The association for shipbuilding and marine technology, the political and economic representation of the interests of the German maritime industry, calls for a limited-time fleet program to maintain the competitiveness of the shipyards during the Corona crisis, on the occasion of the presentation of the 2019/2020 annual report.
The association pointed out that the shipyard industry had to go from a weak base into the Covid 19 crises. The crisis was exacerbated. With the global economy slowing down since 2016, demand in world shipbuilding collapsed. In 2019, incoming orders were almost thirty percent lower than in 2018. In addition, the association sees signs that the emerging economic crisis will not be a short-term phenomenon. In the association's assessment, it will also have a structural impact. One of the reasons for this is the price dumping practiced in some manufacturing countries, partly in connection with government subsidies. In Europe there is a risk of losses of up to 75 percent. The loss of demand threatens to widen the existing underutilization, which could result in the reduction of shipbuilding capacities and thus a shipyard death.
One example is cruise ship construction. It was the most successful market segment in Europe. So far, 95 percent of the ships have been ordered in Europe. The industry is broke because of the Covid-19. The shipowners are trying to reschedule orders for the 200 cruise ships originally planned to be built by 2027. Some orders are also canceled. This affects Meyer Werft and MV Werften.
The association is now advocating a holistic approach to crisis prevention in the German shipbuilding industry. In addition to the all-round crisis in the cruise industry, other areas are also affected, including those for which the public sector is the client. If increasing national debt is observed worldwide and budget funds are diverted to other areas of politics and society, the appetite for investing in government and naval ships can be expected to decrease. The association expects the maritime economy to have a weakness period of at least two to three years.
In order to mitigate the risk for shipbuilding companies and suppliers, the association is working with 'its colleagues across Europe' for a temporary fleet program. The program should not only include public contracts, e.g. for the navy, federal police, police, fire brigade, research ships and local public transport, but also initiatives and incentives for the 'green' renewal of the merchant fleet.
The association combines this political request with the expectation of the industry to act responsibly, economically, economically and in a manner that is friendly to staff. The press release is very clear on this point: "It is necessary to" significantly reduce the cost base while maintaining technological leadership and keeping a high proportion of specialists on board ". The previous level of research and development should be maintained. There should be no deviations from the goals of maritime climate and environmental protection. "A smart fleet program can provide decisive support in getting tomorrow's technology up and running early."
According to the association, around 2,800 companies with around 200,000 employees are active in shipbuilding and marine technology in Germany. Together they deliver about 85% domestic value added to deliveries from German shipyards. The annual report presented shows that the order book of German shipyards in civil seagoing shipbuilding was reasonably stable at a high level with 54 ships and a total volume of around 18.7 billion euros at the end of 2019. The domestic naval shipbuilding industry generates around a third of the total turnover of the German shipbuilding industry. On average over the past few years, the shipyards' turnover has exceeded 1.5 billion euros annually. The high export quota is an expression of the international appreciation of the German naval shipbuilding industry and proof of its competitiveness.
Revitalize naval shipbuilding - familiar and new: landing units
According to the annual report, the expectations of the Federal Government are not only directed at the multi-purpose combat ship 180, corvette K130, submarine U212 CD, as well as the current modernization and adaptation measures for the frigates F123, F124, and corvettes K130 (first Come on). They also demand that the fuel suppliers / fleet tankers (class 707) be finally realized. In addition, the association sees options in the launch of replacement procurement for fleet service boats (class 423), anti-mine vehicles and the replacement of tender class 404. Other possibilities for such an economic recovery are seen in replacement procurement for the auxiliary and support units (tugs, special ships).
On top of that. In addition to a demand for up to twenty combat boats for amphibious operations, the association sees an unchanged need for its own capacities for military maritime capability, evacuations and humanitarian crisis responses and the associated further development of amphibious capabilities. In addition, the association does not only see a 'Logistic Command Ship' or 'Dock Landing Ship' to be procured as a better way of closing a capability gap than in the shared use of Dutch units. Finally, there should also be a replacement of landing craft (efforts are made to class 520).
In continuous procurement of new, more economical units in large numbers ("line instead of class"), the association sees opportunities to reduce repair costs while increasing availability. He formulates the appeal to tackle the due issues constructively and promptly with mutual trust, both to the contracting authority and to industry.
Overall, according to the association's ideas, a fleet construction program could not only save the basic workload for maintaining and expanding industrial competence and system capability in surface and underwater shipbuilding during the Corona crisis period. In addition, a competitive German shipbuilding industry would contribute to a “resumption of the market for prosperity and a clean maritime economy”.
Appeal to Berlin's responsibility - and look to Brussels
The association sees the basic direction of fleet growth as positive. However, "everything and above all must be done quickly within the triangle of navy, procurement and industry."
The association very much welcomes the inclusion of naval surface shipbuilding in the new version of the Federal Government's strategy paper to strengthen the German security and defense industry. A law to speed up defense awarding was passed shortly thereafter. The industry now has high expectations for the speedy implementation of these key decisions. The commitment to the domestic industrial location that was made with the key technology categorization is of great importance for the upcoming national procurement projects, but also for the credible international positioning as a partner and export nation. The association sees this as a significant relief when it comes to initiating concrete cooperations and acquiring procurement projects.
However, as far as the national projects are concerned, further steps should now be taken as quickly as possible. Over-bureaucratic and lengthy tendering procedures, such as for multi-purpose combat ship 180 or for the replacement procurement of fuel suppliers / fleet tankers (class 707), should be a thing of the past in the eyes of the association.
The shipbuilding industry fully supports the goal of making arms and procurement more transparent, effective and modern. "From a shipbuilding industrial point of view, however, concrete positive effects of the 'armaments agenda' and the subsequent 'use of the agenda' have so far hardly been discernible," says the association. The shipbuilding industry is expecting a balanced, solution-oriented and partnership-based cooperation between the client and the contractor in order to be able to guarantee the necessary new purchases, as well as repairs and modernizations, reliably and within the cost and time frame.
With a view to Brussels, there are further opportunities for the Association in Permanent Structured Cooperation (PESCO) - also for naval shipbuilding. In order not to leave the field to European competitors without a fight, the association said, it was necessary to get involved in maritime projects with sufficient financial and human resources at short notice. Of course, the plans of the Ministry of Defense and to be coordinated with the industry.
The criticism of the previous measures on the armaments agenda is certainly not without justification from an industrial perspective. Defense minister Annegret Kramp-Karrenbauer initiated the optimization of the procurement system ("Implementation BeschO"), a total of 58 measures, has limits in its implementation. Due to the personnel situation in the Federal Office for Equipment, Information Technology and Use, the scarce job vacancy does not always allow armor and use to be operated simultaneously and equally.
The Navy Command has not yet commented on the demands. It can be assumed that they were received with silent joy.
Hans Uwe Mergener