France and Italy’s warship builders Naval Group and Fincantieri sign joint venture

France and Italy’s state-controlled naval companies signed a joint venture agreement on Tuesday, moving closer to a bilateral defense industrial alliance.

“After several months of negotiations, Naval Group and Fincantieri signed an agreement (joint venture) last night at the Hotel de Brienne, which will allow the development of industrial and commercial synergies,” French defense minister Florence Parly said on Wednesday, October 24.

The two shipbuilders began negotiations last September on the joint venture, which Naval Group and Fincantieri said was the “first step toward the creation of the alliance” between France and Italy.

The Italian shipbuilder is already the largest in Europe. Earlier this year it acquired a 50 percent stake in France’s STX, making it the fourth largest shipbuilder in the world.

In a joint statement, Naval Group and Fincantieri said the alliance would jointly prepare bids for both countries’ acquisition programs as well as export; increase efficiency in the supply chain; conduct joint research and development; and “encourage cross-fertilization” between the two companies, including the sharing of testing facilities.

The shipbuilders already have an agreement to provide the French Navy with four logistic support ships based on the Italian Vulcano LSS.

“A Government-to-Government Agreement would be needed to ensure the protection of sovereign assets, a fluid collaboration between the French and Italian teams and encourage further coherence of the National assistance programs, which provide a framework and support export sales,” the statement said.

The two companies will combine efforts to be more competitive in the export market and avoid “often damaging” competition between Europeans, Parly said Wednesday.

Europe’s defense industry

In June, the European Union presented its €13 billion European Defence Fund, which will offer money to member states for research and development beginning in 2021.

The E.U. has given the EDF a budget of €13 billion over the period 2021-2027, including €4.1 billion for research and €8.9 billion for developing military capabilities.

Parly said at the time that France hopes to get financing for a military drone project it is working on with Germany, Italy and Spain.

The E.U. formally established the 25-member Permanent Structured Cooperation on security and defense (PESCO) pact in December. PESCO was introduced by the Lisbon Treaty and allows states participating the the joint framework to develop joint defence capabilities, invest in shared projects, and enhance the operational readiness and contribution of their armed forces.

The pact has prompted U.S. concerns that it would become a protectionist vehicle used to shield European defense companies such as France’s Dassault from American competition.

But the E.U. insists there is no unfairness, with one official telling AFP in June: “It is normal that European money goes to European companies.”

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