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France bags $40-bn Australian deal to build 12 submarines

26 April 2016

France has bagged a $40-billion deal to build a fleet of 12 new submarines for Australia, one of the world's most lucrative defence contracts, Australian prime minister Malcolm Turnbull announced today.

French state-owned naval contractor DCNS Group aced offers from Japan and Germany, underlining France's strengths in developing a compelling military-industrial bid. According to commentators, the development comes as a blow to Japanese prime minister Shinzo Abe's push to develop defence export capabilities.

Citing knowledgeable sources, Reuters had reported that DCNS would be announced as the winner.

"The recommendation of our competitive evaluation process ... was unequivocal that the French offer represented the capabilities best able to meet Australia's unique needs," Turnbull told reporters in the South Australian state capital of Adelaide where the submarines will be built.
Australia is boosting defence spending as it seeks to protect its strategic and trade interests in the Asia-Pacific while the US and its allies counter the growing might of China.

Though Japan had been in the lead early on for the contract, the inexperience of its Mitsubishi Heavy Industries and Kawasaki Heavy Industries and initial reluctance to say they would build in Australia saw them slip behind DCNS and Germany's ThyssenKrupp AG.

Meanwhile, Thyssenkrupp AG stock slid in Frankfurt trading after the German industrial company lost out to DCNS Group.

The stock fell was down as much as 5.1 per cent, bringing up the rear on the benchmark DAX Index and the shares that had gained 11 per cent this year, traded down 2.5 per cent at 20.30 as of 9:39 a.m.

''It may be disappointing at first sight, but those big orders always entail major risks,'' Bjoern Voss, a Hamburg-based analyst at Warburg Research GmbH, told Bloomberg by phone. ''I am not that sad about it actually. Thyssenkrupp still has a solid order book for the next four to five years.''

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