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ThyssenKrupp's Naval Shipbuilding Division Faces Headwinds

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The lead F125-class frigate, constructed under a TKMS-led contract and since returned for quality issues (file image)

By MarEx 2018-06-08 13:59:00

Shipyard union IG Metall Kueste is urging ThyssenKrupp to keep its naval division, ThyssenKrupp Marine Systems (TKMS), in the wake of its exclusion from a multi-billion-dollar shipbuilding competition. TKMS has historically been the Deutche Marine's main naval shipbuilder, but German arms procurement agency BAAINBw eliminated it from the bidding process for the new MKS 180-class frigate earlier this year, citing a high price quote and quality issues with a previous class of ships. The loss of the contract is seen as a damaging development for TKMS' business.

"The companies and the federal government are responsible for the impending disaster in naval shipbuilding," asserted IG Metall district manager Meinhard Geiken. "This was triggered by the Federal Ministry of Defense, which accepted the end of naval shipbuilding in Germany with the Europe-wide invitation to tender for the billion-dollar MKS 180 contract." 

The German government decided to exclude ThyssenKrupp from the bidding process this March and to open bidding to European competitors, including Dutch shipbuilder Damen. TKMS' failure to secure the $3.5 billion contract will reduce its domestic revenues, and will likely take a toll on its export business as well, according to German outlet Handelsblatt. "No navy in the world orders from a company that is not an outfitter of its own military," a manager at a competing German yard told the paper.

TKMS is already a loss-making division, and ThyssenKrupp CEO Heinrich Hiesinger has attempted to sell it before. If ThyssenKrupp decides to divest TKMS, or to close any of its yards, thousands of employees could be affected. 

TKMS experienced significant delays, cost overruns and technical difficulties during the construction of the Deutche Marine's new F125-class frigates. The government returned the first vessel in the class due to quality problems, the first time that this has occurred in the history of Germany's navy. TKMS is the lead contractor in the F125 project, with construction of the vessels' stern sections at Blohm + Voss (owned by Lürssen since late 2016)  and construction of the bow sections at Lürssen's yard in Bremen. TKMS also faces allegations of bribery related to the sale of three diesel-electric submarines to Israel.