January 24, 2016

French versus Japanese Competition on Australian Submarine Pricing

Toulon, the French Navy's main base. Homeport of many DCNS products including: current nuclear carrier Charles de Gaulle, DCNS built FREMM (multi-mission) frigates, Rubis SSNs and the future Barracuda SSN, (Map-diagram courtesy scoop)
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French naval bases and Headquarters in metropolitan France (2015). On the northwest coast is Cherbourg where French Navy submarines are built. France's SSNs are homeported at Toulon Naval Base in the south, on the Mediterranean coast. France’s four Triomphant class SSBNs are based in northwest France.
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In Submarine Matters S is providing good comments on the Japanese approach to the sale of a future submarine to Australian. There has been some German information, particularly from MHalblaub.
However there has been little information about France DCNS’ place in the competition. To that end Comments on January 24, 2016 from KQN are very informative, as follows. [Pete has added some links and some bolding]:

“On the US combat management system, pricing will depend on how the deal is structured. It is possible for Australia to get the same price that the USN is paying. That will be the floor price since the US will not discount beyond that. 

Japan is jump starting an export defence business, so I bet it will be aggressive on pricing. It cannot afford to lose its 1st deal which happens to be a mega deal. After all to grow a business, you need to take on some debt. Japan will still benefit since after all, with or without Australia, it is investing into LIB Soryu 2. If it can get Australia to tag on, things will look better on the balance sheet.

Price wise, I would watch out on DCNS if I am Japan. DCNS is a state owned enterprise so you can never be sure what cost of money the French state will use on this business case (besides the EU is flooding financial markets with cheap money). State owned means government employees and that means without this deal, they are still on payrolls. And then the whole economy is bad, with near 11% unemploymemt.

If [the submarine] deal closes at the end of 2016, it gets dicy for the French government. April 2017 is election in France. [President of France] Mr Hollande may deem this a must win so he can get re-elected. Still France is a bit stuck on pricing as they cannot afford to fuss up Malaysia [which bought 2 Scorpene subs] with a low pricing here. France needs Malaysia to buy their [Dassault Rafale jet fighters]. To the extent that [France can leverage the Shortfin] from the Barracuda investment. France can also leverage this to lower its price just as Japan [leverages the Australian Super Soryu from the LIB Soryu Mark 2 investment].

TKMS in my view is the one that gets cornered on pricing. They cannot low ball so much to make the Koreans [with 209 and 214 derivatives] and Singaporeans [218s] mad, just in Asia alone. The German economy is out performing, there is full employment so this deal may not be so critical?

KQN and Pete

7 comments:

MHalblaub said...

Dear Pete,

there is hidden problem with state ownened or state protected companies: they don't lose much by not fulfilling their orders. The state pays the bill.

It is also easier to sue a normal company.

Regards,
MHalblaub

Peter Coates said...

Hi MHalblaub

Also the higher bilateral political power of the state backing state owned enterprises may distort the market or results.

On a different aspect TKMS is already very successful and likely well into profits (the "black"). With TKMS having a full order book (maybe 10 submarines on the blocks in Kiel being built or upgraded) TKMS might be more willing to forgo the price cutting involved in the Australian future sub contest and therefore drop out?

Regards

Pete

Josh said...

Just my opinion as a non-submariner and non-engineer, but the French offering offers the most risk. It is a vaporware product - the nuclear version is not operational and the conventional version I can't see as being a simple modification. Besides the reactor being removed for diesels, the entire coolant system to the reactor has to be removed or left as dead weight. The whole CG of the boat will change as a result of not having a core and the appropriate shielding. Fuel will have to be stored throughout the hull such that trim can be maintained and adjust the CG.

The Japanese offering is closest to being the right size and range out of the gate, and the German design at least builds on the same technologies and propulsion that would seem to scale up more easily. But the French conventional boat would have to be a radical departure from its ancestor. For purely technical reasons I'd never opt for the French design, price not withstanding. But that is just a non-engineer, open source, arm chair general opinion.


Cheers,
Josh

Anonymous said...

@Josh
You're talking like the french engineer don't konw conventional submarine and never did.

DCNS build both the rubis class a ssn and the scorpene class a ssk.

Actually, except the russians and chineses, it's the only one of the tenders who could offer that to Australia

Peter Coates said...

Hi Josh

I came to many of the same conclusions as your first paragraph when I wrote http://gentleseas.blogspot.com.au/2014/10/revised-frances-dcns-announces-smx.html . The forerunner of the Shortfin Barracuda was the SMX Ocean which was only unveiled as a concept as late as October 2014.

This indicates that DCNS only came to the Australian future submarine competition late. This is compared to:

- the Soryu (an actual commissioned hardware design from 2009) and

- the TKMS Type 216 (vaporware but targetted for the Australian customer for at least 4 years). See http://www.navyrecognition.com/index.php?option=com_content&task=view&id=264

Regards

Pete

Josh said...

@ Anonymous:

The French have done SSKs before certainly and export such to numerous countries. I'm not saying that the end product would necessarily be bad or that the French don't know how to build boats, merely that compared to the other two offerings it is the furthermost from being an actual boat in the water. There are numerous changes that would have to be made to almost the entire hull from one end to the other (fuel and additional batteries added, reactor space, shielding, turbines, reduction gear, coolant piping removed). This would affect most of the spaces of the boat - and a lot of the remaining spaces would then be affected by the decision to adopt the US fire control, leaving very little left of the original French nuclear design that currently doesn't exist as a launched boat in the water regardless. Hence, highest technical risk, and one I would not personally opt for if I had a say in the matter.


Cheers,
Josh

Peter Coates said...

Hi Josh

You're right.

A previous article http://gentleseas.blogspot.com.au/2015/09/shortfin-barracuda-bid-maybe.html pointed to the major changes of converting the Barracuda SSN design into the Shortfin SSK.

In the Comments thread for that article an Anonymous [at 20/9/15 10:11 AM] probably from DCNS, said:

"The extent of changes from SSN to SSK is greatly exagerated on this blog. The front half of the sub will barely change at all. They may simply convert some of the trim tanks to dual use for more transit fuel. There is already storage for some fuel aboard as evidenced by the presence of two emergency diesels. Only one hull section (rearmost propulsion section) will require complete redesign, in order to accommodate diesels, fuel and batteries. This involves a scaling of the Scorpene propulsion module, using similar components. Hardly revolutionary stuff however. There will certainly be no arbitrary down-scaling of hull thickness, or complete redesign of 80% of the hull components."

Difficult to believe these DCNS minor changes claims.

Regards

Pete