Ask cdp44. His ships have properly-functioning damage models.
Edit: Hang on a sec, I just thought of something. If I remember correctly from my testing of Emden, doesn't that ship have a working damage model? It steadily took damage over the course of an attack on a convoy, and by the time I disengaged I had 40-odd percent hull damage, lots of big nasty holes, and a funnel shot away.
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