With Hervé Guillou retiring, the naval industry loses one of its most intelligent and visionary figureheads. During the six years at the helm of Naval Group, he has promoted the concept of a European Naval Airbus. He was quoted by Defense News as saying during a press conference last week: “Over the past 15 years, we’ve seen one Chinese, one Russian, two Koreans, the Japanese, Singaporeans, Indians — and I could go on — arriving on the naval defence market. They are posing a considerable challenge, and that’s why Europe must consolidate.”
He continues to complain in the article: “We are the only ones in the world who have to export over half our production to survive. When you are only two on a U.S. domestic market, which provides 80 percent financing at cost-plus pricing and margins of more than 10 percent, then you can stay in your comfort zone. You don’t have to take unmeasured risks in Australia, Egypt, Romania or Belgium to win business that you’ve fought for tooth and nail."
A shipbuilder myself, I have to admit that I struggle to connect the rise of the Asian competition, to which countries like Turkey, Singapore and Indonesia could be added, to the necessity of a Naval Airbus. I have always regarded the export success of the European naval industry as a sign of its competitiveness, combining top quality with attractive pricing. U.S. destroyers cost twice as much as European ones.
Nobody denies that we do have severe problems in Europe. Our political weakness offsets our economic strength. It is unhealthy and worrying that we, a European community of 500 million people, need the help of 350 million US citizens to defend ourselves against a country of 140 million Russians. But how is the creation of a Naval Airbus going to make Europe stronger?
I admit that apart from more realistic spending levels, industrial consolidation can help in tackling the problem of exponentially increasing R&D cost. As a result, consolidation in aerospace and defense electronics is self-propelled rather than politically enforced. Unfortunately, Fincantieri, Navantia and Naval Group are state-owned companies, not generally known for their political independence nor their drive for efficiency. Moreover, you can ask yourself the question of whether consolidating big naval shipbuilders will create an efficient organization. History shows otherwise.
On top of that, Naval Group is a highly diversified company, trying to excel simultaneously in activities as diverse as nuclear propulsion, combat management systems and shipbuilding. If we seek economy of scale, that formula is not sustainable. The future belongs to technological centers of excellence, not to national champions.
So, before we start a ‘Naval Airbus’, let Naval Group first decide what it wants to be: A jack of all trades or a specialist? National champion or provider of shareholder value? Private, like its Northern European colleagues, or state-owned? Let Naval Group make up its mind first before embarking on this European adventure.
Hein van Ameijden is managing director of Damen Schelde Naval Shipbuilding.