Greek Submarine News

Greece has decided not to pay Howaldtswerke-Deutsche Werft GmbH and Hellenic Shipyards SA dockyards 524 million euros ($775 million), so ThyssenKrupp AG, the German shipbuilder and steelmaker, canceled contracts with Greece yesterday for the construction and maintenance of all submarines.

ThyssenKrupp is reducing its workforce and seeking to sell or spin off units after the global economic slump slashed demand for products from raw steel to yachts. Greece’s dispute with the company prompted the opposition socialist Pasok party to accuse the New Democracy government of “indifference and inability” as the nation gears up for elections next month.

The Greek state “can’t pay, won’t pay, or has other priorities,” said Dirk Nettling, a Commerzbank AG analyst who recommends investors buy ThyssenKrupp stock. “It’s not a pretty event, that’s clear.”

Hellenic Shipyards, the largest in the eastern Mediterranean, was awarded the contract to build four class U214 submarines in February 2000, according to the company’s Web site. It got an additional contract to upgrade three class 209 submarines in 2002. ThyssenKrupp said the Greek Defense Ministry now “is in default of its contractual obligations.”

Hard to tell what is happening here. Greece had recently come up with a plan for the Hellenic Navy that appeared to include payments to ThyssenKrupp for all but the first U-214 built, which reportedly has problems. By canceling the contract it is unclear if ThyssenKrupp is attempting to renegotiate, or is simply telling the Greeks to 'work with someone else.'