Next Week looking big for CPSP

Noah Note

I feel as if we’ve reached a point where submarine discussion is inevitable throughout the week. With CPSP drawing its RFP to a close in the next two months (March 2nd, to be exact), both Hanwha and TKMS are bound to ramp up their efforts to secure partners and commit to investments. This last week, especially, has felt like a massive back-and-forth—one side doing one thing and then the other following in some strange tit-for-tat.

TKMS announces a new teaming agreement with Cohere? Hanwha follows by announcing new potential investments in offshore wind, LNG in Newfoundland, and a new CEO for their Canadian operations. No doubt this trend will continue and very likely ramp up. Next week feels poised to be a headline week on this front, so I wanted to get ahead of things and quickly remind everyone what was going on.

On the 27th, a large delegation will be in Ottawa as part of renewed efforts by the Korean government to cement a comprehensive economic agreement that they can present for CPSP. The Korean government has been pressuring industry to be involved, and the rumor circulating is that this delegation will be bringing with them a long list of economic proposals that would be tied into a winning bid.

This delegation is being led by the Chief of Staff to the President, Kang Hoon-sik, and the Minister of Trade, Industry and Energy, Kim Jung-kwan. Officials from several Korean companies, including Hanwha, Hyundai Heavy Industries, Hyundai Motor Group, Korean Air, and LIG Nex1, are also coming along for the trip. Many had previously been to Canada as part of the Canada-Korea Defence Roadshow; however, some, like Hyundai Motor, are new to this group.

Hyundai Motor—not to be confused with the formerly together but now separate Hyundai Heavy Industries—has taken the spotlight in recent discussions. Government officials have been encouraging both the Korean and German governments to tie additional automotive investment into their CPSP bids. Neither side, as far as I can tell, has been particularly supportive of such measures; Hyundai itself has been quite cold to the idea but seems to be pressured to at least look hard at a potential avenue of cooperation.

For Team GERNOR, the primary discussion has been surrounding Volkswagen, which makes sense given the PowerCo SE Gigafactory in St. Thomas. They already have the established presence, as well as a pathway to invest more fairly easily. There had already been plans discussed, though obviously world events had apparently put that on hold.

Now, to clarify: despite what some say, there is no requirement for automotive investments to be made to win CPSP, nor do I think that it would be a deciding factor in itself. The fact of the matter is that the Canadian government is trying to both use CPSP as an economic conduit—a way of facilitating a mass amount of investment into industry thanks to required offsets—as well as look to support the industries they deem hardest hit. That includes automotive, but also things like steel. Both are critical industries hit hard by tariffs that the federal government has a vested interest in supporting through CPSP.

CPSP will form the anchor to a wider economic agreement, and the federal government is making it known what investments they want to see and who they want both companies to be looking at. That doesn’t mean, though, that those select investments are needed to win CPSP, as some in Korean media especially are panicking over. If a larger economic package came through that did not include automotive, I am hard-pressed to believe the government would toss it. It does help, though, that automotive is a high-value industry, and any such investment would likely be significant in terms of numbers.

Neither side has committed to such investments, though there is significant effort underway from everyone to secure anything, even if a token investment. Again, this is harder for the Korean side, who, as you likely know, have taken to focusing on energy investments as their high-value targeting. It’s a worthwhile strategy. Both Hanwha and Hyundai are significant energy stakeholders, and any investment that can come from the primary suppliers—i.e., from the people bidding on the subs themselves—will always be more appreciated than trying to bring on third parties. Third parties complicate the process, are harder to put to commitment, and carry more risk when discussing attracting investment. For a project like this, it’s impossible not to include them, but it is always preferred that commitments come directly from Hanwha, Hyundai, or TKMS, for example.

For now, there are a few big names to look out for. Hyundai is one, but in recent days Korean Air has also been a hot name in the media. The company already maintains a healthy relationship with Bombardier, with both teaming on the existing Phase II AEW&C project along with L3Harris and ELTA. That bid was selected back in October to provide four aircraft based on the Global airframe to the ROKAF.

They’re also working together with LIG Nex1 on the development of a new Electronic Warfare aircraft, also utilizing the Global 6000 airframe. The idea here seems to be investigating more avenues of cooperation, including in fields like the maritime patrol domain, as well as the possibility of dangling additional orders.

Not to be outdone, the German government has also committed to acquiring additional aircraft from Bombardier in the event of a CPSP win. The Bundeswehr is currently in the midst of acquiring up to six PEGASUS SIGINT aircraft, also based on the Global airframe. Previously, officials discussed the possibility of up to eighteen such aircraft being ordered, including likely AEW&C aircraft themselves. There is surprisingly a lot of overlap there. I guess if you’re Bombardier, life is really good in this case.

Never doubt Bombardier’s ability to win without any effort of their own. We also had TKMS CEO Oliver Burkhard discussing offsets the other day, primarily regarding the company’s efforts to rally German industry as part of a proper package. While details were obviously limited, save the very strange mention of Isar Aerospace—a German space launch company whom I did not expect to be on the list here. That isn’t me hating, mind you. It’s strange to me that a launch company, even in spite of our recent commitments, is seemingly the one company to be mentioned here.

Case in point to all of this: I wanted to give a brief refresher to everyone before next week, as officials from TKMS will also be in town at the same time as the Korean delegation, albeit smaller in nature. I thought it proactive to give some proper backgrounder so you knew what was going on and what everyone’s current plays were.

Backgrounders are great, especially because I truly believe next week will be very busy and likely to have some significant announcements—at least one, I imagine. That gives me some incentive to give you a proper readout, and some of the gossip, before anything potentially drops. Does that make sense? Would these kinds of backgrounders before potentially big events (when I know of them) be helpful?