November 19, 2018

A contract which everyone would have guessed, a few years ago, should have fallen into the lap of German shipbuilder TKMS, slipped between its fingers in a dramatic play-out. By the skin of its teeth, the German shipyard managed to negotiate a small part of the deal, as a small sub-contractor. Once recognized as a global leader in the industry, German shipyards, which once produced the terrifying U-boots during World War 2, are in such pitiful condition that Germany temporarily excluded its own industry from the public bid for the future multi-role combat ship. A Giant falls.

Germany has, over the past decades, been slowly ramping up its military, back from its residual post World War 2 levels. Accordingly, the German Navy is taking an increasingly large role in allied operations. Deutsche Welle states: “Since West Germany officially joined the trans-Atlantic alliance in 1955 and integrated the former East Germany in 1990 during reunification, Berlin has contributed significantly to the North Atlantic Treaty Organization (NATO).” Though Germany wouldn’t dream of going to war alone, they have racked up serious participation days over the years, within NATO or with European allies. Today, with US allies pounding the European table to beef up their military and not let American forces do all the heavy lifting, Germany is on the road to increased capacities. Germany says it is also boosting defence spending because of new threats. “France and Germany pledged increases in defence spending as European leaders face mounting pressure from Donald Trump to pay more for their own defence ahead of this week’s NATO summit […] The challenges for NATO have changed drastically in recent years,” Mrs Merkel said in her weekly video address”, writes Telegraph reporter David Chazan. Hence the bid for the new multi-role naval combat ship, the MKS 180, supposed to be the spearhead of the German surface navy. Able to support large naval helicopters and drones, the ship will display long range, heavy armament, increased seaworthiness (including through ice) and a high cruise speed, therefore being able to address all known threats.

Given the traditional support which German industries receive from their federal government, it was a bombshell to all military observers to learn, in early 2018, that not only Thyssenkrupp’s military shipyards wouldn’t grab the deal after a formal bid, but that they would simply be barred from taking part in it, altogether. Handelsblatt reporter Martin Murphy reports: ‘So it will have come as a shock to the country’s largest shipbuilder that it has been barred from the race to supply the next generation of German battleships. Faced with a program plagued by manufacturing problems, including a new warship that listed, the German defence ministry has taken the unprecedented step of excluding a consortium led by the company, part of the ThyssenKrupp industrial conglomerate, from the bidding process.”. The speed with which the German economy recovered from a state of ash and rubble, to one of the world’s greatest economies, hinged on a variety of factors, and close cooperation and backing from their government is one of the main. But the surprising move did not come from a change in policy: Berlin backs its industries as much as ever. But the technological and industrial downfall which TKMS (ThyssenKrupp’s maritime division) is undergoing was simply more than the German navy could make up for with patriotism. National Interest John Beckner says: “Unfortunately, due to poor planning and decision-making, and lack of funding, it is incapable of fulfilling its primary mission requirements. Unless changes are made promptly and quickly, its capabilities will degrade even further over the coming years. While it is nice to blame “budget cuts,” the Marine’s problems go well beyond a lack of money. The German Navy has major problems with all its major components; submarines, surface ships, and what’s left of its naval air capability.”

TKMS has been in the ropes for years, now. Even slashing prices to the point of profitability, latency between programs became so great that best engineers and qualified workforce started leaving for better-performing German companies, say automotive industry, triggering a vicious circle which the shipyard is fighting to break. With a diminished workforce in a field that requires such high degrees of knowhow, the ability of the company to build reliable ships dwindled, resulting in deal-breaking flaws in the few ships they were commissioned with building. Quality and integration problems became so bad that the last ships to be delivered to the navy were refused by inspection officers and sent back from the military docks. The submarine division is in no better shape, with all 6 German submarines being currently undergoing repairs. In a desperate attempt to avoid bankruptcy, TKMS is suspected to have risked it all by bribing Israeli officials into designating the German shipyard as the winning contender for Tel-Aviv’s next batch of submarines. Also, in order to reinject fresh funds into the company, TKMS high-balls competition, and overpriced its ships. Plagued by quality issues, chronic economic underperformance and a tarnished image, TKMS was unable to gain Berlin’s trust and enter the MKS 180 deal. German news site Handelsblatt reported: “Already suffering from allegations of bribery and cost overruns on several naval orders, ThyssenKrupp Marine Systems has now been barred from bidding to build Germany’s next generation of battleships.” A few months later, in August, Berlin agreed to give TKMS a nudge, by allowing it to re-enter the competition, but only under the control of competitor GNYK, as reported by Naval Today: “TKMS signed an agreement with German Naval Yards Kiel (GNYK) on August 3 under which it will contribute to the development and construction of the 5,000-ton multi-purpose combat vessels MKS 180 (Mehrzweckkampfschiff 180) which the German Navy hopes to start receiving by 2023. GNYK is the only remaining German main contractor in the EU-wide tender of the German Navy after the TKMS und Lürssen consortium was excluded from the tender in March this year.”

Experts are unable to say what the future of German shipyards will be, with German officials still trying to work out the conundrum: how to save and restore a national asset from itself, while not contaminating the armed forces with its products? So far, the stated options from ThyssenKrupp have been either selling off the entire department, or simply shutting it down, leaving Germany to rely on foreign supply for quality ships.

https://www.youtube.com/watch?v=TkQJsM0mCuQ

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Samantha King