defense contracts

ThyssenKrupp Vies for Deal Down Under

U 36-dpa
Hunting grounds below the surface.
  • Why it matters

    Why it matters

    Germany is presenting itself as the neutral option in the fight for Australia’s submarine contract, saying that awarding the contract to Japan could exacerbate regional tensions with China.

  • Facts

    Facts

    • The Royal Australian Navy will spend the equivalent of about €60 billion over the next 20 years to modernize its fleet.
    • The German shipyard division ThyssenKrupp Marine Systems will bid against Japan and France for the construction of both submarine and surface vessels.
    • Political factors will ultimately play a large role in who gets the contracts.
  • Audio

    Audio

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German engineering giant ThyssenKrupp is bidding for what could be the biggest contract in the company’s history.

But the 200-year-old firm, which merged two of Germany’s biggest steel and heavy armaments manufacturers, has a bidding war ahead of it against the Japanese and the French before it wins the contract, worth an estimated €35 billion.

The Japanese aren’t shy about demonstrating their technological prowess and are already planning a preemptive strike. They’re sending a state of the art Soryu class submarine and two warships to Australian waters next month, for a sub-hunting exercise in conjunction with the Australian Navy.

“It’ll be interesting to see how the French and the Germans react,” said Malcolm Davis of the Australian Strategic Policy Institute, a military think-tank.

“The majority of the construction of the submarines would be done in Australia. We've already identified 3,500 potential suppliers.”

Hans Atzpodien, CEO, ThyssenKrupp

French state-owned shipbuilding company DCNS and ThyssenKrupp Marine Systems (TKMS), based in Germany’s Baltic city of Kiel, will be entering the fray against a Japanese consortium comprising Mitsubishi Heavy Industries and Kawasaki Heavy Industries, to fight for the right to build Australia’s next generation of submarines.

In addition to the €35 billion contract, experts calculate that the maintenance contract over the next 30 years will be worth in excess of €100 billion.

Hans Atzpodien, ThyssenKrupp’s chief executive, presented his company’s sales pitch in Canberra a few days ago, flanked by Germany’s ambassador to Australia, Christoph Müller. Amid rising tensions in Asian waters, the two presented Germany as the “safe” option for the contract. Mr. Atzpodien also pledged to build all 12 submarines in Australia, creating more than 2,000 jobs.

“The majority of the construction of the submarines would be done in Australia,” he said, adding “We’ve already identified 3,500 potential suppliers.”

The pledge should at least win the German bid some favoritism with Australia’s struggling ship-building sector.

But the competition is also lobbying hard. France is putting forward a diesel and electric powered version of its 5,000-ton atomic-powered Barracuda submarine. Back in 2014, Australia’s then prime minister, Tony Abbott, had practically promised the deal to his Japanese counterpart Shinzo Abe. He cited strategic reasons for wanting to give Japan the contract.

Mr. Abbott sees China as a threat and Japan as an ally against Beijing’s aggressive expansion in the Asia-Pacific region. But, after much protest, the ultra-conservative Mr Abbott was compelled to put the multi-billion-dollar contract out to public tender. Shortly thereafter he was ousted from the prime ministership by Malcolm Turnbull, who seems to be more inclined to favor France or Germany for the job.

The United States backed Mr. Abbott’s favoritism for the Japanese consortium. They too see Japan as an important strategic partner and had discussed installing their weapons systems in Japanese-built Australian Navy subs.

Analysts say that it’s clear that in the Asia-Pacific region America wants to build a strong defensive network together with Australia and Japan to counter Beijing’s muscle flexing in the South China Sea.

“We can integrate American weapons systems just as easily into our boats as the Japanese can into theirs,” Mr. Atzpodien said.

The pro-Japan lobby in Australia has a powerful ally in the media. Rupert Murdoch’s nationwide daily broadsheet, The Australian, bluntly campaigns for Japan to get the contract. Hardly a week goes by when there isn’t an article or opinion piece arguing in Japan’s favor and expounding on the reasons why France and Germany should not get the contract. The byline seems, more often than not, to be Greg Sheridan – a friend, old university chum and former speech writer of fallen prime minister Tony Abbott.

Despite all the smoke of battle, the German submarine builder maintains a confident front. ThyssenKrupp aims to use German quality as its heavy siege gun, and when asked how he sees the campaign unfolding, Mr. Atzpodien repeats the maxim: “We have a one in three chance.”

WTB Thyssen Krupp

 

Urs Wälterlin covers Australia, New Zealand, Oceana and Southeast Asia for Handelsblatt. To contact the author: waelterlin@handelsblatt.com

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