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Australian military shipbuilding - difficult decisions



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Defence Australian military shipbuilding—difficult decisions David Watt In late February, shipbuilders BAE Systems Australia and Forgacs indicated that unless they receive new shipbuilding work soon they will be forced to close their respective facilities in Williamstown and Newcastle by the end of 2015. The Australian Government has been under pressure to act for some time now from both shipbuilding companies and trade unions representing the workers the companies employ. The media has also raised the profile of the situation, warning of a ‘valley of death’, a term which refers to an extended period of time between major shipbuilding projects.

During such a period shipbuilding companies (and smaller businesses which derive work from them) will necessarily shed jobs, with a resulting outflow of expertise from the industry. Currently, within the shipbuilding and ship repair industry, a ‘valley of death’ is forecast for 2015-19.

This encompasses the Hobart Class Air Warfare Destroyers (AWD) and Canberra Class Landing Helicopter Docks (LHD) projects being finished and the as-yet-unspecified commencement of work on the submarines to replace the Collins Class.

Possible options to prevent a ‘valley of death’ occurring have included building a fourth Air Warfare Destroyer or bringing forward the acquisition of new supply ships and patrol boats. In terms of the latter option, recent reports of the Armidale Class patrol boats experiencing problems with hull cracking might give further

impetus to such a suggestion. A further option, raised by the new Minister for Defence, David Johnston, is the acquisition of Littoral Combat Ships.

However, none of these options are without counter-arguments. Irrespective of which of these individual arguments are correct, there is an inherent tension between government support for military shipbuilding and the need for a responsive, cost effective industry. This tension has been played out in policy responses across many decades.

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Source: Peter Nilsson (Kockums AB)

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A recent survey of the shipbuilding industry in Australia indicated that shipbuilding and ship repair employs 8,616 workers across 432 companies. Furthermore, over 70 per cent of the industry is defence-driven. This means that key Defence-related decisions made by the Government are crucial to the survival of large-scale shipbuilding in Australia. It also means the fortunes of the industry fluctuate with the waxing and waning of large-scale Defence orders. In recent years, the industry has benefited significantly with the Air Warfare Destroyer build and the fit-out of the Canberra Class Landing Helicopter Docks ensuring revenue has been high. However, this is far from a predictable state of affairs.

Australia’s first substantial military shipbuilding program occurred in the years leading up to the First World War with vessels built both in the United Kingdom and in Australia. Government support has been necessary in one form or another for much of the history of Australian shipbuilding. During the First World War and into the 1920s the Hughes Government funded the building of 21 vessels to provide ships for the new Commonwealth Shipping Line. The onset of the Depression during the 1930s saw an end to orders and the number of people employed at Cockatoo and Garden Island fell to the low hundreds. During the mid-1930s new ships were ordered for the Royal Australian Navy (RAN). The Second World War saw a considerable expansion in building both vessels for the RAN and merchant shipping. The Commonwealth funded most of this and the number of Australian shipbuilding facilities expanded to seven and the workforce to around 20,000.

Various schemes offering a bounty to Australian shipbuilders in order to make them competitive with overseas counterparts existed from 1939 until they were phased out in the 1990s. Throughout this period shipbuilding was maintained through a combination of the bounty, import restrictions and defence-related work.

At the end of the 1970s there were 41 registered shipyards in Australia but only 14 had ships under construction or on order. By the 1980s, most of the major shipyards dealing with naval vessels were government-owned and the majority of their work came from the repair and maintenance of RAN vessels. During the late 1980s most of the government-owned defence manufacturing facilities were privatised— for example, Williamstown was sold to the Australian Marine Engineering Corporation (and is now owned by BAE Systems Australia).

It is notable that the Defence Department once proposed that shipbuilding might be consolidated into one shipyard. The Australian Naval Shipbuilding and Repair Sector Strategic Plan was ‘developed’ by a joint industry and Defence working group and released by the

Source: Saberwyn—Wikimedia Commons

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Defence Materiel Organisation in September 2002. The plan attempted to maintain Australian shipbuilding following the Collins Class submarines and the Anzac Frigate projects. The report decided that the sector was unsustainable and that vital skills were in danger of being lost. It concluded that future demand was sufficient to sustain only one shipbuilder and that a single shipbuilding entity model was the only viable approach.

However, some commentators criticised the report, arguing that if adopted, it would end competition in the sector. Unsurprisingly, the Howard Government did not act on the

recommendations and when the 2004 Defence Capability Plan revealed a substantial increase in planned shipbuilding work it seemed that some of the worst fears of the DMO plan would not be realised.

It is perhaps also worth noting that the ‘valley of death’ would not be entirely unique in recent history. As noted by the Australian Strategic Policy Institute, Australia has experienced long gaps between major defence shipbuilding runs in the past—in 1985 between the completion of HMAS Torrens in 1968 and the commencement of the build for HMAS Melbourne, the fifth of the Adelaide Class Frigates, and more recently between 2005 and 2009 when there was a gap between the completion of the last Anzac Class Frigate and the commencement of construction of the first AWD.

A further consideration for the Government is the March 2014 report into the Air Warfare Destroyer Program by

the Australian National Audit Office which sets out the extent of the cost overruns in the project. The Government commissioned its own report into the AWD program which was critical of substantial aspects of the build. The Government accepted the recommendations of the report and subsequently announced the appointment of Greenhill & Co Australia Pty Ltd as Commercial Adviser and Ashurst Australia as Legal Adviser to assist with the remediation activities.

The announcement on 6 June 2014 by the Minister that Australia would seek replacement vessels for HMAS Success and HMAS Sirius overseas but build 20 steel-hulled vessels for the Pacific Patrol Boats program in Australia, displays a relatively cautious approach to dealing with the issues raised in this article. The same media release also reveals that the Department of Defence is carrying out preliminary design work which might enable the AWD hulls to be used as the basis for the future frigates. If this idea proves to be feasible it might provide some continuity for the shipyards currently working on the AWD.

In the light of current budgetary difficulties it will be of little consolation to the Federal Government that Australia has a long history of government support for shipbuilding and that it has never been easy for governments to balance the need for this support with the desire to have an efficient competitive industry.

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