South Korea's Prime Minister Kim Min-seok, centre, Prime Minister Mark Carney, second right, and National Defence Minister David McGuinty, right, are given a tour of the Hanwha Ocean Shipyard in Geoje Island, South Korea, in October.Adrian Wyld/The Canadian Press
Canada is considering splitting a multibillion-dollar contract for 12 new submarines by buying an equal number from Europe and South Korea as Ottawa rearms to confront the challenges of a more dangerous world, two senior government sources say.
Germany’s ThyssenKrupp Marine Systems, in partnership with the government of Norway, and Seoul-based Hanwha Ocean are shortlisted for the contract, which could cost Canada upward of $24-billion.
Final proposals for the contract to build 12 diesel-electric submarines were submitted to the federal government on Monday. A decision is expected to be made by April 4 at the earliest.
The new modern fleet of submarines would replace the Royal Canadian Navy’s current aging fleet of second-hand Victoria-class boats.
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The senior government sources say Ottawa is looking at buying six Type-212CD submarines to be built by Germany’s TKMS. Those submarines would patrol the Atlantic Coast, the sources said. Ottawa would also acquire six Hanwha KSS-III Batch-II submarines. The sources say those submarines would be located on the Pacific coast and could be deployed to the Indo-Pacific region.
The Globe and Mail is not identifying the two government sources, who were not authorized to discuss details of the competition.
Part of Hanwha’s pitch is that some of its submarines are already built and in the water. Additional submarines are currently being built. The TKMS submarines are not yet in the water, although construction has started.
Hanwha said it could deliver the first boat by 2032 and four additional boats by 2035. TKMS has said the company could deliver its first submarine well in advance of 2035.
Defence experts have raised concerns that splitting Ottawa’s submarine contract could complicate supply chains and parts inventories. In September, Prime Minister Mark Carney also raised doubts about a mixed fleet, saying you get “many efficiencies in economies of having one fleet.”
The two government sources said Ottawa will assess the bids, including whether to split the contract, on the basis of what best serves the country’s economic and military needs.
A final decision will involve more than just acquiring new submarines. Mr. Carney is looking for greater trade and economic ties with Europe and Asia as a way to reduce reliance on the United States.
The sources say the benefit of splitting the contract is that Canada would reap industrial benefits from both bidders, including possible investments in this country’s auto industry. Canada’s auto sector has been hit hard by U.S. President Donald Trump’s tariffs, as have the country’s steel and aluminum industries.
Both Hanwha and Germany’s TKMS are trying to make their proposals more attractive by increasing their commitments to benefit Canada, including local jobs and manufacturing and supply contracts.
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Ottawa has asked the governments of South Korea and Germany to make auto industry production pledges as part of their pitches.
During a visit to Ottawa last month, Germany’s Minister of Economic Affairs, Katherina Reiche, said her country’s auto industry is keen on expanding its presence in Canada and is in the midst of discussions about doing so.
Volkswagen has already committed to building an electric-vehicle battery factory in St. Thomas, Ont., through its PowerCo subsidiary.
Ms. Reiche said the German auto industry interest is independent of Berlin’s joint bid with Norway to supply Canada with submarines. But the minister acknowledged that Berlin has been talking to its auto industry.
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In January, Hyundai Motor Group executive chair Chung Euisun visited Ottawa at the same time as a high-level South Korean government delegation. The South Koreans signed a memorandum of understanding intended to bring the country’s auto-sector manufacturing and investment to Canada.
The non-binding MOU pledges both sides to working together to promote the manufacturing of autos, electric vehicles, batteries and hydrogen-powered vehicles.
Germany and Norway are also making the case that they are NATO members and their submarines would be interoperational. South Korea, which is a global powerhouse in shipbuilding, is hoping to expand into submarine manufacturing. Winning even a partial Canadian submarine contract would be a strategic turning point for Seoul’s efforts to become a major player in the arms market.