June 9, 2016

Serious Industrial issues for TKMS following DCNS's Aus Sub Win

The German Navy's sub Type 212A U36 at TKMS' Kiel Shipyard
(Photo courtesy AP via n-tv(dot)de June 6, 2016)

This Submarine Matters article mainly draws on German media sources spotted by a friend. Translating using right-click then “Translate to English” is handy.

On June 1, 2016 several news outlets carried an Agency France Press (AFP) article DCNS is seeking submarine tie-up with ThyssenKrupp. DCNS has long suggested it and ThyssenKrupp band together to face new competition from Chinese, Indian and South Korean arms companies. DCNS rightly indicated that during ThyssenKrupp’s initial period of disappointment ThyssenKrupp was unlikely to respond positively to DCNS

Germany is still angry. Anger is over at least 7 published issues and for the inherently imprecise nature of Australia’s CEP, versus a tender, which would have been preferable. Germany and Japan also wonder whether DCNS won due to DCNS unique advantage of being able to offer nuclear propulsion to Australia in the longer term.

But the anger has been tempered by the hope that a German bidder will win Australia’s Offshore Patrol Vessel (OPV) CEP later in 2016. The announced shortlist of 3 bidders for that CEP includes 2 German bidders, Fassmer (offering the OPV 80) and Lurrsen (offering the PV-80).

TKMS is, to a degree, heartened by ongoing submarine orders in the Asia-Pacific including:
-  2 x Type 218SGs being built in Kiel for Singapore
-  providing parts for South Korean assembled Type 214s (for South Korea)
-  parts for 2 x South Korean assembled 209s for Indonesia
-  1 x 209 to be assembled in Indonesia, and
-  largely secret assistance in designing and assisting South Korea in building the future
   KSS-III 3,400 tonne (SLBM armed) submarines.

TKMS also hopes to help India build 4 to 6 Type 214s for Project-75(I for India).

However, with the Australian loss, TKMS does not have enough submarine or surface shipbuilding  business (over the medium 5+ year term) to keep all of its German workforce employed.

By June 6 there was increasing news of criticisms of TKMS from German shipbuilding unionists with calls for a review of management. Future job security, for around 3,500 shipbuilding workers and 600 "temporary" (casual?) workers, is a major issue.

European shipyards are threatened by defence cost cutting from their own governments. Increasing business from Asia-Pacific countries is valued highly but even there European arms sellers need to compete against Russian and Asian arms companies.

ThyssenKrupp AG's share price dropped sharply after high level leaks indicated TKMS and Japan had lost the submarine CEP, while DCNS had won. The leaks were quickly confirmed by Prime Minister Turnbull on 26 April 2016(Graph courtesy German Kursdaten Telebörse, 8 June 2016)


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