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Minister discusses Australian Submarine Corporation; and Governor-General.



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TRANSCRIPT SENATOR THE HON ROBERT HILL Minister for Defence Leader of the Government in the Senate

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INTERVIEW WITH MATTHEW ABRAHAM AND DAVID BEVAN

ABC 891 Adelaide

8:40am, Wednesday, 7 May 2003

E&oe____________________Australian Submarine Corporation, Governor-General

MATTHEW ABRAHAM:

Now, I think we all agree that the submarine facility here in Adelaide, the Australian Submarine Corporation's manufacturing plant, is brilliant, I mean it is a world class plant. Why, therefore, is it on the market? Well, it's been on the market for a while.

DAVID BEVAN:

Mm.

ABRAHAM:

Some people may be surprised to find how actively it is on the market, but it is being sold. And I think that raises some interesting issues. It's being sold at a time when the State Government is also trying to secure some major work for the naval warfare, the air warfare construction for the Navy, a big contract, there are a lot of states bidding for it. And if we get it, I would think the Australian Submarine Corp plant will be a very important part of that bid.

Senator Robert Hill, Defence Minister, good morning.

SENATOR ROBERT HILL:

Hello Matt.

ABRAHAM:

I understand - well, first of all, is this a fire sale? Is the Federal Government trying to get this plant off its books as quickly as possible?

SENATOR HILL:

No, no, it's not a fire sale. We've said, since we've been in government, that we think the Submarine Corporation would be better in private ownership. We think that the private sector runs businesses better than Government.

BEVAN:

You've been trying to sell it for a long time, Minister.

SENATOR HILL:

Well, we - that's right. And in the end we actually bought shares rather than sold shares, so we're now the sole owner. But that gives us greater freedom in relation

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to the terms and conditions of a future sale, and we would be interested in selling it for the reason that I've just stated ...

ABRAHAM:

Now …

SENATOR HILL:

... and as soon as reasonably possible.

ABRAHAM:

From my conversation with you this morning, there are a few sticking points with Kockums. Now, you own it, but they have ongoing intellectual property rights, or would be claiming that and other rights, because of the submarine construction that has happened there. Is that correct?

SENATOR HILL:

That's right. And, also, there's a whole range of contractual disputes between the ASC and Kockums. And Kockums - of course, this was the Swedish company - it's now been purchased by a German company, a submarine maker, which has further complicated the matter.

BEVAN:

So what's happening with this? I mean, there is a report ...

SENATOR HILL:

Well, we took …

BEVAN:

... in this morning's Advertiser, Ian McPhedran, a very well respected defence writer and he's speculating that - well, the headline says, "Going cheap" and his first line is "The Federal Government has predicted an urgent fire sale of its troubled submarine building company". A lot of people rely on that plant for their jobs, there is a lot of hopes pinning on the future of that plant, what's going to happen, Minister?

SENATOR HILL:

Well, it's a very important plant for us. It has the task of maintaining and repairing the submarines, in particular the responsibility for the major refits of the submarines. They're an important strategic asset and therefore the ASC is very important in terms of the capability of our Navy.

Beyond that it is, as you were hinting, an important repository of technical knowledge, systems integration, all those high-end skills of naval shipbuilding and repair, and we want it to be strong and healthy for the future in order that it continue to invest in the intellectual capital of Australia. That'll give us a long-term asset in terms of the maintenance of our naval assets.

ABRAHAM:

Now, is it possible that this problem with intellectual property rights may be better resolved? I mean, are you able to sell it and leave it up to the private owner to resolve those with Kockums?

SENATOR HILL:

That's certainly an option. We took it off the market about 15 months ago in an effort to resolve a number of outstanding issues. One of them was this series of

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disputes with Kockums. Most of the issues we've resolved. For example, we've put in Electric Boat, the big American submarine manufacturer, as a capability partner; that's giving us a competitive niche in the world submarine environment. But we still do have these issues with Kockums that we've been unable to resolve. There is a view held by some that a private sector owner might do better in resolving these issues than a government.

BEVAN:

Yes. But if you sell it with these legal issues unresolved, you will sell it at a lesser price won't you, because the company won't exactly know what it's buying. It might be buying something that's worth a motzer or it might be buying something that is worth much less, depending on how the court case goes.

SENATOR HILL:

But there are many claims on the other side of the ledger by ASC against Kockums and it depends a little on the level of competition for ASC. And most within the industry see ASC as a vital asset because they see it as well placed in relation to other major shipbuilding projects of the future. So the competition could be intense and some hold the view that, in fact, there would be little or no discount in the price that you would get.

ABRAHAM:

Is this an important key for those bidding for work with the air warfare construction project?

SENATOR HILL:

Well, that's right. Because the - when you go further down time you find that the next major high-end naval shipbuilding contract in Australia will be to build probably three air warfare destroyers. That will be a project of similar

sophistication to that of the submarines, therefore some would like to own the Submarine Corporation as a basic asset in bidding for the air warfare destroyer project.

ABRAHAM:

It would be a nice carrot. That would ...

SENATOR HILL:

Well, that would mean …

ABRAHAM:

… bump the sale price up.

SENATOR HILL:

Well, that would - oh, you could, if you're saying Government could give itself the contract and …

ABRAHAM:

No. No. No.

SENATOR HILL:

... then sell the two as a whole.

ABRAHAM:

No. No. No. I'm saying to a private company that would …

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SENATOR HILL:

Oh yeah, that's right.

ABRAHAM:

Yeah.

SENATOR HILL:

That's what I - just what I'm saying to you. The Submarine Corporation …

BEVAN:

But you've got to be careful though, don't you, Minister, how far you go on that? Are you actually formalising it so that whoever buys the Sub Corp is in the front running? Are you linking the two?

SENATOR HILL:

Well, that would be up to Government in relation to the - you know, what it was putting on the market. What I'm saying is we took the Submarine Corporation off the market while we sought to resolve a number of issues. Some have been resolved; some have not. The issue is whether we just, we continue down that path of negotiation with Kockums and settling the other matters, or we say let's not be held up any longer, let's put the Corporation back on the market subject to certain uncertainties. And that will be a decision that Government will have to take in the next few months if, in the meantime, we're unable to resolve these issues.

ABRAHAM:

Just quickly on a couple of other issues. When will a decision be made on rationalising the ports? We've got too many ports in Australia apparently - or shipyards sorry, too many shipyards - Sydney, we've got the ASC, we've got WA, Melbourne, Newcastle - and there is a big review of that. When is a decision likely on that?

SENATOR HILL:

Well, it was looked at as an unrelated issue, but it is nevertheless of relevance in relation to the Submarine Corporation, that's what I'm saying. We have too many shipbuilders, naval shipbuilders, for the amount of work that's involved and that doesn't encourage those that exist to, as I say, invest in the future intellectual capital of the country.

If it's rationalised, we think we can enter a strategic partnership with one or two shipbuilders, that'll give them confidence to invest in the long-term, which will give us confidence that we'll have the sort of strength within naval shipbuilding in the long term that we need.

BEVAN:

So, Minister, when do you want the Sub Corp off your books, off your hands, end of the year?

SENATOR HILL:

Well, all other things being equal, we would like it off our hands as soon as possible, but it never works quite as simply as that.

BEVAN:

Is it reasonable to expect it will be sold by Christmas?

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SENATOR HILL:

No, it's - we are - we progress these matters in a logical and sensible way. It was sensible to take it off the market to seek to settle the commercial disputes. If we're unable to settle those within a reasonable timeframe, it's logical to look at what other options are available. And one other option, it was speculated in that piece today, is that we could sell it subject to certain commercial disputes being unresolved.

ABRAHAM:

And, just finally, when is a decision likely on the air warfare destroyer contracts, any timeframe on that?

SENATOR HILL:

Well, the final - the - a decision is not due for some years if the contract was in the sort of traditional type. If, however, we move from simply a price competitive process to appointing a strategic partner, we would appoint the partner earlier, hopefully as soon as possible. And that way, we think, we can get the benefit from working with an industry partner that is prepared to invest in the long-term health of naval shipbuilding in this country and we can get a win-win outcome.

ABRAHAM:

Well, the tenderers should be able to read through those lines fairly clearly, Minister, I think.

SENATOR HILL:

We'll see.

ABRAHAM:

Finally, finally, the Governor-General. I don't think we've let interviews with Federal Ministers go past without asking their view on the Governor-General. What is Senator Robert Hill's, as Defence Minister, view on whether Archbishop Hollingworth should resign as Governor-General?

SENATOR HILL:

Well, as he's carried out his functions since he's been Governor-General, I've had no problem with the quality of his work. In relation to the antecedents, whether there've been errors of judgement in his past that affect his current standing, what I said when I was asked that yesterday is that I'd like to read the report first. And I'd probably confer with my colleagues in any event before I made a public statement.

BEVAN:

But the code seems to be - well, I hope I'm not reading too much into this - but if you're not a Hollingworth supporter you say, "Oh, I really think he should be considering his position".

SENATOR HILL:

Yeah. But I didn't say that, did I?

ABRAHAM:

No.

BEVAN:

No.

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SENATOR HILL:

What I said was, in fulfilling his current tasks he's-- it's been fine as far as I'm concerned, in my observations. Here, there is an issue of an error of judgement in his past, which he's acknowledged, which I understand - I'm told the report says - was nevertheless made in good faith. Does that so affect his standing that he should consider his position? Well, as I said, I'd like to read the report and I'd like to talk to my colleagues before I enter that public debate.

ABRAHAM:

Senator, thank you.

SENATOR HILL:

Thank you.

ABRAHAM:

Defence Minister, Senator Robert Hill.

ENDS