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Report: TKMS May Join Forces With Competing German Shipbuilders

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TKMS led the project to build the troubled F125-class frigate (above, file image)

By The Maritime Executive 04-20-2020 09:29:00

German naval shipbuilder ThyssenKrupp Marime Systems (TKMS) is said to be in talks with competitors German Naval Yards Kiel and Lürssen Group about a merger or cooperative agreement - a reflection of the challenges facing Germany's defense shipbuilding industry after Dutch conglomerate Damen won a major German Navy contract.

That contract - a $6.7 billion order for four MKS 180-project frigates - is the largest surface combatant project in recent German shipbuilding history, and it is the first ever awarded to a foreign company. Damen partnered with Lürssen's Blohm + Voss subsidiary for the winning bid, and while most of the construction expenditures will still be made in Germany, the award is highly controversial.

German procurement agency BAAINBw eliminated TKMS' entry early on in the MKS 180 bidding process, citing its price and the serious construction issues affecting the earlier ThyssenKrupp-led Type 125 (F125) frigate program. German Naval Yards Kiel also lost to Damen/Blohm + Voss, and it has threatened to sue the German government for awarding the contract to a foreign shipbuilder.

By joining forces with its competitors, TKMS could operate at a scale like that of other "national champion" defense shipbuilders, like France's Naval Group and Italy's Fincantieri - which are each dominant players in their respective countries. German radio and TV network NDR, which first reported the talks, says that the German government is brokering the negotiations. 

"Consolidation may make sense," said TKMS head Oliver Burkhard in a social media message last week. "[A] national champion could be the answer. Now it is time to explore."

TKMS is just one part of the sprawling ThyssenKrupp industrial conglomerate, and the group faces headwinds on multiple fronts, from steel to auto parts. It said Monday that it would be looking into the availability of state aid as it adjusts its strategy to weather the COVID-19 shutdown. "Like other companies, we are therefore as a precautionary measure, in discussions and examining whether and which forms of financial aid offered to companies by the public sector are suitable for Thyssenkrupp," the company said in an investor notice. 

ThyssenKrupp has previously tried to sell some or all of its TKMS unit. Previous ThyssenKrupp CEO Heinrich Hiesinger attempted to divest TKMS' submarine division in 2014, and in June 2018, the firm was said to be considering the sale of its surface-ship division.