Rheinmetall, record contract to build six military frigates

The German defense giant Rheinmetall aim to get about 12 billion euros to take on the program control F126the project of the new ones frigates of the German Navy became one of the major problem cases in Berlin’s military procurement. The Financial Times writes this, citing sources close to the negotiations. After six months of talks and due diligence, Rheinmetall’s naval division has presented its conditions to take over the construction of six F126 frigates, a project initially led by the Dutch shipyard Damen Shipyards Group.

Blocked payments

The British newspaper highlights how software problems and tensions with German procurement authorities pushed Berlin to block payments, forcing the Dutch group to reconsider its role six years after the contract was awarded. If Rheinmetall’s bid is approved, the total cost of the program to German taxpayers would rise to around 14 billion euros, including the around 2 billion already paid to Damen and various subcontractors.

Rheinmetall Naval Systems’ proposal, writes FT, also includes an inflation indexation clause linked to delivery times. The first ship, initially scheduled for 2028, it has already accumulated four years of delay. Rheinmetall, however, would have assured the authorities that it could deliver the first frigate by 2032 or, in the most favorable scenario, in the second half of 2031 if the German military procurement agency agreed to ease some certification and approval procedures.

“We expect to win the contract as general contractor this summer. We want to accelerate the delivery time and deliver the first of six frigates planned in the second half of 2031,” the head of the company’s Maritime Systems division, Tim Wagner, told the German newspaper Welt. Rheinmetall is currently in talks with the Federal Office for Equipment, Information Technologies and In-Service Support of the German Armed Forces (BAAINBw) in Koblenz to define “how we can achieve this together”.

The F126 program

It is considered strategic for strengthening European deterrence against Russia in the Baltic and North Atlantic, at a time when Germany is massively increasing military spending. If finalized, the contract would represent the largest single deal Rheinmetall has ever secured in its history. In March the Düsseldorf group completed the acquisition of the Naval Vessels Lürssen shipyard, part of CEO Armin Papperger’s strategy to expand the group beyond tanks and ammunition into the naval, drone and space sectors.

In the meantime, the German government is also considering a alternative plan to purchase MEKO A-200 frigates “off-the-shelf” by Thyssenkrupp Marine Systems, a subsidiary of Thyssenkrupp, at around 1 billion euros each. According to sources cited by Ft, Berlin has already signed a preliminary agreement for four units, but has asked TKMS to also prepare an option to extend the order to eight ships, in an attempt to increase negotiating pressure on Rheinmetall.