PARIS — Europe’s naval sector has no choice but to consolidate if it is to remain competitive with new entrants on the international market such as China, Russia and South Korea, according to the outgoing CEO of France’s Naval Group.
At his last news conference before retiring on March 24, Hervé Guillou said that “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 defense market. They are posing a considerable challenge and that’s why Europe must consolidate.”
Guillou said that between 2009 and 2018 — small ships such as offshore patrol vessels and offshore supply vessels excluded — China produced 136 military ships, of which 11 were exported; Russia produced 68, of which 14 were exported; South Korea’s Hyundai Heavy Industries and Daewoo (now consolidated into one business) produced 40 ships, of which 13 were exported; and Japan’s shipyards made 19, all for its domestic market. Two of the United States’ shipbuilders made 78 ships, of which six were exported; Europe’s 12 shipyards produced 80 ships, of which 49 were for the export market.
The figures given by Naval Group are estimates supplied by the European economic group Euroyards, which uses sources such as the Stockholm International Peace Research Institute and IHS Markit.
“What more need I say?” Guillou remarked at the Friday briefing. “We are the only ones in the world who have to export over half our production in order to survive.”
“I’ve always considered, personally, that exporting was an opportunity, but what I wanted to underline is that in any case we don’t have a choice. 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 and don’t have to take unmeasured risks in Australia, Egypt, Romania or Belgium to win business that you’ve fought for tooth and nail," he added.
“Europeans don’t have a choice. Not one European domestic market is sufficiently large, including the French market, to maintain the skills and levels of competitivity which we currently enjoy and are the only thing that enables the French Navy to be the world’s second navy from a technological point of view, and to have the format which it does with the budget that it has.”
Guillou added that Naval Group will be the core around which a future “Naval Airbus” would be built “because we have the means and the desire to do so … and other companies don’t.”
He also announced that Spain has joined efforts by Greece and Naviris, the joint venture between Italy’s Fincantieri and Naval Group, to fulfill the European Patrol Corvette program. “Naviris will be undertaking four worldwide campaigns,” Guillou said without giving further details.
Guillou’s replacement, Pierre Eric Pommellet, 52, previously served as an executive vice president at Thales. Although the French government has not officially announced his appointment, Guillou did mention Pommellet several times as his successor.