The Taiwan Debate

Since 04-17-03

The non-nuclear expertise at HDW, which built the first submarine in 1851 during the German-Danish war, has nonetheless caught the eye of the U.S. industry, which builds only nuclear subs but has pledged to sell eight conventional ones to Taiwan.

One Equity Partners, which snatched HDW out of German hands in a controversial buyout last year, has said it may sell the yard, and U.S. arms firm Northrop Grumman Corp has not ruled out taking a direct stake.

But the attractiveness of HDW, which has long said it wants to help build the Taiwan submarines, is limited by the German government's tight restrictions on arms exports.

The shipyard's spokesman Juergen Rohweder said that although the U31 would be ideal for Taiwan, particularly because its length of 60 metres made it small enough to operate in the region's shallow waters, the debate was now beyond their control.

"It's a question of politics whether or not they allow it, and you know the relationship between (German Chancellor Gerhard) Schroeder and (U.S. President George) Bush" Rohweder said. "The United States won't wait forever."

Northrop had hoped to work with HDW to fulfil President Bush's April 2001 Taiwan pledge, but has started to look elsewhere. General Dynamics Corp. has also submitted a concept for building the submarines.

To diffuse political worries about Germany's defence capabilities draining away, One Equity said when it bought HDW it would offer 15-percent stakes to German engineering firms ThyssenKrupp <TKAG.DE> and MAN <MANG.DE> unit Ferrostaal.

Ferrostaal has said it is still interested in the HDW stake and is keeping its options open while ThyssenKrupp, itself struggling to cut heavy debts, has said it is debating whether taking a stake in HDW would make strategic sense.