The sparrows in Bremen, Hamburg and Kiel whistled from the roofs that there is something afoot. In a joint press release on 13th May 2020, German Naval Yards Kiel and Lürssen announced their intention to work permanently together in naval surface-shipbuilding, with Bremen-based Lürssen taking the helm. According to the firms, the aim of this is “to improve the national industrial structure and to strengthen efficiency and sustainability.” Under the moderation of the Federal Government’s Maritime Coordinator, Norbert Brackmann MP, the preparatory work for a final contractual agreement was successfully completed that week, though the proposed merger is subject to an antitrust assessment by German and/or respectively European authorities.
The Federal Ministry of Economics welcomed the agreement between the two shipyards to pool their capacities in naval surface ship building as an first important step towards the consolidation of German naval shipbuilding which will allow Germany to enforce its position as a maritime nation. Lürssen and German Naval Yards Kiel, which are working together on the construction of the second batch of K130 corvettes for the German Navy, were indirect competitors in the bidding for the construction of the MKS 180 multi-purpose frigate. On 13th January 2020, the Federal Ministry of Defence announced that the proposal from Dutch Damen Group was its preferred solution and the winning company has since announced that it intends to work with Blohm & Voss (a company owned by Lürssen) as a partner in construction and procurement. “We will carry out this project together and in real cooperation. This is very important!” a representative of the management of the Dutch family-owned company said in an earlier interview.
The extent to which the vow of cooperation between German Naval Yards Kiel (who finally withdrew an appeal against Damen being awarded the MKS 180 contract) and Lürssen gives rise to the hope of becoming even more assertive and competitive internationally, will ultimately depend on the quality of the product to be delivered. As for the wider picture, a displacement effect in the German shipyard landscape seems unlikely as most shipyards are characterised by specialisations and work in market segments with valid chances of survival. Lürssen has a separate business producing luxury Yachts, Abeking&Rasmussen specialises in mine-hunters and Thyssenkrupp Marine Systems (TKMS) produces surface warships in addition to submarines.
Politicians and trade unions have long been in favour of a consolidation and the objections of the latter relate to the lack of communication to the workforce about events. Conforming to their role and responsibilities, they make their point with regard to securing sites and jobs but in the end, the two family-driven companies agreed on the modalities that now need to be developed. In this respect, no statements can be made at present about the distribution of work, organisation and structures, including financial planning such as the model of cooperation in general. Although the ‘tactical’ need to implement the multi-purpose frigate MKS 180 project may be at the forefront of the merger, the development is generally well received.
For their part, Damen group sees the move as “a promising opportunity for further strategic and partnership cooperation between the owners of the companies Lürssen and Damen”, Richard Keulen, Director Naval Sales Support, told European Security and Technology. Damen eyes critically the consolidation efforts in Europe – especially with regard to state-backed companies in France, Italy and Spain. Since Lürssen and German Naval Yards, like Damen, are “private-sector shipbuilding companies managed by their owners”, the Dutch are “confident that we can successfully expand the cooperation entered into with Lürssen under the new, expanded, structure, and thereby achieve greater international weight.”
In line with the preservation of maritime and high-tech expertise sought by the Federal Government, it is also necessary to pursue the fate of TKMS. In the past, the Essen-based parent company Thyssenkrupp had repeatedly targeted the sale of its marine division, with Rheinmetall seen as one of the possible takeover partners. TKMS has announced investment measures that do not indicate a withdrawal from the market. These include €250m in infrastructure by 2023 which will cover, among other things, a new shipbuilding hall (200 metres long, 60 metres wide, 40 metres high) with the capacity for large section production, a second equipment line in the dock for equipping submarines, a new stage system as well as a modernised service hall. Additionally, a shiplift will be built with the workforce be expanded by 500.
With its four business units: Submarines, Surface Vessels, Naval Electronic Systems and Service, the TKMS shipyard in Kiel presents itself both as a developer and producer of conventional submarines, naval surface units and as a comprehensive service provider in the life-cycle management of naval ships and systems. The glossy brochure reads: “Thyssenkrupp Marine Systems stands for more than 175 years of advanced technology and engineering know-how made in Germany.”
Within this portfolio, key strength for TKMS is its leading position in the construction of conventional submarines. No other country has sold more of these boats to other states than Germany. More than 120 submarines have been delivered to 17 countries on four continents, meaning almost every second country whose navy is equipped with submarines owns boats made in Germany – by TKMS or its predecessor HDW
Which way to turn?
However, going forward, TKMS may need to associate, possibly with Fincantieri of Italy, with whom talks have already started. Giuseppe Bono, Fincantieri’s CEO, said on the 8th June: “We are already in a project collaboration for the new submarine that we hope to be involved, also together with other European countries.”
This may be the starting line for a joint endeavour. “The policy we have pursued is for the consolidation of European industry. We will arrive at a common European defence, and like Italy we must concentrate our forces and investments where we are strong, otherwise we risk financial flows from Europe to other countries”, said Bono. Fincantieri “is trying to capitalise on two concepts”, the long-term collaboration with the French on surface ships and the Germans on submarines,” he added.
Alternatively, TKMS could pursue a consolidation within the German naval shipbuilding industry. At the last major restructuring, the parent company Thyssenkrup was instrumental in helping the troubled HDW back on a firm course by providing the impetus for the merger of 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. Since this eventual period which saw TKMS founded in 2005, shipyards have been further restructured and changed hands. In 2009 Nobiskrug was sold and in June 2014 Kockums went to Saab. Before that, in January 2013, TKMS took over the Navy-grey shares of Blohm+Voss of Hamburg (before selling it Lürssen in 2016) and in April 2017, Atlas Elektronik was acquired. Therefore, with regard to a possible consolidation of the German naval shipyards, the question arises as to whether TKMS itself is able to once again master such a process rather than become part of it.