German conglomerate Thyssenkrupp is in talks about merging subsidiary ThyssenKrupp Marine Systems (TKMS) with a domestic rival to create a national champion.
Thyssenkrupp board member in charge of the marine systems unit, Oliver Burkhard, tweeted the company was in talks as an alliance could make sense in the current European market environment, with the creation of a national champion one possible outcome.
The tweet followed a report by public sector broadcaster NDR which said Thyssenkrupp was sounding out domestic rivals German Naval Yards (GNYK) and Luerssen.
A Thyssenkrupp spokesman said in response to an enquiry from Reuters, “we always said we are open for talks about consolidation scenarios if these are economically sensible and politically supported”.
Thyssenkrupp also said TKMS could be sold as part of a wider restructuring of the steel and engineering group, struggling with underperforming or loss-making units including plant building, car parts, steel and materials trading. All are exacerbated by the coronavirus crisis.
NDR said the latest talks have been running since the start of the year, focusing on naval surface ships with government assuming a moderating role.
Burkhard added the defence ministry needed a clear position, alluding to the perceived need for state contracts to boost sales and profits.
A German marine contract for 4.5 billion euros this year was awarded to Dutch company Damen, snubbing bids from local firms.
A spokesman for family-owned Luerssen said it believed consolidation was required to boost the competitiveness of various activities in the sector. German defence equipment makers sometimes compete and sometimes partner.
German Naval Yards Kiel chief executive Joerg Herwig said its owner, international shipbuilding group Privinvest, stressed the necessity and opportunities of German consolidation over the past two years.
Consolidation was necessary to safeguard thousands of jobs and shipyard locations in Germany, he said.
TKMS, which builds warships and submarines, operates at locations in Kiel, Hamburg, Emden and Bremen. It has annual sales of 1.8 billion euros and employs 6 000.
TKMS reported improving order intake and the parent company said in November it will invest 250 million euros by 2023.
Possible would-be buyers of the business in the past were Rheinmetall) and the French Naval Group.