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With Saab Contract, Sweden Sets Sights on Recapturing Sub-building Expertise

Jun. 9, 2014 - 06:31PM   |  
By GERARD O’DWYER   |   Comments
Saab has received a production plan order from the Swedish government to carry out design work on upgrading Sweden's Gotland-class submarines.
Saab has received a production plan order from the Swedish government to carry out design work on upgrading Sweden's Gotland-class submarines. (Wikimedia Commons)
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HELSINKI — The Swedish government’s stated aim of re-building an indigenous submarine design and production capacity has come one step closer following the awarding of initial $70 million in construction and production plan orders to Saab covering the next generation A26 submarines and mid-life updates to the Royal Swedish Navy’s Gotland-class submarines.

The funds cover the completion of systems design on the A26, including detail construction, in 2014-2015. This work will be handled by Saab’s Security and Defense Solutions business area.

“This is a big step forward. We have, for some time now, been working to provide the Swedish market with total solutions for underwater systems. This is a very important step in that direction for us,” said Gunilla Fransson, a senior vice president and head of Saab’s Business Area Security and Defense Solutions.

Awarded by FMV, Sweden’s defense materials procurement organization, the orders represent the clearest evidence of the Swedish government’s plan to retain core technologies.

Apart from the $70 million in orders, Saab also signed a letter of intent with FMV to deepen its level of collaboration on the A26 and Gotland-class subs’ programs, as well as engage in related underwater capability projects with the Navy.

The A26 program, coupled with the Gotland-class subs’ upgrade, carries a budget of $1.7 billion to $2 billion.

Saab is hoping to finalize the purchase of core units and Sweden-based facilities in ThyssenKrupp Marine Systems (TKMS/ formerly Kockums) from its German owners ThyssenKrupp by the end of August, although a concrete deal could take longer if the German vendor haggles on price and conditions of sale.

“The orders are important by themselves, but it is the letter of intent which is the main significance here. While the larger contract isn’t guaranteed, the letter of intent is a huge step in that direction. All the indications are that the negotiations between Saab and ThyssenKrupp are progressing well. These orders give Saab a stronger bargaining position,” said Björn Enarson, a company analyst with Danske Bank.

The Swedish government reiterated its desire to see an early conclusion to the TKMS-based asset acquisition talks between Saab and ThyssenKrupp when Swedish Defense Minister Karin Enström held talks with her German counterpart Ursula von der Leyen in Stockholm on May 26.

Of paramount importance for Saab is the acquisition of TKMS’s main submarine shipyard at Karlskrona, near the Baltic Sea in southeastern Sweden.

The FMV’s $70 million contract to Saab is regarded as doubly significant given that the order had been earmarked for TKMS as recently as March.

However, a deterioration in relations between Sweden’s Defense Ministry and ThyssenKrupp since January resulted in the MoD terminating that relationship with TKMS. The MoD’s concerns grew when the German company failed to deliver commitments on fixed price or the retention of core submarine technologies in Sweden.

As a direct result, the MoD turned to Saab, asking the company to conduct a self-appraisal to determine if it was feasible to expand its underwater capability to design and produce the A26 subs and modernize the Navy’s existing Gotland-class vessels.

Cevian Capital, a privately-held Swedish venture capital group, holds a 15 percent shareholding in Thyssen-Krupp. ■

Email: godwyer@defensenews.com.

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