Germany has scrapped a major warship contract for six F126 anti-submarine frigates, a project initially estimated at €10 billion ($11.3 billion) that Rheinmetall had hoped to lead. This decision, announced on Wednesday, caused Rheinmetall's shares to plunge by as much as 19%, marking their largest intraday decline since April 2025. The project had already incurred approximately €2.3 billion in costs for design work and other activities, with the German Defense Ministry stating that continuing would have pushed the total bill to over €18 billion, up from the original €10 billion. The cancellation is a significant blow to Rheinmetall, which had recently acquired the shipbuilder Lürssen Naval Vessels in March 2026 and was poised to take over the F126 program for €12.8 billion.
The F126 program had been plagued by problems, including delays and software issues, since its inception. Initially, the Dutch Damen Schelde Naval Shipbuilding was the primary contractor, but communication difficulties and an inability to meet timelines and budgets led to discussions about transferring the lead contractor role to Rheinmetall. Rheinmetall's CEO, Armin Papperger, had expressed confidence in May that the deal would be finalized in the second quarter. The cancellation raises questions about Rheinmetall's naval sales targets, with analysts like Citi's Charles Armitage now forecasting the company will only reach half of its €5 billion naval sales goal by 2030.
Instead of the F126 frigates, Germany will now procure eight smaller Meko A-200 frigates from Thyssenkrupp's marine division (TKMS). This decision was based on the F126 program's "significant delays, huge cost overruns and unforeseeable risks." The new contract involves four Meko A-200 frigates for an estimated €6.3 billion, with an option for four more at €5.3 billion. TKMS's shares rose by 8.2% following the announcement. The Meko A-200 frigates are considerably smaller, at 120 meters and 4,200 tonnes, compared to the F126's planned 166 meters and 10,500 tonnes. While Germany aims to build the strongest conventional army in Europe by 2039, this incident highlights the challenges in translating large defense spending commitments into actual procurement.
