Germany has canceled its F126 frigate program, originally valued at an estimated $11.3 billion for six ships, due to significant delays and cost overruns. This decision particularly impacts Thales, which was a key supplier for the program. The original contractor, Dutch shipbuilder Damen Schelde Naval Shipbuilding, informed the German Defense Ministry that it could not meet the agreed-upon timelines or budget. The F126 program had already incurred approximately $2.5 billion to $3.8 billion (depending on the source) in costs, including design work, software development, and initial construction activities.
The German Defense Ministry stated that continuing the program would have pushed the total cost for six ships to over $20.4 billion, up from the initial $11.3 billion. They explored transferring the general contractor role to Rheinmetall's NVL division, which is the newly acquired shipbuilding group, but negotiations priced this at around $16.3 billion for six ships. With work already completed, the total financial requirement would have exceeded $19.4 billion. Rheinmetall shares plunged as much as 18.7% following the announcement, marking their worst daily performance in over 30 years.
Instead of the F126, Germany will now procure eight smaller Meko A-200 frigates from Thyssenkrupp Marine Systems (TKMS). This new contract is estimated at $7.15 billion for the first four ships, with an option for four more at approximately $6 billion, bringing the total to $13.2 billion for all eight. TKMS shares rose 8.2% on the news. This move also negatively affected other European defense stocks, with Renk shares falling 7.4%, Leonardo dropping 5.2%, Saab decreasing 2.6%, and Dassault down 1.5%. The cancellation is seen as a setback for Germany's defense modernization despite commitments to increase military spending.
