Photographer: Fred Tanneau/AFP via Getty Images

Hollande's `Bus Full of Generals' Helps Beat Germans to Sub Deal

  • French effort pays off in bid for $39 billion submarine deal
  • German, French governments' approaches to bid differ greatly

It was Anzac Day when President Francois Hollande got a call from Australian Prime Minister Malcolm Turnbull to tell him that France’s DCNS Group had beaten a bid from Germany to win a defense contract worth A$50 billion ($39 billion).

Hollande relayed the news to his defense minister, Jean-Yves Le Drian, who had travelled to the Somme in northern France to mark the annual day of remembrance for Australian and New Zealand soldiers who served and died in battle. Le Drian was on the former battlefield at 4 a.m. Monday for the beginning of a ceremony that was broadcast live in Australia. 

Jean-Yves Le Drian speaks in the Somme on Anzac day on April 25.

Photographer: Francois Nascimbeni/AFP via Getty Images

The turn of events, relayed by two people familiar with the matter, capped an all-out push by France to win the order for 12 submarines, an effort that paid off with the announcement that DCNS had beat a competing bid by Germany’s Thyssenkrupp AG. 

With Japan seeming to fade from contention in the past month, the French campaign underscores how the tactics of the two remaining contenders couldn’t have been more different. While France’s bid will culminate in a long-planned state dinner Tuesday night for Australia’s governor-general hosted by Hollande, Germany, by contrast, left the wining and dining to a deputy minister.

Whereas Hollande has unabashedly lobbied on behalf of French arms suppliers, Merkel’s government has been a somewhat silent advocate, preferring to tiptoe around the topic out of concern for a public backlash even with what would have been the largest ever German defense contract on the line.

“The French bring Francois Hollande and pack a bus full of generals and lawmakers,” Frank Haun, chief executive officer of German tank maker Krauss-Maffei Wegmann, said at a conference last fall in Berlin. “I come in a Smart and, if I am lucky, I can bring an ambassador.”

German Delegation

The lobbying in Germany for Thyssenkrupp’s bid to build the submarines fell to deputy economy minister Uwe Beckmeyer, who took a business delegation to Australia last year. His efforts pale against the French display, with Le Drian spending nearly a week in February touring the country, laying flowers at a war memorial and handing medals to veterans. In the last two years, French ministers made at least four visits to Australia to promote the bid by state-owned shipbuilder DCNS.

From a purely economic perspective, such all-out efforts have been very fruitful for France. Its military exports reached a record 16 billion euros ($18 billion) last year, double the 2014 number and four times the 2012 tally. Germany, meanwhile, fell to fifth place globally in weapons exports in 2015 from third in 2010, according to data from the Stockholm International Peace Research Institute. France was one of the two countries that passed it.

French Jobs

A key reason for the French lobbying is that defense is one of the country’s biggest industries, providing about 165,000 jobs. With the number employed expected to exceed 200,000 by 2018, the sector is important to helping bring down the unemployment rate of over 10 percent. The defense industry is arguably not as important in Germany, which has an automobile industry that dwarfs other areas of manufacturing and only about 60 percent as many defense jobs as France.

The approval process for weapons contracts also plays out differently: Germany has strict rules for arms exports, largely a result of its bloody 20th century history. The government’s security council has in the past withheld or delayed export licenses, even in cases where the country was supplying minor parts. As a result, some countries have blacklisted German suppliers, while producers from competing nations have begun to advertise their equipment as “German free.”

France approves contracts via a defense committee, whose members are often those who promote and lobby for the contracts, including the defense minister himself.

Not Restrictive

“In France, arms exports aren’t a major issue of concern for civil society or parliament, so France is not very restrictive,”said Pieter Wezeman, a senior researcher on the arms trade at SIPRI. “The perception in the public is in support of exports because they are good for the industry and for jobs. In Germany it is the contrary.”

Airbus Group SE’s defense unit was among those hit. After being selected to supply targeting systems for armed vehicles destined for Saudi Arabia in 2012, the approval dragged on, and the company was excluded as supplier, losing a 600 million-euro order. Airbus also suffered delays in delivering French-made helicopters to Uzbekistan after Germany blocked a permit to sell a slip ring needed in an optical system, prompting Airbus CEO Tom Enders to call the government’s behavior ‘‘grotesque.’’

The differences are also apparent in other competitions. While Germany has denied Saudi Arabia the Leopard 2 tank since the 1970s, Hollande and his prime minister have visited the country in the past twelve months to support bids to supply everything from missiles to drones, warships and helicopters. Saudi Arabia’s crown prince Mohammed bin Nayef was honored with one of France’s most prestigious awards, the Legion d’Honneur, despite complaints the two countries don’t share human rights values.

France had the advantage “because they build the longer-range, larger type that Australia is looking for,” Wezeman said, before the decision. “Germany tends to make smaller ones. They have pledged that they can scale those up, but the Germans haven’t made such big submarines since World War II.”

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