As an industrial nation, Germany is dependent on exports. As an exporting country, Germany has considerable economic and security interests, which is why German security policy must have a maritime component.
The privately managed German naval shipbuilding industry has achieved a strong market position in Germany and abroad with new high-performance products. However, the industrial policy observed in numerous European countries, in particular with state-owned companies in France, Italy and Spain, to secure national defence capacities and key technologies and to support export activities by the government increases competitive pressure. This pressure is also intensified by the restrictive German arms export policy. As a consequence, the inevitable consolidation of Europe’s highly fragmented naval shipbuilding industry has become a distant prospect.
Capacities and Strategic Orientation
As a large industrial nation, Germany is highly dependent on exports and, as a leading exporting country, has considerable economic and security interests. This is why German security policy must have an important maritime component. In terms of security policy, economy and technology, Germany needs an efficient, globally active naval industry to preclude overdependence on foreign countries and to ensure participation in international armament cooperation.
Since the end of the Cold War, three trend-setting strategic corporate decisions, also determined by the security situation, have contributed decisively to maintaining the efficiency and international competitive position of the German naval industry to this day: firstly, maintaining defence technology as a core business, secondly, developing technologically market-leading products, and thirdly, intensifying the development of foreign markets.
The construction of naval ships requires a special technological competence and a high system capability in the integration of complex technological fields such as sensor technology, propulsion technology, electronics, weapon system technology, protection technology and lightweight construction as well as efficient project management. In particular, the demands on IT security and networks as well as on the command and weapon control system (CWCS) network and on missile defence are increasing.
The German naval industrial base comprises the shipyards and the supply industry and can be divided into the following system areas: Surface combatants, conventional submarines, MCMV and combat boats, naval support vessels and subsystems, including propulsion systems, CWCS and radar systems.
The Shipyards
Nine shipyards and around 400 suppliers are active in German naval shipbuilding. These shipyards are system houses and global technology leaders in their specific product areas. They have undergone considerable consolidation and restructuring in recent years, and at the same time German Naval Yards Holdings has entered the market. The current ownership, capacities and structures make it clear that a German shipyard alliance, as it has long been favoured by the German government, has little chance of success.
The thyssenkrupp Group made a major contribution to the consolidation and restructuring of naval shipbuilding. The Kiel-based company was formed in 2005 from the merger of the former Howaldtswerke-Deutsche Werft (HDW) in Kiel, HDW-Nobiskrug in Rendsburg, Blohm+Voss and Blohm+Voss Repair in Hamburg, Nordseewerke in Emden, Kockums in Sweden and Hellenic Shipyards in Greece. ATLAS ELEKTRONIK has also been part of thyssenkrupp Marine Systems since 2017. This means that thyssenkrupp Marine Systems can not only cover shipbuilding, but also a significant share of CWCS and in particular underwater sensors and weapons – a unique selling proposition among German shipyards.
Today thyssenkrupp Marine Systems, with annual sales of more than €1Bn, employs over 5,000 people at its Kiel, Bremen, Hamburg and Emden sites. The company is the world leader in the development and manufacture of non-nuclear submarines. Since 1960 it has signed contracts with 20 states for 165 submarines, 112 of which were built in Germany and 53 of which were made from prefabricated material packages with technical support from Germany in the respective customer country.
A technological quantum leap was made with the development of an air-independent submarine propulsion system based on noiseless and emission-free fuel cells. The Class 212A and 214 submarines can thus operate submerged for considerably longer than comparable purely diesel-electric boats. In exports, thyssenkrupp Marine Systems is currently particularly successful with its Class 214 submarines, which are also equipped with a fuel cell propulsion system and take extended deployment scenarios into account.
The core business of thyssenkrupp Marine Systems also includes the development and design of state-of-the-art frigates, corvettes and naval support vessels as well as a wide range of services. Together with the Lürssen shipyard, thyssenkrupp Marine Systems is currently supplying the four F125 class frigates for the German Navy in the ARGE F125 consortium.
With the abandonment of the surface shipbuilding shipyards, which have belonged to German Naval Yards in Kiel since 2011 and to Lürssen Werft in Hamburg since 2016, the thysssenkrupp Group has made a far-reaching strategic decision in this market segment. Hellenic Shipyards (2010) and Kockums (2014) were also sold as part of the focus on the core business.
thyssenkrupp’s decision to abandon the Emden site of thyssenkrupp Marine Systems was suspended until 31 December 2020 due to the announcement by the Ministry of Defence and the coalition agreement between the Christian Democratic Union (CDU) and the Social-Democratic Party (SPD) that surface shipbuilding is regarded as a key technology in Germany.
With approx. 2,700 employees the Lürssen Werft group of companies, to which the Bremen-based Fr. Lürssen Werft with the Aumund, Berne and Lemwerder divisions, the Lürssen-Kröger Werft in Schacht-Audorf (since 1986), the Neue Jadewerft in Wilhelmshaven (since 2004), the Norderwerft in Hamburg (since 2012), the Wolgast-based Peene-Werft (since 2013) and Blohm+Voss (since 2016) belong, has pursued a successful strategy of growth and specialised orientation in recent decades. Lürssen is the lead company in the K130 corvette joint venture, which also includes thyssenkrupp Marine Systems and German Naval Yards Kiel. The contract to build five K130 corvettes for the German Navy was signed on 12 September 2017.
German Naval Yards is a new shipyard group in the German State of Schleswig-Holstein, to which the three shipyards German Naval Yards Kiel, Nobiskrug and Lindenau belong. It is owned by the Privinvest Group, which also includes CMN in France, Isherwoods in Great Britain and PISB with the shipyards Hellenic Shipyards and Abu Dhabi Mar. Privinvest has over 2,500 employees worldwide.
In addition to working on the construction of the five German class K130 corvettes, German Naval Yards Kiel, which employs 450 of a total of 950 people in defence technology, is currently building four corvettes for the Israeli Navy under the leadership of thyssenkrupp Marine Systems. German Naval Yards, as general contractor in cooperation with thyssenkrupp Marine Systems, has submitted a final bid for the development, design and construction of the German MKS 180 multi-role combat ship.
With 440 employees in the naval business area the Abeking & Rasmussen shipyard develops and manufactures in Lemwerder mine countermeasure vessels, patrol boats as well as special ships up to 125 m in length.
The Fr. Fassmer shipyard has developed special units for the integration of flexible warfare and surveillance systems based on a modular design concept. These include the 1,850 t displacement OPV 80 class blue water patrol veselss. According to Fassmer, the company employs 1,500 people worldwide.
The Supply Industry
The German naval shipbuilding industry has a broad-based, efficient, medium-sized supplier industry that has successfully positioned itself at German shipyards and abroad. The locations are not limited to the coastal states – a large part of the supply industry is located in Baden-Württemberg and Bavaria.
ATLAS ELEKTRONIK, as a system house for naval electronics, supports navies all over the world in their mission to ensure maritime safety. The company, which can look back on frequently changing ownership structures, has been a wholly-owned subsidiary of thyssenkrupp AG since 2017 and has been assigned to the thyssenkrupp Marine Systems division. ATLAS ELEKTRONIK’s product range includes sonars and sensors, command and control systems for submarines and surface vessels, mine warfare systems, unmanned underwater vehicles, radio and communication systems, naval weapons and coastal protection systems.
In October 2017, thyssenkrupp Marine Systems and ATLAS ELEKTRONIK established the 50/50 joint venture kta naval systems with the Norwegian company Kongsberg in view of the forthcoming joint Norwegian-German programme of six Class 212CD submarines. The company is headquartered in Kongsberg, Norway, with a branch in Bremen. kta naval systems is to become the exclusive supplier of command and weapon control systems for thyssenkrupp Marine Systems.
Gabler Maschinenbau is a leading supplier of hoistable masts, special equipment and other components exclusively for submarines.
Hagenuk Marinekommunikation, an independent subsidiary of the ATLAS ELEKTRONIK Group, is the European market leader for integrated submarine communication systems and one of the world’s leading manufacturers of integrated radio communication systems.
As part of its strategic reorientation and concentration on the aerospace industry, the Airbus Group has disposed of extensive parts of its defence electronics business, which in 2017 became the new defence technology company HENSOLDT with around 4,000 employees and sales of around one billion euro. This puts it in 63rd place among defence companies worldwide. HENSOLDT generates 24% of its sales in the maritime segment, which includes radars, optronic systems, periscopes as well as electronic and data transmission systems. Class 212A submarines, Class K130 corvettes and Class 125 frigates are all equipped with HENSOLDT products.
Raytheon Anschütz, a subsidiary of Raytheon Company, USA, is one of the world’s leading manufacturers of integrated bridge systems and nautical equipment such as gyro compasses, autopilots, rudder control and monitoring systems, radar equipment, electronic charts, radio and communication systems. Strategically, the company has undergone a transformation from a pure component supplier to a systems supplier, with the result that integrated navigation and bridge systems are increasingly being supplied today, combining its own and third-party products into a single system.
Renk is a leading transmission manufacturer with 2,319 employees and a turnover of €502M in 2018. The Maritime Transmissions business unit develops and produces transmissions for naval vessels. The ships of 35 navies worldwide are equipped with Renk transmissions. Class 125 frigates and Class 130 corvettes also have Renk transmissions.
The Rohde & Schwarz technology group develops, produces and markets communication, information and security technology products, which it also supplies to naval forces. In 2018, the company had 11,500 employees and a turnover of 2.04 billion euro. R&S Marinesysteme GmbH was founded with the aim of concentrating development activities at the Kiel location on the national and international naval business. The company develops and implements system solutions for secure communication and reliable telecommunications and electronic reconnaissance on board naval vessels.
Rolls-Royce Power Systems, headquartered in Friedrichshafen on the Lake Constance and a division of Rolls-Royce plc, supplies diesel engines for naval vessels. Class 212A submarines, Class 130 corvettes and Class 125 frigates are equipped with Rolls-Royce diesel engines from MTU.
Siemens supplies drives, switchgear and automation systems for naval vessels. Major ongoing projects include Class 212A and Class 214 submarines and Class 125 frigates. The Siemens PERMASYN propulsion engines and fuel cells are core components of the air-independent submarines.
Thales Germany realigned its naval organisation in 2018 and merged the Wilhelmshaven and Kiel sites into a new, cross-location unit. This integrated business unit will further expand marine competence in joint teams. This will enable them to develop and supply customer solutions in the areas of mission control systems, submarine solutions and naval communications solutions.
In 2015 Finnish Wärtsilä took over the L-3 Marine Systems International group from the L-3 group, which includes Wärtsilä ELAC Nautik and Wärtsilä JOVYATLAS EUROATLAS. ELAC is a market leader in the field of hydroacoustics with innovative areas of digital underwater communication and the introduction of open system architecture for submarine sonars.
Capacities and Perspectives in Europe
In contrast to the aerospace industry, naval shipbuilding in Europe remains highly fragmented. In France, Great Britain, Italy, Sweden and Spain in particular, despite a strong shrinking process and increased cross-border cooperation, there are still considerable capacities to be found which are supported by national industrial policy, domestic procurement projects to secure technologies and jobs, and successful foreign projects.
Cross-border procurement programmes are still rare in naval shipbuilding. The FREMM frigates and the Logistic Support Ship (LSS) are the only bilateral naval shipbuilding projects of 13 European programmes managed by OCCAR. FREMM is a series of frigates that France and Italy have been building since 2007 in a joint project in different configurations and designs for their respective naval forces. FREMM stands for the French Frégate Multi-Mission and the Italian Fregata Multi-Mission. The LSS is also a Franco-Italian project for supply vessels of both countries’ navies.
The discussion of creating a “Naval EADS” or “Naval Airbus” analogous to the European aerospace industry, which has been recurring for decades, has not yet been generated results. With the acquisition of the Swedish shipyard Kockums in 1999 and the takeover of the Greek Hellenic Shipyards by thyssenkrupp in 2002 and their integration into HDW, a European shipyard alliance was created for the first time. The establishment of a European naval alliance, analogous to the EADS and Airbus aviation groups, was thus increasingly propagated, and HDW’s 1998/1999 annual report announced this “as an early orientation towards a European market”. However, this strategy was not successful. Nor was the “Joint Declaration by German Chancellor Gerhard Schröder and German naval shipbuilding companies of 28 October 2000” to view the strategic alliance between Babcock Borsig and Thyssen Krupp Industries “as a decisive element in the restructuring of the European defence industries” a successful one.
In 2003, Jean-Marie Poimboeuf, then CEO of the French shipyard group Direction des Constructions Navales (DCN), now known as the Naval Group, advocated an “EADS of the Seas” and saw European defence policy and joint industrial projects as the key driving force. However, both are still lacking today. In 2005, under the heading “European Shipyards Unlikely to Consolidate”, Defense News listed the six largest European companies in naval shipbuilding: BAE Systems, DCN (now Naval Group), Fincantieri, Navantia, Thales and thyssenkrupp Marine Systems. These continue to exist as independent shipyards, and so, as shown in the following, there are still substantial nationally determined capacities in naval shipbuilding in Europe. This strong national orientation and fragmentation is exemplified by the major European frigate programs of the day.
In France, Naval Group, Thales, Chantiers de l´Atlantique and CMN are three powerful companies with strong political support and international strategic success in naval shipbuilding.
Naval Group is a European leader in naval shipbuilding, developing, manufacturing and servicing aircraft carriers, frigates and submarines. In addition, Naval Group has expanded its business activities in the field of drones. In 2018, the group had a turnover of €3.6Bn with 14,800 employees. The company is owned directly by the French state (62.25%) and by Thales (35%). In 2002, Naval Group founded the 50/50 consortium Armaris with Thales. Major programmes include the FREMM frigate project, the construction of nuclear submarines for the French Navy and conventional submarines for foreign navies.
On 14 June 2019, Naval Group and Fincantieri signed a cooperation agreement with the objective of establishing a 50/50 joint venture based in Genoa for the POSEIDON project by the end of the year. The aim is to “strengthen cooperation in naval shipbuilding and create a more efficient and competitive European shipbuilding industry”.
In 2017, the Italian shipyard Fincantieri took over 50% of the shares in the French STX shipyards and continues to operate them under the old name Chantiers de l´Atlantique . The French Government retains a 34.3% stake. Chantiers de l’Altantique and Naval Group have jointly developed the MISTRAL Class landing helicopter dock and command vessel. Chantiers de l’Altantique is building the four ships planned for the French Navy.
The shipyard Constructions Mécaniques de Normandie (CMN Group) was taken over by Iskandar Safa in 1992 and belongs to the PRIVINVEST Group based in Lebanon.
With 19,274 employees and a turnover of €5.47Bn, the Italian shipyard Fincantieri is one of the world’s largest shipbuilding companies and the largest naval shipyard in Europe. It is a partner of foreign shipyards in major supranational naval shipbuilding programmes. Its broad product range includes aircraft carriers, frigates, corvettes, OPVs and submarines. The Italian state has a direct stake of 71.6% in the company.
Since 2014, Fincantieri has been cooperating with Leonardo, Italy’s largest defence industrial element and number 13 worldwide, with 46,262 employees and a turnover of €12.24Bn, with the aim of bundling expertise in naval shipbuilding and developing markets. For this purpose, both companies have founded the joint venture Orizzonte Sistemi Navali (OSN) as a system integrator (Fincantieri 51%, Leonardo 49%). OSN is the system integrator for the ten Italian FREMM frigates, the eighth of which was handed over to the Italian Navy in April 2019.
In addition to the strong focus of the Italian naval industry’s surface activities on France, there are still close relationships in submarine construction with Germany. The German-Italian cooperation in the procurement of Class 212A submarines, which began in 1996, was regulated by an intergovernmental agreement between the MoDs of both countries and by an industrial agreement between the German submarine yards and the Italian shipyard Fincantieri as licensee. Italy now intends to continue the German-Italian submarine cooperation and has signed a government memorandum of understanding with Germany on 10 March 2017 for the planned procurement of a further four Class 212A submarines.
The British naval shipbuilding industry has undergone profound restructuring in recent years in the form of mergers and plant closures. Vosper Thornycroft was taken over by BAE Systems Maritime in 2011 and the DML Appledore shipyard, taken over by Babcock in 2007, was closed in 2019. On the basis of the “National Shipbuilding Strategy” published on 6 September 2017, the future orientation of British naval shipbuilding is being undertaken in connection with the planned procurement programmes of the Royal Navy. This is primarily driven by national interests. The industrial policy aims to build the ships in Great Britain with British design and the involvement of foreign partners and to support British industry in its export efforts by the Government in order to maintain the national shipbuilding capacities, so successfully done in the Australian HUNTER Class frigate programme (nine frigates) and in the Canadian Medium Service Combatant (up to 15 ships based on the Type 26 Global Combat Ship).
This Government strategy is closely linked to the Royal Navy’s major naval programmes such as the Type 31e frigate, also known as the General Purpose Frigate, the Type 26 frigate, the ASTUTE nuclear submarine programme and the QUEEN ELIZABETH class aircraft carriers. The strong government support is also reflected in the successful marketing of British naval products abroad.
With 85,400 employees and a turnover of £18.4Bn in 2018, BAE Systems is the largest European defence company and number seven worldwide. Of these, 16,000 are employed in the maritime sector, which has a turnover of £2.98Bn. The two British aircraft carriers of the QUEEN ELIZABETH class, the Type 26 frigates and the ASTUTE submarines make a decisive contribution to the utilisation of maritime capacity.
Babcock International Group, with 35,075 employees and a turnover of £4.47Bn, 47% of which is in the defence sector, is the second-largest defence technology company in Great Britain and a major participant in the Royal Navy’s major naval programmes. In the naval sector, sales amounted to £1.69Bn.
The privately-owned Dutch company Damen Schelde Naval Shipbuilding had a turnover of €2Bn in 2018 with 12,000 employees, including 3,500 in the Netherlands. The naval shipbuilding programme includes frigates, patrol boats and MCMV. The shipyard has submitted a final offer for the procurement of the German MKS 180 and intends to have the ship built by the Lürssen-owned shipyard Blohm+Voss in Hamburg.
Saab Kockums is a division of the Swedish Saab Group, which in 2018 had a turnover of SEK33.2Bn with 17,096 employees. Kockums employs around 1,200 people, and the company’s product portfolio includes naval surface vessels, the national A26 Class submarine programme currently under development, autonomous underwater vehicles, weapons and other naval systems for communication, underwater reconnaissance and protection.
After the acquisition by HDW in Kiel the Swedish shipyard belonged to thyssenkrupp Marine Systems until mid-2014. On 22 July 2014 Thyssen-Krupp Industrial Solutions sold the shipyard to Saab, now known as Saab Kockums. With this industrial policy shift toward more national sovereignty, the Swedish Government expects to retain its submarine construction capabilities in the country, secure foreign markets and enter into international cooperation.
With the construction of aircraft carriers, destroyers, frigates, submarines, patrol boats and support ships, the government-owned Spanish shipyard Navantia has a broad product range in naval shipbuilding. The company, which has around 5,000 employees, has developed the SCORPÈNE submarine together with the French Naval Group. It was successfully marketed abroad, but neither in Spain nor in France. Navantia is currently building four S80 class submarines for the Spanish Navy.
Need for Political Action
The consolidation of European naval shipbuilding has been pushed into the distant future by an increasingly national industrial policy and the massively state-subsidised arms export policy of numerous countries to support their state-owned enterprises.
In order to ensure equal opportunities for German naval shipbuilding run by the private sector and to safeguard our national defence capacities and key technologies, there is still a considerable need for political action to promote international cooperation, negotiate “at eye level” and promote the consolidation of companies in Europe:
- To step up the creation of European military joint projects as an indispensable prerequisite for international cooperation and the formation of cross-border joint ventures;
- Harmonised procedures for the development, procurement and operational approval of military equipment, coordinated throughout Europe and oriented towards NATO standards;
- To organise competition in the European Union under equal conditions (“level playing field”);
- Harmonisation of European arms export regulations to ensure equal opportunities and the ability of the German defence industrial base to cooperate in international competition,
- Abolition of the protectionist and competition-distorting offset laws which exist in many countries and which require compensation for defence materiel contracts and thus, particularly in the case of relocation of production shares and licensing, put the German small and medium-sized supplier industry at a considerable disadvantage.
These industrial policy measures will strengthen naval shipbuilding in Europe, enable naval shipbuilding in Germany to successfully meet international challenges and, with its innovative products, expertise and flexibility, remain a strategic partner for the Bundeswehr and the allied armed forces as well as for the foreign naval industry.
Major (ret) Dieter Hanel is Chairman of the Working Group on Defence Technology at the Business Associations in Schleswig-Holstein and author of the book “Military Link. Security Policy Time Travel of an Officer and Defence Industry Manager”.