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Germany: the MKS-180 decision, an earthquake in naval yards!

 

TKMS and Lürssen barred from the next generation warships

Already suffering from allegations of bribery and cost overruns on several naval orders, ThyssenKrupp Marine Systems (TKMS), associated to Lürssen, has just been eliminated by the German Federal MOD from the future MKS-180 warship competition.[1]

The decision was disclosed in a notice sent to the companies by the MOD’s purchasing agency. It said the government did not trust TKMS and its partner Lürssen to build the new Multi-role Combat Ship 180 (MKS-180 for short).

The agency also said the consortium’s proposed price of € 4 billion ($ 4.9 billion) for four ships was too high.

[1] Die Welt 03-03-2018

 

The decision follows the resounding flop of the F-125 program under TKMS leadership

In June 2007 under a € 2 billion ($ 2.25 billion) contract, Germany ordered four F-125 frigates from the ARGE F 125 industry consortium, consisting of TKMS and Lürssen Werft Shipyard. Under TKMS leadership on the programme, Lürssen is responsible for constructing and fitting out the fore sections of each ship; these sections have been built at Lürssen’s Bremen and Wolgast yards. Rear section construction and outfitting, along with whole-ship assembly, is carried out for TKMS at Blohm + Voss (Hamburg).[2]

The first of class, FGS Baden-Württemberg, was returned by the German navy for repairs to defects after it failed its seagoing trials. The ship had been under construction for six years. This comes after similar problems occurred in the K-130 corvettes program…

According to the newspaper Kieler Nachrichten, the Baden-Württenberg‘s central computer system, which was meant to allow the ship to be manned by only half the crew of similar-sized vessels, had failed to function properly. There were also problems with its radar and a ship listing to starboard.

[2] Jane’s Navy International, M. Nitz, 01-May-2015

 

No surprise for naval observers!

This unprecedented step of excluding a full German Consortium led by the Thyssen Krupp concern may come from this major setback of the brand new F 125 frigate.[3] Although a stunning blow to TKMS, the MKS 180 humiliating ousting is not a real surprise to naval observers.

Before the 125 flop there had been the German Navy K 130 failure.

Also in several export countries over the past year, TKMS had to pay heavy penalties for late deliveries or contractual performances not reached[4] . It is also presently stuck in a major bribery investigation in Israel for a Netanyahu interaction with a global naval package of 3 submarines and 4 corvettes to be supplied by TKMS.

[3] news.com.au January 18, 2018,: German Navy new state-of-the art warship sails into tech trouble

[4] Handelsbsblatt Global 23 Nov 2017.

 

What could result from the German MOD decision?

 

For the time being, two competitors’ consortia still remain alive in this MKS 180 race:

 

  • Blohm&Voss in Hamburg (now property of Lürssen) associated to the Dutch Damen. Design capacities and marine engineering of Blohm&Voss where totally retained by TKMS when they sold out the Hamburg shipyard in 2011. Since then no new military building could be performed by B&V without the TKMS design and engineering management …. until Lürssen bought the yard in 2017, bringing in its own design capacities (however more oriented missile boats and corvettes than frigate class and above). As for the Dutch wing of the consortium, DAMEN does not bring any design capability of such a MKS 180 frigate.

 

  • German Naval Yards in Kiel (property of PRIVINVEST) associated to the British BAE System. Here again, the Kiel design capacity is retained by TKMS in Hamburg and the yard built the Algerian frigates and is building the Israeli corvettes plus a piece of the K 130 program under TKMS design and prime-contractorship. If TMKS 180 were given to them, the ships should have to be totally designed by BAE. The British Yard which has to catch-up a 20 year-gap in frigate production (since the type 23), has encountered some difficulties in export contracts (legacy contracts inherited from VT Group) and in domestic major orders (T-45).[5] Its capability will be therefore challenged as they are in the newly-launched T-26. But for GNY, a quite new player in the German naval sector against TKMS and Lürssen, this decision is an important milestone after several ones: the flawless construction of the 2 MEKO-A200 for Algeria, its participation into the K-130 batch-2 (far from being acquired) for the German Navy, and the launch of the SA’AR 6 program for Israel.

 

One may guess that at the end of the day, the contract will be shared in the pure German tradition between Lürssen and GNY and their associates.

But, surely, as first result, it comes out that TKMS loss of the MKS 180 contract would cost the company a lot. The deal estimation was a rough €3.5Bn for four ships, plus a likely follow-up order of two more vessels, bringing the total close to €5Bn. In addition, once the German order completed, whoever receives the contract will also be able to export the MKS 180.

In Germany, time may have come for Lürssen to take the leadership over TKMS on naval surface ships construction. Would the leadership of ThyssenKrupp take this loss as a pretext to accelerate its divestment from the naval domain?

[5] Defence Chronicles 27 October2017.

 

In Europe, a new naval order?

 

The MoD’s decision has consequences, which go far beyond the sole German horizon.

First and foremost, Germany, known for protecting its naval industry, opened the doors to the European competition. This decision is likely to undermine the whole naval industry in Germany claimed the trade unions (IG Metall Küste)  and the issue will be addressed at a meeting of all the German Yards on the 14th of March. One thing for sure: the taboo has been broken for the biggest ships ever built since the end of the WWII!

One will look very carefully how the new GroKo will deal with the lobbying of trade unions, the ousted shipyards and the local politicians. The attitude of the German Government will be carefully watched in Europe in the following sequences.

Should the GNY-BAE option be preferred, it could produce a come- back of the British naval shipbuilding with the possible following prospects in Australia and Canada (the MKS 180 having then possibly a Type 26 look). After years of nightmare and hurricanes, blue sky again on the river Clyde?

The Blohm&Voss-Damen option presents a risk, given the Dutch shipyard has not built real combat ships since 30 years, only OPVs, frigates or corvettes looking, but not based on combat ships standards.[6] But Damen could help to bring the six frigates of the Dutch Navy in the next decade and probably the Belgian ones (replacement of the 2 Karel Doorman).

 

In any case, MKS 180 could become the Northern Europe next frigate (14 ships) designed and built by the German and Dutch shipyards…excluding TKMS.

[6] Defence Chronicles 01-02-2018

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