BAE Systems, Global Combat Ship And Turkey (Part 1)
31 Oct 2011 2 Comments
In November Turkish President Abdullah Gül will visit United Kingdom. This visit has two highlight particularly important from naval point of view: First during his visit he will visit the BAE System’s shipyard in Portsmouth. Second an agreement (probably a Letter of Agreement) about joint defense R&D with UK will be signed. A similar agreement was signed with India last month.
Why are these two highlights of Mr Gül’s visit important? They are important because they represent a significant milestone in the British efforts to increase the defense cooperation between Turkey and UK.
United Kingdom is one of the largest exporters of defense equipment in the world. But their market share in Turkish defense market is almost non existent.
Since 1950, with the exception of four used Milne class destroyers, the main UK export products for Turkish Naval market were 10 AWS-6 Dolphin, 8 AWS-9 radars, 6 Type 2093 MCM sonars and some Mk24 Tigerfish torpedoes and Sea Skua missiles.
The British Government designated Turkey as a strategic partner. Prime Ministers Recep Tayyip Erdoğan and David Cameron signed a new Turkey/United Kingdom Strategic Partnership in Ankara on 27 July 2010. According to the British Embassy in Ankara, this new partnership reflects many common strategic interests of the two countries. It brings together commitments in the fields of bilateral relations, trade and investment, Turkey’s EU accession, regional stability and peace, a Cyprus settlement, defense, global security and terrorism, illegal trafficking of weapons, illegal migration, energy security and a low-carbon future, intercultural dialogue, and education and culture.
Well the issues like Turkey’s EU accession, regional stability and peace, a Cyprus settlement are there just for lip service. The real deal behind the strategic partnership is to increase bilateral trade and investment and especially in defense field. The British government is investing a considerable amount of political capital to create a government to government connection. The next step is to create a navy to navy connection. This will be followed by a industry to industry connection.
The reason the British government and the British defense industry is investing in a cooperation with Turkey can be explained with the current state of the British defense budget. Britain must find new markets for its defense products as the British defense budgets is not large enough to support the British defense industry anymore. So Turkey appears as a lucrative market for the British. And the untouched naval market offers a good opportunity for a start.
From this perspective it is very understandable why there such large attendance of British companies in IDEF 2011 Defence Exhibition and 4th Naval Systems Seminar (UKTI DSO, BAE Systems, Rolls-Royce, BMT, IHS Janes, Johnson Controls, MBDA).
The British marketing efforts in Turkey, spearheaded by BAE Systems, is concentrated around the Global Combat Ship project.
The Global Combat Ship (GCS) is the export variant of UK’s Type 26 frigate. BAE Systems Surface Ships (BAE SSS) has been designated lead ship contractor and systems integrator. The company was also awarded a 127 million GBP contract by UK MoD to lead a four-year assessment phase in March 2010.
The Type 26 is a versatile ASW combatant and is intended to form the workhorse of the Royal Navy (RN). Entering into service from 2021 the Type 26 ships will replace the existing Type 23 frigates. The RN plans to have 13 Type 26 ships, compromising eight ASW version and five general purpose variant.
For RN the export success of GCS is important because as Dr. Julian Lewis puts it neatly if the RN is to have any chance of restoring the escort fleet, it must make the Type 26/GCS as cheap as chips.
In order to create the economics of scale to make the ships as cheap as chips a lot of GCS’s need to be exported. Otherwise the Royal Navy may not stay ahead of Belgium or Danish Naval Forces.
For BAE SSS is Type 26 may be their last hope to become a global naval shipbuilder. BAE Systems is one of the top five defense contractors in the world. They have build every thing from submarines to tanks, airplanes etc. But the company has yet to prove itself as a serious player in international naval market. And definitely this is not going to be a smooth sail.
The BAE SSS suffered a series of set backs in the recent years in international projects.
Greece: In March 2011 BAE SSS announced that it has pulled itself from the contract with the Elefsis. BAE SSS cited the lack of payments for the project by Greek government as the reason for its departure.
The construction of Super Vita corvettes is or was the biggest warship construction project in Greece besides the construction of 6 Type 214 AIP submarines.
Brunei: In 2005 BAE SSS had to sue the Sultan Of Brunei, one of the world’s richest men, over a row involving over $1-billion order for three Nakhoda Ragam class corvettes, as the sultan has refused to accept them because they allegedly fail to meet his specifications, the paper said
All three completed vessels remain unsold and are laid up at Barrow-in-Furness, and are waiting for a customer.
Trinidad & Tobago: The Caribbean island Trinidad & Tobago ordered three patrol ships from VT Shipbuilding in April 2007. After BAE acquired VT in October 2009 the project encountered considerable delays so that in September 2010 Trinidad & Tobago had to cancel the deal causing BAE SSS a loss of 150 million GBP.
Malaysia: BAE SSS encountered delays due to difficulties in the systems integrations of the weapons and weapons control system before the delivery of these frigates to Malaysia. The problems were overcome in the end but a plans for the purchase and construction of two Batch II Lekiu Class frigates from BAE Systems have been scrapped. A report in the British newspaper The Times in August 2009 quoted a BAE spokesperson as saying that both parties had agreed to not continue with the deal due to cost cutting measures by the Malaysian government, although BAE offered a cheaper alternative in the form of offshore patrol vessels.
Oman: The delivery of three corvettes destined for the Royal Navy of Oman has been hit by the discovery of a series of engineering problems found during sea trials of Al Shamikh, the first of class being built by BAE Systems Surface Ships.
BAE SSS is trying to fix the problems as Oman is a key export market for the British defense industry. BAE is involved in talks with the Gulf State government to complete a multibillion-pound deal to sell Typhoon fighters to the air force.
Some of the above mentioned problems can be attributed to the fact that BAE SSS’s rapid growth by buying other naval shipbuilders and the related management issues arising after such mergers.
Never the less the RN is currently the only important customer of BAE SSS, but the number of projects the company is running for this customer is decreasing with the diminishing defense budget.
So the Type 26/GSC can really be the last ticket for the BAE Systems to the global naval shipbuilding market along with other key players such as DCNS, Navantia, HDW, Fincantieri. Failing to succeed the BAE SSS will remain predominately a supplier for the RN and UK Mod and may face a significant downsizing reflecting the UK defence spending.
And the fact that since the export success of Leander (Type 12) frigate 40 years ago Britain failed to come up with a frigate design acceptable by foreign customers does not make things easier.
The above explained circumstances clearly show why the Royal Navy and BAE Systems SS is acting together and getting the political back-up from the British government.
These efforts of British government and defence industry has not been without success. So far UK established dialogues with Australia, Brazil, Canada, India, Malaysia, New Zealand and Turkey. Canada has already refused to take part in Type 26 program and has chosen its own course.
Is there a market for the GCS in Turkey? According to a BAE Systems military advisor, Read Admiral Chris Clayton UK is keen to establish a strategic partnership with Turkey, to jointly develop future naval capability. One potential area for co-operation is the Global Combat Ship (GCS) programme. This would see us jointly developing the expertise to deliver state-of-the-art warships that meet the demands of global maritime customers into the middle of the 21st century.
In Part II, I will share my thoughts on Turkey’s participation on Global Combat Ship project.