Canada Selects German Firm Thyssenkrupp as Preferred Submarine Bidder, South Korean Consortium Named Reserve

SEOUL/WASHINGTON, July 7 (Yonhap) -- 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 (local time) before departing for Ankara, Turkey to attend the North Atlantic Treaty Organization (NATO) summit, dashing hopes that the Korean consortium, led by Hanwha Ocean Co. and HD Hyundai Heavy Industries Co., would win the lucrative project.

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," he said during a press conference.

"We will now enter into negotiations to procure up to 12 submarines, and that process is commercially sensitive, and as always, we will not negotiate in public so as to maintain the strongest possible position for Canada," he added.

The prime minister pointed out 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 called the South Korean consortium the "reserve supplier."

Carney expressed his appreciation to the competitors in the high-profile procurement bid.

"I would like to thank both bidders for the extraordinarily thoughtful, comprehensive and cooperative proposals that they and their government submitted," he said.

"As dynamic, reliable, like-minded democracies, Germany, Norway and the Republic of Korea are each critical strategic partners to Canada in this new world," he added, referring to South Korea by its official name,

He 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 pointed out that there are "many other areas" where the two countries are cooperating.

"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," he said.

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 said it plans to closely analyze issues identified during the bidding process and come up with solutions.

Industry watchers, meanwhile, said Canada's decision to select the German company apparently came as it considered 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 said.

Others, however, noted it was significant that Hanwha Ocean was 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 said. "This indicates that the South Korean submarine industry has entered the global market."