DefenseNews asks of the European shipbuilding industry:
“Is there enough drive to reach a unified shipbuilding enterprise?…
“As European shipbuilders prepare to transform their nations’ rising military budgets into naval power, local priorities are acting as formidable forces against the integration of a fragmented market.”
But wait, why is industry unification important? The consolidated lead-systems integrator model in the U.S. doesn’t appear particularly efficient.
 |
| German Naval Yard in Gaarden. |
Usually, economies of scale is invoked when there are declining budgets. Consolidation decreases the overhead burden associated with underutilized facilities, capital, etc. This idea was invoked after the Cold War causing the DOD to encourage industry consolidation (the famous “Last Supper“).
But now that European budgets are rising, we have the same policy prescription: industrial consolidation. Its not clear that experts think much about the limits of the size of administration and its constraints on economies of scale.
Moreover, it isn’t clear that European integration will continue. The Euro crisis has already pushed Italy to the periphery. Let’s not forget Brexit. Euro-wide consolidation of defense industries is premature and will likely encounter political compromises that reduce efficiency.
Leave a Reply