Germany abandons the F126 frigate program delivering a blow to Rheinmetall.
Berlin has chosen to replace the program for the construction of six specialized anti-submarine warships with the purchase of eight Meko A-200 frigates produced by Thyssenkrupp Marine Systems (Tkms).
The decision comes after years of delays and continuous cost increases in the program, originally awarded in 2020 to the Dutch shipyard Damen Schelde Naval Shipbuilding for the construction of six 10,550-ton frigates, valued at about 10 billion euros. According to the German Ministry of Defense, Damen subsequently communicated that it was no longer able to deliver the ships within the timeframes and budget limits set by the contract. Since 2025, the German armed forces were therefore considering the possibility of transferring the role of main contractor to Naval Vessels Lürssen (Nvl), the shipbuilding group that had meanwhile become part of Rheinmetall.
The cancellation of the program announced by the Ministry of Defense caused one of the worst drops in Rheinmetall’s stock in its recent history.
The shares of the German defense giant plummeted by up to 20%, reaching the lowest level in the last 15 months and wiping out over 11 billion euros in market capitalization, Reuters reported yesterday. Conversely, Tkms shares rose by as much as 14%.
All the details.
THE GERMAN GOVERNMENT CANCELS THE F126 PROGRAM
The German Ministry of Defense confirmed the cancellation of the F126 program, warning that the total cost of the six frigates would have exceeded 18 billion euros compared to the approximately 10 billion initially planned.
Initiated by Ursula von der Leyen, then Minister of Defense, as part of Germany’s contribution to NATO, this construction contract was one of the most important for the German Navy, highlights the French daily Les Echos. However, the project remained stalled after difficulties with the original contractor, the Dutch group Damen.
Damen Schelde Naval Shipbuilding “did not meet the agreed timelines and financial parameters,” the German ministry stated.
In recent months, Berlin had considered the possibility of awarding the contract to Rheinmetall’s Nvl division, which had acquired the Naval Vessels Lürssen shipyard precisely to strengthen its presence in military shipbuilding. According to Der Spiegel, in May Rheinmetall had submitted an offer to take over the program for 12.8 billion euros. For the Financial Times the company had negotiated a price of 15 billion euros for the acquisition of the program.
CEO Armin Papperger had also stated that the group expected to sign the contract related to the F126 in the second quarter.
BERLIN BETS ON TKMS MEKO FRIGATES
The goal is now to purchase eight Meko A-200 frigates from the German manufacturer Tkms, to ensure anti-submarine capability before NATO commitment deadlines.
Subject to Budget Committee approval, the acquisition cost for the first four Meko-200 frigates would amount to about 6.3 billion euros, with an option for an additional four ships by the end of 2026 for about 5.3 billion euros.
The head of the German Navy has formally approved the Meko A-200 DEU, considering them capable of fulfilling Germany’s primary mission of submarine hunting and meeting the obligations of the Atlantic Alliance, the ministry stated.
TKMS’S SATISFACTION
“Great news, definitely for us,” said Tkms CEO Oliver Burkhard in a video posted on LinkedIn, adding that the company remains open to involving industrial partners excluded from the F126 program.
THE IMPACT ON RHEINMETALL
The German government’s decision had an immediate impact on financial markets. Rheinmetall shares lost up to 20%, marking the largest intraday drop since 2025 and falling to the lowest levels in the past fifteen months. The decline resulted in a loss of over 11 billion euros in market capitalization.
According to Morgan Stanley analysts, the cancellation of the program will result in a write-down of about 2 billion euros for Rheinmetall and “undermines market confidence in German defense procurement and contract transparency.”
JP Morgan analysts also believe the decision means Rheinmetall “will likely not meet the order acquisition target” of 80 billion euros planned for 2026. Just last year, the group expanded into the naval defense sector with the acquisition of Nvl. Not to mention, Reuters recalls, that the German giant led by Papperger is still competing with Tkms for the acquisition of the smaller German shipyard in Kiel.
