S Korea’s price hike in sub deal raises Turkish hopes

ANKARA - Hürriyet Daily News

A Turkish U209 submarine surfaces in this file photo. Together with its German partner, Turkey lost a bid to build U209s for Indonesia.

A German-Turkish joint venture striving to win a contract to build submarines for Indonesia is waiting for word from Jakarta after their South Korean rival raised the price for three submarines it has agreed to build for the country by $300 million, a senior Turkish procurement official said.

South Korea’s Daewoo Shipbuilding and Marine Engineering announced on Dec. 22 that it had won an Indonesian deal for $1.1 billion for three U209 submarines. But the company in early February unilaterally told its Indonesian counterparts that the price was too low, and increased it to $1.4 billion.

“Meanwhile, we gave our best offer to the Indonesians on Feb. 7. Now we are waiting for their decision,” the Turkish official recently told the Hürriyet Daily News. “We think we have a chance.”
South Korea won Indonesia’s sub deal last year, but a partnership between Turkey’s Undersecretariat for Defense Industries, its procurement agency, its shipyard STM, and the German shipyard HDW, owned by the German conglomerate ThyssenKrupp, raised a rival bid on the last minute. Still, Daewoo Shipbuilding and Marine Engineering won the bid. Then came the company’s move to raise its price.
Meanwhile, Adm. Agus Suhartono, the chief of staff of Indonesian military forces, visited Turkey in late February. The Indonesian team told Turkey to forget about the U209s and instead focus on the more developed U214 submarines.

Manufacture of U214 subs

For Turkey, a $2 billion submarine deal with HDW for the joint manufacture of six U214 platforms formally took effect in July 2010, the German company announced.

“As a longstanding partner and supplier to the Turkish Navy, ThyssenKrupp Marine Systems can now begin executing the order. The order will contribute to securing employment at [ThyssenKrupp’s] HDW in Kiel, as well as at many subcontractors in Germany and Turkey, for the next 10 years,” it said.

A major loan deal between German banks and the Turkish Treasury rescued the multibillion-dollar submarine contract between the Turkish state and German shipyard Howaldswerke Deutsche Werft (HDW).

“The U209 situation is a complete unknown now, with Daewoo raising its price. We and the German HDW have already given our price. Now we are waiting for Indonesia’s move,” the Turkish procurement official said.

Turkey has a document showing that HDW was given the right to negotiate with third parties to manufacture the U209. It claims the South Korean company does not have the right to build the U209.
Turkey and South Korea are strong partners dating back to the Korean war of the 1950s. Turkey produces howitzers under South Korean license, and the two countries are together building basic aircraft trainers for the Turkish Air Force.