COLOGNE, Germany – The German government facilitates talks between large naval shipbuilders in an effort to establish a national conglomerate rival industry champions such as the Naval Group in France and Fincantieri in Italy, according to local media reports.
Negotiations on the effect have been going on in private since early 2020 between ThyssenKrupp Marine Systems, German Naval Yards Kiel, and Lürssen, the NDR broadcaster reported on Thursday.
Top executives from the company confirmed developments on Twitter, though without elaborating on the status of the negotiations.
News of the consolidation plan came after German Naval Yards Kiel and TKMS lost a billions of dollars contract for a new type of German Navy ship, dubbed MKS 180. Dutch bidder Damen win the competition in January. The Dutch company has collaborated with Lürssen for this program, vowing to do most of the construction work in Germany.
However, the MKS 180 award angered industrial lobby groups in Germany, which argued that the country’s good faith effort to carry out an EU mandate for broad-block competition in key public programs backfired. Other European countries tend to maintain such defense-related work within their own industrial ecosystems, the argument goes.
“The need for German consolidation in shipbuilding has been repeatedly emphasized by us and our owner, Privinvest, over the last few years,” German Naval Yards CEO Kiel Jörg Herwig was quoted as saying in a statement. “Only a strong German player will be able to remain competitive globally and strengthen the German technology sector.”
Privinvest is owned by a French-Lebanese businessman, Iskandar Safa.
A request for a statement from the German Ministry of Economic and Energy Affairs was not immediately returned on Thursday.
The idea of a unified German naval industry cluster contradicts the narrative that European defense markets should focus less on national austerity rather than rely more on efficiency through cross-continent mergers.
“I think we must be honest with ourselves and recognize that the acquisition of European defense is largely national, and may be binational or trinational,” said Sebastian Bruns, a naval analyst with the University of Kiel in northern Germany.
Bruns said Lürssen’s role in the consolidation talks would be interesting to watch because the company had a foot in the door of the MKS 180 program – through Damen – and at the same time would benefit from a German industrial conglomerate with the Navy as a guaranteed customer.
Meanwhile, German Naval Yards Kiel has begun a legal process to challenge Damen’s choice of the Ministry of Defense for the business. Allowing litigation to be played out in court will inevitably lead to delays in shipments to sea services.
But in future consolidation talks, the government can use its levers as an intermediary – and final approval authority – to place protests by the German Navy, Yard Kiel, to rest and let the MKS 180 program run quickly, Bruns said.
“In the end, the most important question is what actual results will come out of this,” he said.
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