freaks it´s easy to underestimate that any system (air, land, sea) with hight operational access, actually even get´s more efficient than systems better on the paper as you both will have a well tranied crew and tactical superiority compared to a system with lover operational access.

I think both Germany and Sweden build sub´s of very hight class. Then the systems also reflect 2 very different tactical needs and context. Germany withit´s larger capacity and NATO membership would have been able to defend it´s bases and operate more conplicated systems in land, sea and air.

Sweden (althought it´s "neutrality" could be questioned given the at that time very secret but close cooperation with US) had to assume they would have to fight it out alone for some time and assume that all their bases could be eliminated early in a conflict putting extreme efforts in systems with independent operational capcity.

Great ideas to have a fighter airplane in your garage, would make any commuting to work or the local shop very Swift.

I would however go for the SAAB-37 as you then also could land and take of on your garage driveway ;-)

https://www.youtube.com/watch?v=QIErhm2y7wY

Joakim Wohlfeil said...

AND, forgot to just support your very, very relevant comment.
"In some countries commissions-bribes to officials, politicians and other middle men is also important."

Depressing, bu extremely relevant. I however think Australia seem like one of few examples that could show an alternative way to do defence business...

Pete said...

Hi Joakim

Thanks for both comments.

Yes there’s many ways to measure efficiency including many financial parameters. Operational access has been a weak point of Collins in terms of operational availability – due to many propulsion problems and not enough crewmen.

Aussie training would be better than most opponents – but still couldn’t handle SSNs in blue water.

The US and Australian military face vast continental landmass and blue water, oceanic operating areas – very different from smaller landmass and green-brown water of Europe. Australia is resolving this difference by buying US aircraft (F-18s and F-35s) but for many reasons cannot buy US (or any) SSNs.

If Germany (HDW) has done substantial work on designing a large blue water SSK (the HDW 216) then it will have advantages over competitors. DCNS's process of evolving SSK into SSN designs (as in Brazil) is also interesting.

In Australia straight monetary bribes probably wouldn’t work but promising senior or acquisition officers retirement jobs in Boeing Australia or Lockheed Martin Australia seems an established loophole.

My next door neighbour has a Draken but I reckon I can replace my Viggin with a hot new Gripen JAS 39 E/F sporting a twin tail for extra stealth :)

Cheers

Pete