November 13, 2019

The German naval industry is in desperate conditions, and no spin-doctor can hide it anymore. The last program has marked a point of no-return for German shipyards, and the end is nearing. But perhaps, with the now inevitable demise of ThyssenKrupp’s naval division, an opportunity for a new rationalized market is coming to light. A European blessing in disguise.

The dire condition of TKMS

The collapse is comparable in magnitude to the capsizing of the world’s largest banks during the 2008 financial crisis. Just a decade ago, Germany’s shipyard, ThyssenKrupp Marine Systems (TKMS), was a national flagship, and the worthy heir of a long tradition of state-of-the-art shipbuilding. Throughout the 20th century, the Germans proved proficient in ship design and produced some of the most advanced vessels in the world.

But in as few as 5 years, TKMS has entered troubles so deep that few now believe in recovery. TKMS troubles started in 2007, with K130 corvettes delivered to the German navy, which were badly produced and misdesigned, but the patriotic German State gave TKMS a pass for that one. Defense journalist John Beckner wrote: “Strangely, the Marine has just committed to five more K130 corvettes, after the previous navy chief killed off batches two and three – as his last gift to the service before retiring – on the basis of practical experience that showed them to be little more than over-armed and over-priced OPVs but lacking the latter’s ability to operate a helicopter.” ThyssenKrupp repeated the malpractice offense a few years later, when German naval officers discovered during trials that the F125 corvette’s central computer didn’t operate properly, and that the ship wasn’t straight. Naval Today reported: “FGS Baden-Württemberg has been experiencing problems ever since it was delivered to the navy for trials. In addition to hardware and software integration, the frigates have a listing problem. They list 1.3 degrees to starboard and are overweight, an issue that could possibly complicate future upgrade options.” In 2014, Greece sued TKMS for having sold submarines which were still unfinished in a Greek shipyard, almost 15 years after they were first ordered. Finally, after years of industrial decay and quality decline, ThyssenKrupp hit a new low in 2018: its answer to the tender for MKS-180, the new multi-role frigate, wasn’t even accepted by the government, which rejected its bid as a prime contractor.

Options are now few

It is probably fair to say that not even the German State can now save ThyssenKrupp from itself. The Chinese, who keep a close eye on the global submarine market, read on Xinhua: “TKMS’ failure to secure the government order worth 3.5 billion euros (4.12 billion U.S. dollars) has thrown the future of its 6,000 employees into doubt. Aside from a general dearth of orders currently experienced by the unit, TKMS is also likely to struggle to attract new defense sector business from other countries without the credentials of already delivering equipment to its own national navy.

In desperate attempts to win new contracts and break the bad streak, TKMS is heavily suspected of having indulged in bribery and corruption in a recent submarine-procurement deal in Israel. Due to press coverage of the scandal, it is probable that, even if Germany had the financial resources to re-build its naval industry from the ground up, the German taxpayers, who are notorious for their high standards in political ethics, would oppose it. As for winning new bids fair and square, the chances are slim. TKMS is throwing its hat in the ring in the upcoming submarine-replacement program for the Netherlands. But the Dutch are on a winning streak and proving very useful against Russian submarines incursions in European waters. According to Defense Minister Ank Bijleveld and State Secretary Barbara Visser, the overall goals and ambitions of Netherlands cannot be lowered. They are therefore unlikely to take the risk of purchasing their new subs from Germany, whose building capacities have collapsed beyond hope of recovery.

A new European layout?

The unfortunate demise of TKMS may be the painfully necessary step towards a more rationalized defense industry, and an opportunity for Europe to work together on military matters – something it has sought to do for a long time. Political analyst Janosch Delcker writes: “Experts have argued that the European defense market should be rationalized, with countries withdrawing from sectors in which another has a competitive advantage. Some have suggested that France, for example, could hand over the production of its military land systems such as armored vehicles to Germany, known for ground force systems produced by manufacturer Rheinmetall. In return, France could become the main supplier of ships to the Germans.” The fall of TKMS may be an industrial “Titanic”, but Europe still has submarine-building champions who compete well on the global market. French Naval Group and Italian Fincantieri are both posting proud results and satisfying their customers, while staying at the tip of the technological spear. Smaller players on the field may bring valuable contributions to the consortium.

With a rationalized mix of technological creativity and solid manufacturing capacities, Europe could build itself into a major naval power, and compete collectively on the growing market. TKMS has already returned Kockums, the Swedish shipyards, to Saab, after owning it during a short and disastrous partnership. Pushing the reallocation of energies just a step further could turn the German disaster into a European victory.

It goes without saying that Europe cannot simply accept the disappearance of German shipyards without doing anything about it. European countries are major providers of NATO defenses and the United States clearly will not deal with European defense single-handedly. But looking beyond what is now inevitable may be the key to, instead of suffering the slings and arrows of outrageous fortune, building a solid and unified defense industry.

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David Palmer