New Prospects for Aussie Submarine Corporation
29 November 2000
By Trevor J Thomas/CANBERRA
A new chapter in the history of the Australian Submarine Corporation began this month with the Commonwealth Government's assumption of 'full direct ownership and control' of the Australian Submarine Corporation, and the appointment of a new Board of Directors charged with managing the entity and its employees, and setting a business course for the immediate future.
Since the beginning of the year, it had become apparent the Federal Government had concluded that it needed to reverse a policy of defence-industry privatisation in order to achieve policy objectives aimed at consolidating existing submarine construction capability to support long-term submarine repair, refit and enhancements. To do this, it would therefore be necessary to effect a full equity take-over of the Corporation.
The need to re-intervene in the marketplace, also reflected acceptance of an internal discipline on the Government - given the substantial investment of public funds in the program to date - of the need to capture the skill base established in Australia over the course of the 'Collins' submarine construction program, so as to underpin the sustainability of future sub-surface Defence capability.
Such observations were subsequently confirmed 30 October with a long-delayed Federal Government announcement that the AIDC had signed a A$43.49 million agreement to acquire the remaining 51.55% of equity in the Corporation held by Kockums/Celsius, and James Hardie Industries.
The equity consolidation by Government also recognised the Corporation's diminished prospects for an immediate private sale of its minority interest given it was nearing the end of the Project Sea 1439 'build phase', and currently, was "in the process of transformation to a smaller scale maintenance and support operation."
Lead enthusiast for the ASC equity resumption, Defence Minister John Moore, now sees the period of transitional ownership being used 'to address a number of commercial and strategic factors' on the way to achieving more sustainable 'Collins'-class support arrangements. At the top of his list are initiatives "to secure access to necessary technologies," and "ensure a sustainable and viable Australian naval shipbuilding industry."
As such, the ASC equity resumption has been pitched by the Ministers for Finance and Administration; Industry, Science and Resources; and Defence, as a 'first stage' in a reform process expected to lead to its onward sale to the private sector, as part of a larger shipbuilding industry rationalisation. Interests in industry suggest, however, that to be successful, this will require early directives from Government on a follow-on submarine build program, given projected RAN submarine maintenance and support work - approaching not much more than A$100m a year - is considered insufficient to sustain a viable enterprise.
To this effect, five corporate groups: BAE SYSTEMS plc, Newport News Shipbuilding Inc, General Dynamics Corporation/Electric Boat Division, ADI Limited and Tenix Pty Ltd, have been invited to take part in a study whereby each separate group will be paid A$70,000 to bring forward options for structuring future ASC capability maintenance and enhancement arrangements.
In a joint release 30 October, Ministers Fahey, Minchin and Moore said the study participants had been selected "on the basis of their whole system submarine construction and support experience, or their substantial Australian naval shipbuilding and repair expertise."
They added, it was envisaged "other Australian and overseas companies with relevant experience would also be given the opportunity to discuss aspects of the study with participants."
According to the Ministers, the resultant options studies, expected by end-December, would be used by the Commonwealth in refining and developing better and more sustainable arrangements for future support of the 'Collins' fleet, whilst also assisting in development of a privatisation strategy for the Corporation - although the Government says it is not seeking any proposal or expression of interest in the shares or assets of ASC at this time.
Recognising the ASC's difficult commercial position - effectively reliant on one customer, supporting a relatively limited revenue opportunity for long-term maintenance work - a satisfactory resolution to any subsequent privatisation outcome will be heavily influenced by the Federal Government, and decisions on its requirement for follow-on surface and sub-surface defence platforms.
Such directions are expected to emerge in the upcoming Defence 2000 White Paper in the form of support for Project Sea 4000, and a 'new generation' sub-surface combatant project, in the form roughly canvassed in the 1998-2003 'Pink Book' (via project Sea 1439, Phase 3), and initially allocated a 2001/02 Year of Decision.
Consideration of a new generation sub-surface combatant program - most likely in the form of a newly-defined acquisition project under SMART procurement rules - is now well placed in the aftermath of decisions to extend the series of 'Collins' get-well fix-its (as permanent upgrades) to four units of the six-boat fleet, as well as a conclusion to the current contest between Raytheon and STN-Atlas for selection and replacement of the 'Collins' combat system.
A direction on these latter endeavours is expected towards the end of this year, and should occur following acceptance into service of the first two 'fast-track' submarines (the 'Dechaineux' and 'Sheean') by Defence Minister Moore at a yet to be advised ceremony set to be held at HMAS 'Stirling' (WA) prior to Christmas.
The retention and enhancement of future Australian sub-surface defensive capability is also expected to be influenced by changes in the strategic outlooks of both the United States and the United Kingdom, involving a reassessment of the merits of conventional submarines for the conduct of 'littoral' warfare operations. Both nations currently sustain all-nuclear submarine fleets, although BAE SYSTEMS (via Marconi) retains a knowledge-base in supporting the former RN 'Upholder' class boats recently transferred to Canada.
United States Navy enthusiasm to secure strategic access to opportunities to merge advanced nuclear submarine and unmanned platform technology into a conventional platform, is also said in some quarters to be driven by a desire to assume technological leadership over European manufacturers, themselves formerly represented in the equity structure of the ASC.
This interest is said to be primed through General Dynamics (given Newport News has declined to take up the ASC study offer), and on the understanding the Australian Government will commit to long-term support of the 'Collins' fleet, as well as a prospective new generation sub-surface combatant replacement/augmentation program.
The preferred option now evolving assumes a decision by the Australian Government to quarantine further 'Collins' upgrade investments in the existing fleet of four boats already approved for 'fast-track' upgrade (units #02, #04, #05 and #06). Under this scenario, the first-of-class 'Collins' would essentially remain in RAN service, but as an R&D/proto-typing test-bed and training platform, to support new Australian-based capability upgrades/developments.
After a further period of service in the RAN, and before its next major re-fit, it is said HMAS 'Waller' could be turned over (on long-term lease) to the US Navy to serve as a separate operational concepts familiarisation and technology-demonstrator base for the proposed new generation boat, whether as a stand-alone unit, or 'mother-ship' for a new unmanned sub-surface warfare capability.
Assuming this to be the case, it is understood the first batch (prospectively 2-3) such sub-surface 'stealth' vessels would be constructed in Australia to joint RAN/USN specifications. Along with later-build export versions to trusted Western regional allies, the new-build program would provide the required financial and return on investment base to attract an eventual private consortium to take over full ownership of the Australian Submarine Corporation.
REF XQQFS
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