Naval Group Looks to International Growth With Fincantieri Tie-up

by Richard Pettibone, Aerospace & Defense Companies Analyst, Forecast International.

Shortfin Barracuda. Source: Naval Group

As DCNS continues on its restructuring path, the company took another step in this direction and renamed itself Naval Group earlier this year.  The renaming is part of an effort aimed at improving the company’s exposure and recognition in international markets. Continue reading

The Submarine Tsunami

by Stuart Slade, Warships Analyst, Forecast International.

Virginia Class SSN Under Construction   Source - US Navy

Virginia Class SSN Under Construction.  Source – US Navy

The significant impact of a tsunami lies not in the height of the wave but in its duration. A tsunami may only be a few feet high but its length, often several miles, means the water just keeps on coming. It is the cumulative volume of water that drives the head of the flood far inland and is responsible for the resulting damage. Continue reading

Three Nations Bidding for $38.8B Australian Submarine Program

By Stuart Slade, Forecast International.

HMAS Collins diesel-electric submarine SSK Australian Navy

HMAS Collins diesel-electric submarine SSK Australian Navy

Australia has invited France, Germany and Japan to bid for SEA-1000, its ambitious Collins-class submarine replacement program. The program, for 12 long-range, ocean-going, diesel-electric submarines, is valued at AUD50 billion ($38.8 billion). Competitive evaluation of the quotations is expected to take at least 10 months, after which the Defence Department will advise the government on the proposal most suited to Australia’s needs.

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Britain’s Trident Nuclear Deterrent Replacement Program is a Political, Financial Headache

by Dan Darling, Forecast International.

HMS Vengeance SSBN

HMS Vengeance SSBN

With an election just two months away and funding pressures bearing down on its budget, Britain’s Ministry of Defence has topped up spending on the assessment phase for a new class of nuclear-powered ballistic missile (SSBN) submarines for the Royal Navy. The funding allocation comes amidst the backdrop of campaign politics and mounting concerns over the long-term trajectory of Britain’s defense spending.

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Chinese Construction Drives Submarine Revival

By Stuart Slade, Forecast International

Over the next 10 years, at least 133 new submarines are projected to enter service worldwide, according to Forecast International’s 2015 edition of “The Market for Submarines.” This is the fifth year in succession that the projected number of new submarines has increased following the low point reached in the early 2000s. There are a number of reasons for this revival of construction, including a bow wave of delayed construction programs held over from the late 1990s onward and increasing international tensions expressed as disputes over territorial waters. However, the most significant factor is the intense effort made by the Chinese Navy to modernize and strengthen its submarine arm. More than a quarter of all the new submarines to be built over the next 10 years will enter service with the Chinese Navy.

 

Project 041 Diesel-Electric Submarine

Project 041 Diesel-Electric Submarine

The Chinese submarine fleet is now a very different force from its ancestor of a decade ago. The submarines based on old Russian designs from the 1950s have been withdrawn from service, and the last few examples of Chinese developments from that basic design are being decommissioned. They are being replaced on a one-for-one basis by new classes of diesel-electric attack submarines that draw heavily on modern Russian, German and Japanese influences. The Project 041 may not be quite as capable as the latest products of European and Japanese shipyards, but it has closed the gap greatly and is regarded as being a serious contender on the high seas. More importantly, almost 30 percent of the new diesel-electric submarines entering service during the next 10 years will be Chinese.

Another significant change has been the reappearance of a Chinese nuclear-powered submarine construction program. While construction of nuclear-powered attack submarines has been much slower than expected, with only 7.5 percent of new SSNs projected over the next decade coming from Chinese yards, China’s nuclear-powered ballistic missile submarine program has picked up serious momentum. More than half the SSBNs built over the next decade will be Chinese.

Project 094 SSBN

Project 094 SSBN

There is no doubt that the Chinese submarine fleet is much more formidable than its equivalent of 20 years ago. The question is, why have the Chinese invested so heavily in this arm of their Navy? Attempts to answer this question have led to a fever of speculation about the Chinese trying to establish a worldwide power projection capability or challenge the U.S. Navy for dominance of the Pacific Ocean. Other, less extreme suggestions include establishing an entry-denial capability that would stop the U.S. Navy from interfering with Chinese naval operations. Yet, what all these assessments neglect is the fundamental fact that countries build navies to serve their own national interests. The converse of this is that the national interests of China, as determined by the Chinese themselves, can be assessed by looking at its fleet and how it is deployed.

The answer to that question is particularly clear with the Chinese submarine fleet. While the Chinese have indeed invested heavily in their SSBNs, the priority in deployment is not to Qingdao on the eastern coast, where they might reasonably be expected to deploy against the United States. Instead, all the new SSBNs have been deployed to a new, southern SSBN base on Hainan, where they are better-placed to operate against Chinese regional enemies. The lack of emphasis on and slow construction of SSNs suggest that the Chinese Navy does not anticipate any serious threat to its SSBNs – certainly not a reasonable assumption if the perceived enemy is the United States, but a very reasonable one if said enemies are regional powers with limited ASW capability. Deploying SSKs against the U.S. Navy requires something much better than the existing Chinese designs, but those submarines are entirely adequate to operate in the face of the limited regional ASW capability.

Thus, evidence from Chinese naval construction and deployment strongly suggests that China’s naval buildup is purely in support of existing Chinese regional interests. Assuming that Chinese interests remain regional in nature and do not envision any kind of real confrontation with the United States, then we can expect to see continued construction of China’s SSKs and SSBNs while SSNs take a back seat. Thus, Chinese submarine construction will continue to drive production forecasts for this sector.

No Saab Story Here

By Richard Pettibone, Forecast International

saab

As it faces an austere and highly competitive global defense market, Saab is building its strategy to increase revenues and profits.  Under this effort, the company plans to reduce costs and focus on successful niche markets and opportunities abroad.

While cost reductions have been ongoing throughout its operations, the company has so far maintained a high level of R&D. Much of this funding will be targeted to niche areas, especially the growth market of unmanned vehicles.

Around the globe, Saab has been quite successful in building its presence.  Through a series of acquisitions and joint ventures, Saab has been aggressively penetrating new markets in India, Brazil, and most interestingly, the U.S.

Though not without risk in this downturn/recovery, the push into the world’s largest defense market does make sense.  However, with U.S. defense spending set to be reduced, Saab may face some difficulty in penetrating the market.  The pressure from the U.S. government to buy local will be high in the face of budget cuts and the resulting layoffs at manufacturers.

A big part of this drive will entail Saab establishing partnerships with U.S. aerospace and defense firms.  Such teaming would make the acceptance of Saab products for military consumption all the more palatable if it is perceived as supporting a local firm as well. True to this strategy, the company teamed with Boeing in late 2013 to offer a new, clean-sheet aircraft design for the USAF T-X trainer program.

Saab’s operations in the U.S. have also been consolidated under a new organizational umbrella, Saab Defense and Security USA (SDAS).  This new organization includes Saab Training USA, Saab Barracuda, Saab Support and Services, and the defense-related operations of Saab Sensis.  SDAS will focus its energies on providing defense and homeland security systems and services to the U.S. market.

Gripen_JAS39E

In South America, Saab scored a major coup when its JAS 39E Gripen NG was selected to fulfill the needs of Brazil’s FX-2 fighter competition.  The Gripen beat the Dassault Rafale and Boeing F/A-18E/F Super Hornet after a lengthy tender process. The deal is for the purchase of 36 fighters for an estimated cost of $4.5 billion. The contract is expected to be finalized by December 2014 and completed by 2023.

However, along with the good news the company had to deal with the bad when Swiss voters rejected a proposed acquisition of 22 JAS 39E Gripens. The deal, which had been worth an estimated $3.5 billion, was opposed by 53.4 percent of the voters. A reworked deal with Switzerland is considered unlikely in light of the vote. Despite that setback, Saab is proposing the Gripen for upcoming fighter procurements in Bulgaria, Croatia, Denmark, Greece, Malaysia, and Slovakia, among others.Next Generation SubmarineAt sea, Saab expanded its maritime activities with the purchase of the Kockums submarine yard from Germany’s ThyssenKrupp Industrial Solutions AG. The acquisition was pursued after a falling out over price and submarine exports between Sweden and ThyssenKrupp.  As a result, Sweden pulled A26 submarine work from the firm and tasked Saab with coming up with a plan for the country to maintain an indigenous submarine-production capability.  Under the $50.5 million deal, Saab will acquire operations in Malmö, Karlskrona, and Muskö and add around 900 employees.

All told, Saab has been very proactive in adapting to the new aerospace and defense marketplace. Although it has at times been challenging, Saab has proved over the years that it can adapt quickly and successfully correct its course. With competition in these markets becoming even more fierce as government spending declines, this skill will be critical in the years ahead.

@RPettiboneFI