Australian submarine tender narrows to Japanese and French bids, Germans lose ground-sources

Thu Jan 21, 2016 6:04pm EST
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By Tim Kelly and Matt Siegel

TOKYO/SYDNEY (Reuters) - The competition for a A$50 billion ($34.55 billion) contract to build Australia's next submarine fleet is narrowing to a race between Japan and France as a bid from Germany's ThyssenKrupp Marine Systems (TKAG.DE: Quote) (TKMS) loses ground over technical concerns, multiple sources said.

Australia is expected to decide the winner of one of the world's most lucrative defense contracts within the next six months, ahead of a national election in which the deal and the jobs it will create is expected to be a key issue for the conservative government.

TKMS is proposing to scale up its 2,000-tonne Type 214 class vessel, while Japan is offering a variant of its 4,000-tonne Soryu boats made by Mitsubishi Heavy Industries (7011.T: Quote) and Kawasaki Heavy Industries (7012.T: Quote).

France's state-controlled naval contractor DCNS has proposed a diesel-electric version of its 5,000-tonne Barracuda nuclear-powered submarine.

Australia has said it wants a boat in the 4,000-tonne class.

Scaling a submarine to twice its original size presents exponential technical challenges, experts say.

That puts TKMS furthest from having the experience to offer what Australia wants in a large, long-range, stealthy submarine to replace its aging Collins-class fleet, said six industrial sources in Asia and Australia with knowledge of the situation.

"The German proposal is an enlarged version of a smaller existing submarine, and that technically is risky," said one source.   Continued...

A visitor takes a picture of a model of Japan Maritime Self-Defense Forces diesel-electric submarine Soryu at the MAST Asia 2015, defence exhibition and conference in Yokohama, south of Tokyo in this May 13, 2015 file photo.   REUTERS/Toru Hanai/Files