Troubled Australian Shipbuilding to Make Comeback

By MarEx 2014-12-09 10:30:00

Defense contractors BAE Systems Plc, Navantia SA and Raytheon Co will increase their roles in Australia's A$8.5 billion ($7 billion) warship building project as the country tries to get the troubled program back on track.

Finance Minister Mathias Cormann said on Tuesday the trio's increased involvement will drive immediate improvements in shipbuilding performance, without giving any financial details of their expanded contracts.

Australia's Air Warfare Destroyer project has been blighted by long delays and cost blowouts. An auditor's report earlier this year found that local shipyards were not fully prepared to take on the complex work, while Spain's Navantia provided poor blueprints marred by "drawing errors or omissions" and late changes.

"The good news is we have turned a corner," Cormann told reporters. "We're committed to stop the growing scheduling and cost overruns."

BAE, Navantia and Raytheon were chosen to increase their involvement after a competitive procurement process, Cormann said.

Navantia will contribute design function skills, BAE will coordinate shipbuilding and Raytheon will offer management skills.

Raytheon was already part of the program's AWD Alliance, rounded out by government military purchaser Defence Materiel Organisation and government-owned shipbuilder Australian Submarine Corp (ASC).


Defense Minister David Johnston said the kickstart to the destroyer program was the first step of a plan aimed at restoring the future of naval maritime capability in Australia, including the creation of a "sovereign industry around submarines."

Johnston declined to comment when asked if that meant the country's next submarines would be built in Australia.

The defense minister was forced to apologize last month after saying he would not trust ASC "to build a canoe", comments that fueled expectations that most of the work in an A$40 billion program will go offshore.

Reuters reported in September that Australia was leaning toward buying as many as 12 off-the-shelf stealth submarines from Japan.

Prime Minister Tony Abbott had previously pledged the submarines would be built in South Australia, where unemployment exceeds the national average, but his government began back-pedaling in July, signalling cost and schedule were paramount.

Tuesday's announcement came as results from a by-election indicated that Abbott's Liberal Party may concede a majority government to the opposition Labor Party in South Australia.

Johnston, who has faced increasing pressure to step down from his portfolio, said more detail on the defense program would be provided in the government's Defense White Paper, due out next year.

($1 = 1.2057 Australian dollars)

By Jane Wardell (C) Reuters 2014.