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Interview With Hervé Guillou, CEO of French Shipbuilder DCNS

October 12, 2016 (Photo Credit: DCNS)
PARIS — Hervé Guillou, chairman and CEO of shipbuilder DCNS, is a keen yachtsman with his own sail boat. That attachment to the sea is reflected in Guillou’s decision to start his career with the then-Direction des Constructions Navales in 1978, before moving on to government and industry posts.
In an interview with Pierre Tran of Defense News, Guillou reflected upon influences in today’s naval market: tougher foreign competition, and the French Navy's winning a share of an expected increase in the defense budget to fund a planned intermediate frigate and a future nuclear ballistic missile submarine.


DCNS, majority owned by the government, will be a major exhibitor at the Euronaval trade show, which opens Oct. 17.

Q. What are the biggest changes since the previous Euronaval trade show?

A. There have been two big changes. The bigger change is the return to growth in defense budgets towards 2 percent [of gross domestic product]. The budgetary shift in two years is amazing. The navies and clients have realized they need to respond to the return of the great powers — Russia has boosted its huge defense budget; China builds a submarine every four months, a frigate every three months. That’s without talking about India and other countries.  That is fundamental change. That justifies the French Navy’s high priority requirement for 15 first-rank frigates, nuclear attack submarines and [the retention of a] nuclear deterrence.

There are budget increases in Germany, Britain, Poland and the other NATO countries, which committed in July [to spend 2 percent of GDP on defense]. There has been a rise in crises around the world.

Q. What’s the second big change?

A. The second big factor for industry, and for the client, is aggressive foreign competition. There are three US companies in the naval sector, BAE and then us, DCNS. The level is €3 billion (US $3.4 billion) annual sales. What’s new in the last five years is the companies above the three billion mark. There is the Russian OSK, CSSC from China, soon there will be a company from India, Korea, and Japanese Mitsubishi. That will profoundly change the competition. These companies, unlike the too fat, too slow US firms, attack markets directly. The US mostly sell secondhand ships, or go through [foreign military sales]. The newcomers are very aggressive. Russia is selling to Egypt, China is selling to Pakistan, China into Africa, Korea everywhere. They all have the ambition of securing a place in the market.

Q. What are other major factors on the naval front?

A. There has been a huge acceleration in the technology cycles — two years ago, there was little talk about digital technology. There is a huge challenge not to miss the technology leap.

This is not [a] marketing issue. This is a life or death issue for navy crews.

Twenty years ago, we didn’t have a cellphone. In 20 years’ time, there will be three or four intermediate frigates, with 6G, 7G or 8G smartphone technology available. Warships have 40 years of operational life. Thirty years ago we started with a policy of a midlife upgrade to avoid obsolescence of combat systems. In the future we will need to upgrade permanently or face technology problems.

The first intermediate frigate will be delivered in 2023 when we will be at 6G. When it retires from service we will be at 12G. Then there is energy technology — batteries, air-independent propulsion, big data and digitalization with predictive maintenance, 3-D manufacture, onboard data center, cyber technology, and telecommunications.

The studies on the intermediate frigate are on a digital platform shared by DCNS, DGA, the Navy and Thales. DCNS has launched a €170 million, five-year digital transformation to change engineering and computerized-design capability and database. The first order was in October 2015, the second with Dassault Systèmes in February.  

Q. How important is defense in the political world?

A. We’re at a turning point. It is primarily a political decision, but we can anticipate that the French 2 percent should help fund the increase in work for the nuclear deterrence. Then there is building the first-rank frigates and nuclear attack submarine. And the third priority is maritime security.

For industry, there is need for work to maintain our know-how. Work on the Australian submarine program will plug most of the gap between the Barracuda nuclear attack submarine and the next-generation nuclear ballistic missile submarine.

The intermediate frigate will allow the French Navy to have a first-rank frigate. That is the importance of signing the contract by the end of the year for a delivery from 2023. The two important projects are launching studies for the third-generation nuclear ballistic missile submarine and the intermediate frigate production contract.  

Q. There is a forecast annual €5 billion-€6 billion for work on the next-generation nuclear deterrence compared to the present annual €2.5 billion-€3 billion. What effect will this have on DCNS?

A. Is the warhead, the missile infrastructure in there? The submarine is just a part of that.

There is also the importance of an annual €1 billion budget for research and development, reflecting the acceleration of technology change.  We will be dinosaurs in 10 years without the digital ship. The intermediate frigate will be the digital ship with all the digital systems onboard.

Here is a comparison: A warship has 23 million lines of real-time code, 10 times more than the A400M.

Q. What are the lessons learned on the leak of information on the Indian Scorpene submarine?

A. The French authorities are investigating to see the exact nature of the documents which were illegally published. As this stage, there was not a problem of top-secret information. The information was not classified, it was a low level — restricted distribution. We believe there is no real operational consequence.

This was an attempt to damage. The Australian court concluded this was an illegal publication. The file that was built and shown — not handed over — to the press; [it] was fabricated from various sources to damage France, DCNS and the client.

We have filed a complaint in France and the authorities are now conducting an investigation.  .

It was clear this publication was intended to create a crisis. This was clearly intended to hurt. It was economic warfare.

Q. What are the labor aspects of the Australian Barracuda Shortfin artificial intelligence submarine program?  

A. This indicates work for about 4,000 staff in France in the development phase at DCNS and subcontractors, which fills a gap between the Barracuda (nuclear attack submarine) and the nuclear ballistic missile submarine. It is too early to give the definitive number of jobs. There will be work with technology transfer, adapting the infrastructure in Adelaide and the supply chain. There is the sophisticated combat information system which will be compatible with [International Traffic in Arms Regulations], Australian secret and [French] secret classifications. There will be 2,900 Australian jobs among which 1,700 [will be] in shipyards in Adelaide and 800 in the supply chain. We help to structure a sovereign Australian naval branch.
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