Exclusive: Inside Hanwha’s pitch for Canada’s lucrative defence deal

A newly constructed KSS-III submarine is docked at Hanwha's shipyard in Geoje. (CTV News)

SEOUL, South Korea – On a packed bullet train heading towards Seoul, the face of Stephen Fuhr, Canada’s secretary of state for defence procurement, suddenly appeared on monitors in each of the 18 train cars.

In a four-minute news story, Fuhr was shown touring Hanwha’s shipyard in Geoje, along with more than 20 Canadian CEOs along for a trade mission.

Over two days, the delegation visited multiple industrial sites and the Republic of Korea’s (ROK) submarine command base. The event was widely covered by South Korean media, and is an indicator of the importance the Republic has placed on winning the massive contract to build Canada’s next generation of submarines.

READ MORE: Hanwha eyes major Canadian defence deal, plans Pacific voyage of attack submarine

CTV News was the only Canadian media present for Fuhr’s South Korean visit.

The two finalists, Hanwha and Germany’s ThyssenKrupp Marine Systems (TKMS) are facing a deadline of March 2, to submit their proposals.

The Royal Canadian Navy (RCN) wants to purchase 12 new conventional diesel submarines to replace its aging fleet, which will become obsolete by 2035. Of the four Victoria-class submarines the RCN currently owns, only one is operational.

If the federal government decides to purchase a full dozen, the Canadian Patrol Submarine Project could be the biggest military procurement in Canada’s history.

The offer of a torpedo factory

The scale of the deal means that negotiations are occurring at the top levels of government, not just between companies. The federal government is seeking a deal that extends beyond submarines that can bolster other industries targeted by U.S. President Donald Trump’s trade war.

“This sub purchase will come down to cost, timeline and economic benefits to Canada,” said Fuhr in an interview with CTV News, following a tour of Hanwha’s shipyard.

READ MORE: Canada’s secretary of state heads to South Korea as submarine bid deadline approaches

During Fuhr’s week-long visit, the South Koreans sweetened their offer. LIG NEX1, which makes torpedoes for the KSS-III offered to manufacture the weapons in Canada, if Hanwha is selected. The secretary also met with Hyundai officials who demonstrated a range of hydrogen vehicles. But Fuhr’s office says no concrete plans for Canada were detailed in those meetings.

Prior to the secretary’s arrival, the two governments signed a non-binding agreement to pursue closer industrial cooperation in strategic sectors such as auto and battery manufacturing, critical minerals and artificial intelligence.

Fuhr said the federal government is prepared to act quickly, not only because the navy needs the boats, but Canadians need the jobs that will come with building the infrastructure that supports the submarines, such as the construction of dry docks on both coasts.

“We want to start creating jobs. It’ll mean thousands (of jobs). We want to make sure that we have the infrastructure in place, so when the sub arrives, it’s ready to go.”

Crossing the Pacific to Canada

While in South Korea, the delegation saw four KSS-III submarines in various states. The two located at Hanwha’s shipyard in Geoje were either under construction, or in the water awaiting final certification to be turned over to the South Korean navy.

The other two vessels were docked at the Republic of Korea (ROK) Submarine Command Centre at Jinhae naval base. Submariners were on board one vessel, sitting at their stations as the Canadians climbed down the ladder to invade their workspace and peek into their sleeping quarters. The remaining 3000 tonne boat was in dry dock, undergoing maintenance for what could be its most important mission.

As the Canadian executives walked underneath the hull, Korean naval officers excitedly told them they were planning to set sail across the Pacific to show off the KSS-III in Canadian waters. The three-year-old submarine is expected to surface off the coast of British Columbia at the end of May.

Glenn Copeland, the newly hired CEO of subsidiary, Hanwha Defence Canada, says his company is well positioned to win the contract.

“We have a submarine in the water. It is fully operational. You can see it. You can feel it, you can touch it,” said Copeland, a former senior officer with the RCN, who also worked at Lockheed Martin.

READ MORE: Submarine bids could bring economic benefits to Maritimes

Robotic technology

The tour of both industrial and military sites was choreographed to emphasize South Korea’s speed and operational capability. It takes approximately six years to build a submarine. Hanwha’s pitch includes delivering four submarines by 2035 and the full fleet of 12 by 2042.

The speed at which Hanwha can build is made possible through its automated production line. The shipyard which employs 31,000 people is able to produce 45 commercial and naval vessels in a year. Robot welders are watched over by human supervisors holding tablets, programming their every move. Some of the robots are the size of a Roomba, others the height of a high school locker. Tour guides said that only 10 per cent of the welding at Hanwha is done by human hands.

Hanwha says if Canada signs a deal this year, it can deliver its first sub in 2032, three years earlier than TKMS, allowing the RCN to save at least a billion dollars in annual maintenance costs by retiring its aging Victoria-class subs earlier.

Hanwha’s submarines will cost about $2 billion dollars each to build, but the bulk of the contract involves long term work like maintenance, repair and overhaul, which will be worth tens of billions of dollars over at least three decades

“100 per cent of the submarine’s capabilities will be maintained in Canada,” Copeland says.

READ MORE: Germany’s TKMS seeks investment package to woo Canada over US$12 billion submarine tender

Auto sector assistance

The federal government has been clear that it wants a proposal that comes with industrial benefits that can offset the pain felt in sectors hit hard by tariffs such as steel, aluminium and autos.

Hanwha has already offered to invest up to $345 million dollars in Algoma Steel to help it build a steel beam factory. The company has also discussed the possibility of producing its K-9 Howitzer armoured vehicles in Canada as part of the submarine deal.

“The manufacturing automated lines we have now (in Changwon), we can take that from here and use the technology we have and implement it in Canada for the development of these vehicles,” Copeland said.

In 2024, Hanwha opened a factory outside Melbourne, Australia, after Ford and Toyota shuttered their auto plants in the region.

It took Hanwha two years to build the Australian facility, which Copeland says now employs approximately 1,000 people. The numbers have piqued the federal government’s interest.

“We’re looking at it. Given the moment we’re in - everything’s on the table,” said Fuhr, who was given an opportunity to ride in the turret of the K-9 as it barreled down a track at speeds of up to 65 km/h.

Training support

During last year’s Asia Pacific Economic Cooperation Summit in Gyeongju, Prime Minister Mark Carney and President Lee Jae Myung signed the Canada-Korea Security and Defense Cooperation Partnership. The agreement entrenches a commitment between the two countries for deeper military co-operation and interoperability to deal with mutual threats.

Through a translator, Republic of Korea’s Commander of submarine forces, Kim Tae Hoon says the establishment of the strategic partnership would allow the two countries to form a deeper bond than just “buyer-seller.”

The two navies could “create an integrated framework for operations, training, maintenance and ship operation and share information,” Kim said.

The ROK says it will support a training program for four Canadian submarine crews, or approximately 200 personnel. It’s also offering to establish a cutting-edge training facility with a tactical simulator at its Jinhae naval base for the Royal Canadian Navy.

The Republic’s top naval commander also points out that Canada holds a special place as a valued friend of South Korea.

“We will not forget that Canada sent 26,000 personnel to support us during the Korean War. Our people always remember Canada’s support with deep gratitude,” Kim said.

Some partners hedge

The Canadian CEOs on the trip felt the Korean hospitality, but it won’t be enough for some to stop playing both sides.

With the Canadian proposal deadline less than a month away, Hanwha has signed memorandums of understanding with 15 Canadian companies and says more are on the way. The companies will provide steel, construction expertise, and communications technology to Hanwha, among other products and expertise. Hanwha has also agreed to transfer some of its robotic technology to some Canadian shipyards, if it’s awarded the contract.

But some of the companies who signed non-binding agreements with Hanwha also admit to signing similar MOUs with TKMS. Several executives declined to speak on the record about why they were hedging their bets, but the founder of Anvil Intelligence, Sam Witherspoon was willing to sit down for an interview.

Witherspoon’s Ottawa-based company uses artificial intelligence to help agencies analyze national security data to enable faster decision making. Witherspoon said he had not signed with either Hanwha or TKMS, but was interested in striking a partnership, although he won’t say with whom.

READ MORE: TKMS signs agreement with Seaspan on submarine sustainment

He’s impressed with the scale of Hanwha’s operations, but even more surprised at the pace at which the Canadian government is advancing this procurement.

“I’ve never seen the government move faster than they have in the last year. It’s given me a renewed sense of optimism,” Witherspoon said, as he sat in the lounge at Incheon International Airport. Having seen both sites and heard both, the European and Asian pitches, Witherspoon says the federal government will have a tough decision to make.

“You know it’s going to be complicated. Inevitably it’s going to be messy. (The deal) is huge, but when they nail it, it’s going to set a new precedent. It’s going to set a tone for the entire industry that this government is serious about its future in defence,” Witherspoon said.

Although the government has not said when it will announce the winning bidder, most of the CEOs on the trip believe an announcement will come this summer. In the meantime, both Hanwha and TKMS continue to shore up their proposals which are due in less than a month.