November 27, 2017

TKMS Lost Australia's Submarine Competition for Good Reasons

Charles Wallace and Martin Murphy writing for Berlin, Germany’s Handelsblatt GLOBAL [English for global commerce newspaper] November 22 2017, report.

"German Shipbuilder Rapidly Sinking

...ThyssenKrupp’s Achilles heel is...along the wharves and dry docks in the northern city of Kiel, where the skeletons of dozens of ships and submarines under construction by [TKMS] line the shore. Despite all the evidence of feverish activity, ThyssenKrupp’s shipbuilding division is in a mess. Sources at the company told Handelsblatt that the division suffered an operational loss in the financial year 2016-2017, and that the dire situation is unlikely to change going forward. As a result, company sources told Handelsblatt that division chief financial officer Evelyn Müller will depart the firm by the end of the year.

If every dry dock in Kiel is occupied with a ship or sub[marine] under construction, how could the company be losing money? Because of technical and planning bottlenecks and delays, almost every ship is finished well behind schedule. The company actually loses money every time the Dom Perignon bottle smashes on a hull at launch. “No submarine is delivered on time,” said one source at the company.

This sloppy management convinced the Australian government to award a €34-billion contract for a fleet of new submarines to France’s DCNS shipyards in 2016, a huge blow to ThyssenKrupp’s ambitions. After that fiasco, company management promised a complete overhaul of its business – but nothing much seems to have happened.

One reason for the division’s poor performance is that it was starved [of] new investment by the group’s executives, who hoped to sell the business. But the timing was not right and “now the division is unsellable,” said one source at the company. The lack of investment means the firm is using old equipment. One source said that plans for new ships were sometimes drawn on paper rather than using computer modeling, which is quicker, cheaper and more accurate.

An example is the delays that have beset an order from Turkey for six submarines. The first sub should have been delivered in 2015, but so far none of the subs is even finished. “The order has blown through every cost and time limit,” said one executive. Because of these delays, ThyssenKrupp is contractually obliged to pay the Turkish government a penalty, now thought to be over €100 million, according to the employee. Other delayed projects also have resulted in huge penalty payments.

A bigger headache may be the shipyard’s business with Israel, the company’s largest customer. It is currently building a submarine and four corvettes for the Israeli navy."


Autumn Leaf said...

I wonder if the Singaporean navy will return to acquiring Swedish subs after taking delivery of the Type 218 SG.

Peter Coates said...

Hi Autumn Leaf

Looks like Singapore is contracted to receive four Type 218SGs, which may keep Singapore going until ordering new subs in the late 2030s.

"On 16 May 2017, Singapore defence minister Ng Eng Hen announced an order of 2 more Type 218SG submarines for a total of 4. The first 2 will be delivered in 2021 and 2022, while the remaining 2 will be delivered from 2024"



Froggy said...

"German shipbuilder rapidly sinking" I doubt.

According french source, the norway oder was a vital order for TKMS.
German governement propose oder 2 more submarine, then the compétition TKMS/Naval Group was abort.
The german governement will probably help TKMS.

I can understand this year isn't a good year :

more information but german language

Without connection with the post this could be interessed you peter.

MHalblaub said...

Dear Pete,

according to the follow on order by Singapore it seems only Turkey has problems with German submarines like Greek once had (no money). I doubt that Turkey has a problem about money but some nerd has problems with Europa. Could similar to the Australian problem (see Collins-class/Tiger/Canberra-class aka "we know it better than...").

Any buyer of such an equipment is looking very closely to the progress made by a company. So I guess the progress of Singapore's submarines does well just like the Israeli and Egyptian ones.

BTW, Autumn Leaf, when did Kockums delivered its last complete new build submarine?

Despite the narration of the article TKMS is building for about 50 million Euros new facilities in Kiel:

Also TKMS has a nice flirt with Kongsberg:

How good are German submarines?
According to the German Navy as good as the maintenance you offer them:


Ztev Konrad said...

There seems to be some confusion over who is the owner of the naval yards in Northern Germany usually called TKMS or Thyssen Krupp Marine Systems as the holding company for the former HDW shipyards

Prininvest a Middle east investor claims to be the owner of "German Naval Yards "
With facilities in Kiel , Kiel-Friedrichsort and Rendsburg ( along the Kiel canal)

The owner of German Naval Yards ( which seem to exclude the submarine yard ?)

Have they bought out the naval surface vessels of TKMS or is this a separate German naval and civilian construction business ?

Anonymous said...

While TKMS may be in some trouble generally (mostly caused by their own management - I hope quite a few were shown the door), they are basically like BAe. They are too big to fail. If it has to, the German govt would have to bail them out (or buy them out - both France, Italy & Spain have sucessful state owned equivalents). Too many orders from too many nations, including the German navy itself, for the German govt to let it collapse. It would be more than a diplomatic bun fight. It may allow some parts to be sold off to other parties (such as Lurssen for example), but it has to keep production going.