Brothers in arms: Why is Italy building its warships in the US?

Italian shipbuilder Fincantieri has secured a revised $3 billion contract with the US Navy, including approximately $1 billion in compensation, after the original 2020 agreement for 10 frigates was scaled back to just two vessels.

The rescheduling, announced on 26 November, came ahead of Monday’s EU Foreign Affairs Council meeting of defence ministers in Brussels, where military support for Ukraine and defence readiness will be discussed.

Under the revised deal, two Constellation-class frigates already under construction will be completed, but four additional units previously commissioned will be discontinued. The remaining vessels will be replaced by smaller ships for amphibious operations, special missions and surface combat, both manned and unmanned.

The two frigates under construction are only 10% complete, two years after work began and five years after the contract was signed, according to US trade journal The War Zone.

The new order is worth approximately $2 billion, with compensation of around $1 billion, bringing the total to $3 billion, Fincantieri’s press office told Euronews.

The original 2020 contract was worth $5.58 billion for 10 ships based on the FREMM (European Multi-Mission Frigates) design. Fincantieri beat competition from Austal USA, General Dynamics and Navantia to win the contract.

However, only $795 million was guaranteed immediately, with the remainder dependent on the US Navy exercising an option.

Production is being carried out entirely in the United States by Fincantieri’s subsidiary, Fincantieri Marinette Marine, based in Wisconsin. The company currently employs 3,750 highly specialised workers in the US, a recent increase of 850.

Fincantieri acquired Marinette Marine in August 2008 from US-based Manitowoc Marine Group for €120 million.

The Italian state holds a 71.32% stake in Fincantieri through Cassa Depositi e Prestiti.

Limited economic return for Italy

The fact that production is being carried out entirely in the US makes the economic return for Italy negligible, according to Francesco Vignarca, campaign coordinator of the Italian Peace and Disarmament Network.

“Beyond the foreseeable payment of a small portion of taxes to the Italian state when Fincantieri’s balance sheet is consolidated, the workers employed are and will be American,” Vignarca said. “Concretely, beyond a return in terms of marketing, our country will only get crumbs of those billions.”

Fincantieri told Euronews that orders often include additional returns in terms of services, maintenance or training beyond mere vessel construction.

The company also noted that in shipbuilding cases, governments are involved, as is the Italian Navy, which could impose constraints for reasons of national interest. Fincantieri said the shipbuilding industry is “privileged” compared to others, as it has high European technological and design content.

Questions over European defence strategy

The contract raises questions about European defence strategy at a time when the EU is pushing for rearmament of member states.

“All the funds that Brussels proposes, most recently the EoIP voted on a few days ago, are of little use in pushing for real structural coordination of the military industry,” Vignarca said. “This has already been demonstrated by the first years of implementation of the European Defence Fund.”

The European Defence Fund sets a 65% European co-production threshold. Fincantieri noted that this threshold accounts for the fact that some non-European components are useful for rapid production.

“Military production companies go where the most profitable contract takes them,” Vignarca said.

“They pretend to pursue national and security interests, but in reality they mainly seek the biggest profits. This is why European funds, as they are structured, will function poorly as catalysts for a dynamic towards a common European defence.”

The case recalls past instances where European know-how was exported elsewhere, such as Italy’s Agusta A129 Mangusta helicopters, which were purchased by Turkey and built under licence from Italian arms giant Leonardo.

Fincantieri told Euronews that in shipbuilding, finished products are normally sold rather than exporting know-how.

Cassa Depositi e Prestiti, which is 83% owned by the Ministry of Economy, declined to comment, saying: “These are Fincantieri’s choices on which we do not feel we have to express ourselves.”