Procurement: <b>November 10, 2003</b>

November 10, 2003

Following upon the news that the US is now advising Taiwan to shop for slightly-used late model submarines, an upper-cut has been delivered to Taipei's jaw in its increasingly troubled fight to upgrade its small submarine fleet.

Last year, the American firm, Bank One Equity Partners quietly purchased Germany's Howaldtswerke Deutsche Werft Shipyard (HDW,) considered by Germany to be one of its "defense-industrial crown jewels," for $ 875 million when engineering company Babcock-Borsig declared bankruptcy. Bank One Equity had apparently hoped the acquisition would allow it to team with Northrop Grumman to furnish Taiwan with eight new diesel-electric submarines, a potential multi-billion dollar deal. Northrop, in turn, indicated it was considering using advanced hull design and composite materials technologies developed by Swedish sub-maker Kockums, which HDW acquired in its bid for the US Navy's new Littoral Combat Ship.

However, Germany has turned on Bank One, saying it wouldn't allow HDW designs or technologies to be used to build submarines for Taiwan, purchase or not. Instead, Germany is now showing willingness to allow HDW to instead become part of a Franco-German group, favoring seeing Howaldtswerke Deutsche Werft (HDW) in European hands, with Franco-German cooperation. Meanwhile, Thales has recently offered $574 million to buy HDW. Its sensor and combat systems products are a potential fit for HDW's U212/U214-class submarines. Thales, in turn, with DCN last summer formed Armaris. Its prime objectives are to win new business on the world market for warships and combat systems. Armaris may soon cooperate to install a Thales combat system aboard the S80-class diesel-electric submarine under development by IZAR (Madrid, Spain) for Chile and Malaysia. The S80, in turn, is based upon the DCN-IZAR Scorpene-class.

No US firm builds diesel-electric submarines, and the US Navy will not consider selling any of its older SSNs. -- K.B. Sherman

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