France and Germany could be ready to form a powerful European warship and submarine maker in two to three years by merging their naval shipyards, the head of France's state-owned shipbuilder DCN said on Thursday. Both the German and French governments have voiced support for the creation of a naval group, modelled on European aerospace firm EADS, but Germany has said it would oppose a deal as long as the French government is a DCN shareholder.
The shipyard businesses of DCN, German steel maker ThyssenKrupp and French defence electronics firm Thales SA, would be the key players in an alliance.
"It will take at least two to three years," DCN Chairman and Chief Executive Jean-Marie Poimboeuf told Reuters on the sidelines of an event.
Poimboeuf, in Singapore to mark the delivery of one of six stealth frigates to the wealthy city-state, noted that France and Germany would have to focus on the domestic consolidation of their naval shipbuilding industries before embarking on a deal.
ThyssenKrupp took the first step last year when it merged its naval assets with those of shipyard HDW, whose submarines are the first in the world to be propelled by fuel cell-generated power, and are in use in 12 countries.
But German officials have been cautious after a French regulator accused DCN - whose business is highly dependent on the French military - of "questionable contracts" and "operational and technical failures".
A German newspaper recently quoted a German defence ministry study as saying that a connection between the firms would not be advisable and cautioned that German know-how, particularly in the field of submarine propulsion, would fall into the hands of the French.
Talking to business people and military officials, Poimboeuf said France was willing to create the conditions for a cross-border merger by reducing its stake in DCN.
"It will be done progressively of course but it will be done," he said. "There is a strong will".
Last month, the French parliament approved a law to allow the sale of up to 49 percent in DCN. The move also eliminated a barrier to a planned alliance between of DCN and parts of Thales, which Poimboeuf expects to complete by the end of this year.
Under the plan, DCN would merge its naval shipbuilding business with that of partly state-owned Thales, creating a group with annual sales of 2 billion euros ($2.6 billion).
Poimboeuf also told Reuters that France and Britain could co-operate in several areas regarding the construction of aircraft carriers. France is in the process of building a carrier with DCN and Thales while Britain is working on two such ships together with Thales and Europe's biggest defence group, BAe Systems
"Co-operation in propulsion and aviation systems could save a lot of money for both sides," he said, adding that communications systems and diesel engines were another field for collaboration.
"It is also imaginable that parts of the hull could be made in France and the UK."
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