Read on Twitter
Important changes are taking shape in the German naval Industry. A short thread trying to contextualize what is going on and how it fits into the European picture. #Lürssen #GNY #Marineschiffbau #Schlüsseltechnologie #TKMS #EDTIB [1/17]
One month ago, news emerged that the three large players in the German naval sector - TKMS, Lürssen, and Germany Naval Yards - were talking since January about a massive merger to create a player comparable in size to its European competitors. https://bit.ly/2AsavYW [2/17]
What does that mean? Well, it’s an open secret that the European naval industry is still very much fragmented. Most companies are national and rather small players or business divisions of larger companies mostly doing other stuff. [3/17]
If you want to see that in one picture, take a look at this one: Dark blue is naval. Work I did with my formidable colleagues @ce_moll & @AliciaVonVoss. Even though its old data (2015), not much has changed – apart from company names. (Turnover per sector, SIPRI Top 100) [4/17]
![If you want to see that in one picture, take a look at this one: Dark blue is naval. Work I did with my formidable colleagues @ce_moll & @AliciaVonVoss. Even though its old data (2015), not much has changed – apart from company names. (Turnover per sector, SIPRI Top 100) [4/17]](https://pbs.twimg.com/media/EX-EUa1XgAE95Ky.png "If you want to see that in one picture, take a look at this one: Dark blue is naval. Work I did with my formidable colleagues @ce_moll & @AliciaVonVoss. Even though its old data (2015), not much has changed – apart from company names. (Turnover per sector, SIPRI Top 100) [4/17]")
Two of the three important German naval yards are even too small to make SIPRI’s Top 100. So yeah, that is what it means to merge German shipyards to become comparable to other European players such as Naval Group (still DCNS in the picture) or Fincantieri. [5/17]
Yesterday, though, the picture change again. Lürssen & German Naval Yards announced to merge their military divisions (Lürssen is also building cool megayachts) under the leadership of Lürssen. This plan is well received by essentionally in Germany. https://bit.ly/2y1zG3z [6/17]
There are 2 main drivers for this development: 1) the MoD decision in January this year (see tweet 2, probably no coincidence) to give the contract for the MKS180 ships to Dutch Damen (though with Lürssen as main subcontractor). 2) Some also take COVID-19 into the picture. [7/17]
Where does this leave TKMS? Apparently, it is exploring two options: 1) joining forces with Lürssen/GNY at a later point in time to create a true national naval champion or 2) striving for a joint venture with Fincantieri. https://reut.rs/2zGW3f1 [8/17]
The problem is that TKMS is pretty much focused on submarines, while Lürssen and GNY concentrate on ships. Moreover, Lürssen and GNY are both family-led, a different style to do things than in a large stock-noted company like ThyssenKrupp. https://bit.ly/3bxqstJ [9/17]
Nationally, surface & underwater shipbuilding capabilities are defined as national industrial core capabilities in the latest installment of the Strategy Paper of the Federal Government on Strengthening the Security and Defence Industry – see p. 3. https://bit.ly/3cyhbTn [10/17]
On a more European level, this process between TKMS and Fincantieri is interesting in its relation to Fincantieri’s ongoing joint-venture process with Naval Group (NAVIRIS) – which declared operational readiness in – you guessed it – January 2020. https://bit.ly/2WVpZvZ [11/17]
I haven’t looked at the industry in detail for too long to be able to make sense of all the intricacies of the European picture – which also includes the Netherlands/Damen and Sweden/Saab/Kockums - but others do: See for example https://lefauteuildecolbert.blogspot.com/2020/05/los.html @FauteuilColbert [12/17]
Further reading: https://twitter.com/JoedeBrig/status/1260833289818058753?s=20; https://twitter.com/CarloMasala1/status/1260811419441864704
If you have any other recommendations, please feel free to add, especially European takes on this development!
If you have any other recommendations, please feel free to add, especially European takes on this development!
Is consolidation overdue? Both nationally & on the European level? Yes & no. It is probably overdue on a German national level, as it is unusual today to uphold such a fragmented domestic industry. But might entail less competition, higher prices https://twitter.com/Bjoern__M/status/1260867515749711873?s=20 [14/18]
On the European level, the picture gets more complicated. The main achievement of an industrial consolidation would be the reduction of overcapacities, as reflected in the export dependency. But industrial consolidation does not automatically lead to demand-consolidation. [15/18]
2 short notes on that export dependency: 1) A significant majority of European naval exports are going outside the EU ('99-'13, SIPRI Data). Thus its shipyards are dependent on export contracts – a clear sign for overcapacities, but probably also of good quality products. [16/18]
![2 short notes on that export dependency: 1) A significant majority of European naval exports are going outside the EU ('99-'13, SIPRI Data). Thus its shipyards are dependent on export contracts – a clear sign for overcapacities, but probably also of good quality products. [16/18]](https://pbs.twimg.com/media/EX-EqxjXsAAhOUX.png "2 short notes on that export dependency: 1) A significant majority of European naval exports are going outside the EU ('99-'13, SIPRI Data). Thus its shipyards are dependent on export contracts – a clear sign for overcapacities, but probably also of good quality products. [16/18]")
2) Europe has been the shipyard of the world for the past 2 decades (again '99-'13, SIPRI). Compared to the US and Russia, naval products made up a way larger percentage of all arms exports from Europe. (US mainly supplying second-hand stuff, Russia conventional subs) [17/18]
![2) Europe has been the shipyard of the world for the past 2 decades (again '99-'13, SIPRI). Compared to the US and Russia, naval products made up a way larger percentage of all arms exports from Europe. (US mainly supplying second-hand stuff, Russia conventional subs) [17/18]](https://pbs.twimg.com/media/EX-ExtmXkAE7m1z.png "2) Europe has been the shipyard of the world for the past 2 decades (again '99-'13, SIPRI). Compared to the US and Russia, naval products made up a way larger percentage of all arms exports from Europe. (US mainly supplying second-hand stuff, Russia conventional subs) [17/18]")
Lastly, what to watch in the future: 1) domestic industrial considerations that might continue to hamper consolidation (national & European), esp. in times of economic downturn. 2) If consolidation happens, how does it affect suppliers down the supply chain (esp. Tier-2). [18/18]
