Ottawa: A South Korean consortium has failed to win Canada's multibillion-dollar submarine procurement project, with Ottawa selecting Germany's Thyssenkrupp Marine Systems (TKMS) as the preferred bidder, according to the Canadian leader. Canadian Prime Minister Mark Carney made the announcement on Monday before departing for Ankara, Turkey, to attend the North Atlantic Treaty Organization (NATO) summit, thereby dashing hopes that the Korean consortium, led by Hanwha Ocean Co. and HD Hyundai Heavy Industries Co., would win the lucrative project.
According to Yonhap News Agency, the announcement came amid speculation that in its selection process, Ottawa could consider the importance of defense cooperation with Germany, a NATO ally, at a time when the transatlantic alliance faces continuing threats from Russia and diplomatic tension with the United States. The project involves the construction of up to 12 diesel-electric submarines under a procurement program valued at up to 60 trillion won (US$39.1 billion), including construction and long-term maintenance.
"I am pleased to announce that Canada has selected TKMS as the preferred supplier for Canada's patrol submarine project," Carney stated during a press conference. "We will now enter into negotiations to procure up to 12 submarines, and that process is commercially sensitive. As always, we will not negotiate in public so as to maintain the strongest possible position for Canada," he added.
The prime minister highlighted that if negotiations with TKMS are unsuccessful, Canada retains the right to designate Hanwha Ocean as the preferred supplier and enter into negotiations with it. He referred to the South Korean consortium as the "reserve supplier." Carney expressed appreciation to the competitors in the high-profile procurement bid, acknowledging the extraordinary, thoughtful, comprehensive, and cooperative proposals submitted by them and their government.
Carney also noted that he spoke by phone with South Korean President Lee Jae Myung over the weekend on various topics, including the submarine project. "I understand the disappointment (by South Korea), particularly given the strength of the bid, and these are tough decisions," he said. He highlighted that there are "many other areas" where the two countries are cooperating, further stating, "I can see this is a disappointment. We are moving forward with the relationship (with Korea) because there's so many things we can do together."
Canada currently operates four Victoria-class submarines acquired second-hand from Britain. In a statement released following the announcement, Hanwha Ocean vowed to continue efforts to help South Korea's maritime defense industry take another leap forward in the global market. "We were not able to overcome the barrier posed by the NATO alliance, despite making all-out efforts backed by the government's full support, the outstanding performance of our submarines and the Navy's successful experience operating submarines," Hanwha Ocean said. The company plans to closely analyze issues identified during the bidding process and come up with solutions.
Industry watchers suggested that Canada's decision to select the German company was influenced by considerations of relationships with NATO. "From Canada's perspective, if the performance of the submarines is not significantly different, it may also prioritize interoperability within NATO, as well as its relationships with trans-Atlantic allies," an official from the defense industry explained. Other observers noted the significance of Hanwha Ocean being shortlisted after competing against major European players, including those from France, Spain, and Sweden. "A South Korean defense company, which developed based on German submarine technologies, has now reached a level where it can compete with Germany," another official stated. "This indicates that the South Korean submarine industry has entered the global market."
South Korea's arms procurement agency remarked that the project nevertheless helped enhance the reputation of the country's defense industry in the global market. "By promptly implementing an artificial intelligence-led transition in the defense sector, we will make efforts to narrow technology gaps," the Defense Acquisition Program Administration mentioned in a release. "By pursuing innovative localization strategies, we will spare no effort to enter major defense markets. We will also further develop the cooperative relationship with Canada established through the latest procurement program," it added.