The armaments industry is a discreet, even secretive, one.
So not much was said last August when the INS Tanin submarine, produced by the Thyssen-Krupp subsidiary HDW, headed for its new homeport of Haifa, Israel.
However, an incident onboard the submarine has called the competence of the two German companies into question.
According to several people familiar with the event, there was a technical glitch with the fuel cell during the test phase of the submarine.
The fuel cell supplies the submarine with power for its weeks-long dives, which helps make the vessel practically invisible to potential enemies. It is this special fuel cell that has had customers around the world lining up for the HDW submarines – those produced by competitors in France and Spain are not nearly as efficient as the German models.
The Tanin (Hebrew for "crocodile") belongs to the Dolphin II class. At 68 meters it is about 10 meters longer than its predecessor, and submerged it has a displacement of about 2,300 tons.
While the fuel cell still worked perfectly in dry dock, on the high seas the mistake had a disastrous effect.
This glitch may have a negative effect on Thyssen-Krupp and HDW, which have been hoping to win contracts in some of the largest armaments deals currently being negotiated.
The Australian Navy wants 12 submarines at a price tag of about €12 billion ($13.6 billion). In the run up to the contract announcement, HDW was the favorite, said a manager involved in the negotiations. Australia’s Defense Minister David Johnston showed great interest, but has cooled off in the meantime.
A Japanese consortium is now in the best position to win the Australian contract, said a source. The French industrial group DCNS is also in the running.
An HDW submarine contract with Turkey is now reportedly delayed for two years. Thyssen-Krupp is also behind by two years in its completion of the remaining three subs ordered by Israel.
Video: The INS Tanin makes its impressive arrival in Haifa, Israel.
The industry is looking especially closely at this deal with Israel, because the Tanin is the largest submarine ever produced in Germany. It is also interesting for the Australians, as they need larger boats to protect their coastline.
Thyssen-Krupp could really use the huge Australian contract, because the group wants to break away from its shipyards. The fact that HDW is the global market leader in conventional submarines doesn’t change that.
The Kiel-based company’s technological edge is largely due to its wide network of suppliers, mostly located in Bavaria. The electronics company Siemens plays a key role, and builds each fuel cell. And it was at Siemens that the major blunder happened with the Israel order.
Since the fuel cell is so sensitive, workers must adhere to a very precise assembly plan. Any mistake can later destroy the system.
Siemens was proceeding on schedule with the fuel cells for the Israeli order. In its Erlangen base, a so-called degasser was installed that was meant to protect the sensitive membranes in the inner part of the system from damage by using coolant. A worker, however, forgot to turn the device on. It was an act of carelessness that would have serious consequences.
While the fuel cell still worked perfectly in dry dock, on the high seas the mistake had a disastrous effect. Gas collected in one of the 300 membranes and created a pinhead-sized hole in one of them. The fuel cell turned off automatically, causing damage that was not so easily fixed, according to insiders.
The situation is extremely irritating for Thyssen-Krupp and Siemens. Israel is not just a regular customer, but with the production of the submarines – two others will be delivered in addition to the Tanin – Germany is making amends for the crimes committed under Nazism. The German federal government is paying for about one-third of the price of an estimated €600 million.
Both technology groups must therefore now accuse each other of being negligent with tax-payers' money, because the fuel cell’s vulnerability was known. In an earlier order, a fuel cell had already broken because of the same problem, and that is why the degasser was developed – but was not turned on in this case.
Both companies have reviewed the issue at the highest levels. Thyseen-Krupp CEO Heinrich Hiesinger had every reason to intervene in the case, because until he moved to the Ruhr Valley-based company in 2010, he had been on the management board for the industry sector at Siemens, which included the unit that produces the fuel cell.
After initial wrangling over who was responsible for the blunder, the two sides came to an agreement. The Tanin got an improved fuel cell and an extended guarantee until the end of 2019, which was confirmed by Thyssen-Krupp. Siemens would not comment on the Tanin.
The Israeli Defense Ministry emphasized that the submarine is fully operational with all of its systems. That is understandable, because Israel would not want to publicize possible gaps in its defense. The country considers its submarine fleet to be life insurance. There are unconfirmed reports that Israel equipped the submarines with nuclear warheads, meant to deter potential enemy attacks.
Israel refused to say anything negative about HDW. “The shipyard is very reliable and professional,” said the Israeli Ministry.
It was a kind statement, in light of the two-year delay and the breakdown of the fuel cell.
Martin Murphy is Handelsblatt's defense industry expert. To contact him: [email protected]