Ahoy there

Shipbuilders pleased as Germany’s new warships cost more than expected

navy yards, shipbuilding, german shipmakers
Shipshape and Hamburg fashion. Source: Imago/Jan Huebner

In the shipbuilders’ yards in Hamburg, Blohm & Voss once made megayachts for the megarich, but it’s quiet here now. Its big hope on the horizon is the German military, which has plans for a warship called the Multirole Combat Ship 180, MKS 180 for short.

The MKS 180 will be 170 meters long, with a crew of 180, navigable from the Arctic to the equator. Two companies are in the running for the contract, German Naval Yards and the Dutch Damen Group. If Damen wins the bid, the ships will be built at Blohm & Voss’s shipyards, which would be a major win.

“This project will shape the future of the industry,” said Iskandar Safa, owner of Privinvest, the parent company of German Naval Yards.

Business has been drying up in recent years at the Hamburg wharf, and the MKS 180 is the biggest contract the navy has had to offer in decades. Defense Minister Ursula von der Leyen advertised the tender across Europe, a first. But their usual go-to supplier, ThyssenKrupp Marine Systems, didn’t make the cut this time. Quality was too low and the prices too high, sources said.

revenue german shipyards shipbuilders, 2009 to 2017

The most recent cost estimate for four ships is at least €5.3 billion, Handelsblatt has learned, and two more are likely to be ordered. Initially the budget for four to six MKS 180 ships had been €3.5 billion, but officials wanted better IT systems and training facilities. The ships must be impervious to cyberattacks and have room for upgrades.

The warships could reshape the German shipbuilding industry. Three domestic manufacturers — ThyssenKrupp Marine Systems, Lürssen and German Naval Yards — currently compete for military contracts, but an industry observer says only one, or two at most, are really needed.

number of employees at germany's largest shipyards, german shipbuilders, 2018

Germany’s navy has often had to wait too long for ships that were then of disappointing quality, like the F125 frigate. Three of those ships are still on the docks in Hamburg, including the FGS Baden-Württemberg, which the German navy returned for repairs after it failed its seagoing trials.

The federal government is pouring in more money than in decades, buying ships worth more than €20 billion over the next 10 years. More than anything, this shows how neglected the navy was in the past 25 years. And its services are more in demand than ever: As the Americans leave Europe and Russia encroaches from the east, German has to contribute more to EU security. Germany’s budget for new weapons is in the hundreds of billions of euros.

Mr. Safa sees the MKS 180 project as the perfect time for the German shipbuilding industry to begin consolidating, as has already happened in the US and UK.

Martin Murphy covers the steel, car and defense industries for Handelsblatt. To contact the author: murphy@handelsblatt.com

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