TKMS: much left to do

After years of woes which left international observers in shock, during which the once-undisputed leader of naval vessels encountered disaster after disaster, German shipyard ThyssenKrupp Marine Systems (TKMS) has bagged several new contracts in recent years. But there is a long road between signing a contract and delivering on it, and it is still far too early for Berlin to rejoice.

Two new contracts

TKMS was gasping for air and has finally managed to get its head out of the water. Last March, Brazil announced that TKMS would be building a fleet of 4 new surface ships for the growing Brazilian Navy. Naval Today reported: “The Brazilian defense ministry has selected the Águas Azuis Consortium as the preferred bidder for the construction of the Brazilian Navy’s Tamandaré-class corvettes. The consortium, formed by ThyssenKrupp Marine Systems, Embraer Defense & Security and Atech, will build a total of four ships under the program which will cost up to USD1.6 billion.” Previously, TKMS had competed for the new Brazilian submarine fleet but had lost, in favor of French competitor Naval Group. Shortly after, and perhaps to reinvigorate its dying naval industry, the Bundestag in Berlin announced the go-ahead for a sale of 6 additional frigates to Egypt, as reported by Defense Aerospace: “The German parliament on Wednesday approved the delivery to Egypt of six frigates [...] The Bundestag’s Budget Committee gave its approval for an export credit guarantee on Wednesday afternoon, Bild reported, in order to secure the financial aspect of the deal. This virtually ensures that the deal will be finalized, unlike an earlier Egyptian attempt to buy a single frigate. However, the government will still have to issue an export licence before the ships can be delivered.” To the untrained eye, these two pieces of good news may seem like the ending chapter of TKMS’s recent horror saga. As reported by Maritime Executive: “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.” But upon closer scrutiny, it appears that TKMS has fixed the only part of its business that wasn’t broken. TKMS’ capacity to sell seems somewhat preserved: it signed a contract with Norway in the end of 2018 for 6 212-CD subs, and a reinforced partnership agreement with the German Navy. But given that the said German Navy is in disastrous condition, in no small part due to TKMS’ industrial blunders, the partnership may well be a source of trouble, rather than of reinforcement.

Winning contracts has never been a problem for TKMS

For many years, ThyssenKrupp has been recognized as one of the most commercially aggressive (and successful) firms on the market. One of the oldest shipyards in the world, and constantly backed (until recently) by the German State as a strategic industry, TKMS has had over a century to refine its technology and has obtained considerable funds to do so. Its technology ranked among the best in the world, making TKMS salesmen’s job relatively easy, when convincing prospects. According to state website Warpp, “German shipyards are world champions in exporting conventional submarines. No country has ever sold more submarines to other countries than Germany has. So far, more than 120 have been sold to 17 countries on four continents. Nearly every second country whose navy possesses submarines has German-manufactured submarines.”

The commercial aggressiveness which TKMS displayed over decades has always yielded a thick order log but has also landed it in several quagmires. Numerous times over the past years, TKMS has been accused of bribing its way into virtually every deal it entered. In 2010, the Greek deal was won with suspicions of “small envelopes” being kicked back. In 2013, a corvette deal in South Africa was, again, singled out. In 2011, the industrial giant had been forced to launch a compliance probe, after a South Korean submarine deal started leaking allegations of bribery and corruption. And in 2017, ThyssenKrupp was again fined by a Frankfurt judge, as reported by Reuters: “German prosecutors have ordered Thyssenkrupp’s Atlas Elektronik GmbH to pay to the state about 48 million euros ($54 million) that it was found to have earned from contracts in Greece and Peru.” In other divisions, ThyssenKrupp has been charged with price-fixing in the steel business and elevator business. Every time, the deals were fraught with graft, but every time they were won.

Delivering properly and on time is another matter

Where TKMS has suffered terribly, in recent years, was in the industrial sector. The large complexity of ship and submarine programs for is such that having good technology simply isn’t good enough. Extremely thorough management and a wide scale overview of the ship’s lifespan must be controlled at every moment. Careful coordination between subcontractors must be led and guaranteed by the integrator. This is TKMS’s Achilles heel, and has been for some time. The most telling example in recent developments has been the F125 frigate, the largest operational ships in the German Navy and the tip of the naval sword. After TKMS delivered the warships, and the German Navy launched sea trials, it turned out that the ships were dramatically overweight and that they didn’t sit straight on the water - largely hampering their performance. Wall Street Journal William Wilkes wrote: “Germany’s naval brass in 2005 dreamed up a warship that could ferry marines into combat anywhere in the world, go up against enemy ships and stay away from home ports for two years with a crew half the size of its predecessor’s. First delivered for sea trials in 2016 after a series of delays, the 7,000-ton Baden-Württemberg frigate was determined last month to have an unexpected design flaw: It doesn’t really work.” This added to the embarrassing submarine situation, in which none of the 6 German submarines worked, and all were undergoing fixes within their pens, leaving the nation’s waters unguarded. Other failures to deliver also landed the German giant lawsuits, and highlighted its incapacity to manage industrial submarine programs. All that probably explains why TKMS is all but the favorite in the bid for the Netherlands submarines replacement project.

We will only know in several years if TKMS has indeed managed to get its act together and has finally focused enough attention on industrial coordination and overall management - and so will the clients. The new contracts are a good start and suggest that German technology still has something to offer. But naval programs are not limited to blocks of tech duct-taped together, they are highly sensitive and complex clockwork. Unless TKMS has considerably beefed up its management department, Norway, Egypt and Brazil could expect similar disasters, like the German company latest clients.

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By: Taylor Robertson (3.00)

Tags: TKMS, ThyssenKrupp,