09 March 2016
by Mark Abernethy
Austal shipbuilding methods winning contracts with US Navy
Littoral Combat Ship
Exports are often an unrecognised but critical element of the viability of many major local defence industry companies.
One of those is the Perth-based Austal, which has become a major supplier to the US Navy.
"Exporting was probably the key to this company's success," says the outgoing chief executive officer of Austal, Andrew Bellamy, who will be stepping down from the position soon.
The manufacturer of innovative aluminium ships operates from shipyards in WA, the Philippines and Alabama, the latter where has the third-largest shipyard in the United States. It builds – or is building – defence vessels for Australia, USA, Oman, Yemen, Malta, Kuwait, Trinidad and Tobago and Bermuda, and it supplied all 30 of Australia's border patrol vessels.
"Exporting means bigger orders, more work, manufacturing to different requirements," Bellamy says. "Being part of a large project with the US Navy allows us to invest in the shipyards and people."
Austal started life making very fast, multi-hull ferries out of aluminium. It expanded from exporting the distinctive designs to Asian commercial customers and in 1999 signalled its intention to expand into military shipbuilding when it opened Austal USA. Having won the contract to build Armidale-class ships for the Royal Australian Navy in 2003, it moved into contract work for the US Navy, winning a 10-ship contract for the EPF (Expeditionary Fast Transport) catamaran vessel and then won a place in the 52-ship LCS (Littoral Combat Ship) project, based on the trimaran hull, in which the final 20 ships will be evolved into frigates.
Bellamy says the path to the lucrative US defence industry market took a decade and was paved with unique IP, attention to high quality work and a preparedness to upscale production for export contracts. Austal built a new shipyard at Mobile, Alabama and now employs 4000 people in what Bellamy calls a 21st century shipyard for a 21st century ship.
"We had a unique approach to aluminium shipbuilding, so we could construct a greenfield shipyard and build these ships to the highest quality and control costs," Bellamy says. "The shipyard at Mobile looks more like an aircraft hangar than a shipyard."
He says the Australian government's defence white paper is encouraging because of the commitment to continuous build of naval surface ships. "We've invested $US400 million [$546 million] in our shipyard in Mobile, and we'd invest in Australia too – but not for two or three ships."
He says it's important that Australian defence companies are encouraged to develop their technology under the auspices of the Australian Defence Force; being nurtured by defence in Australia allows the contractors to upscale and increase their expertise, which enables them to export, which then brings more expertise back to Australia.
"The most important part of the Austal story has been the workforce," Bellamy says. "People build ships, so when you have the best people you build the best ships. But the people aren't working if the work isn't there."
He says the company runs internal development and training programs in key skills, has an apprenticeship program and brings in skilled people from other industries.
The export success of Australian defence ingenuity is not confined to the sea. Thales Australia employs 3000 people in Australia and has made an export success of the Bendigo-designed Bushmaster army vehicle that became so famous from its deployment with the Australian Army in Afghanistan. The Bushmaster is now exported to the Netherlands, Japan and Jamaica.
The importance of export in the defence industry ecosystem is illustrated in the BAE Systems Australia example.
The Nulka Active Missile Decoy, made by BAE Australia, is currently deployed on every US Navy and Royal Australian Navy war ship; it's a highly-effective "soft kill" technology that lures anti-ship missiles away from intended targets.
"It was a home-grown Australian idea in the late 1970s," says Brad Yelland, head of strategy at BAE Systems Australia. "It was initially developed by the DSTO and Government Aircraft Factories."
After the Exocet anti-ship missile became famous in the Falklands War and then an Iraqi Exocet hit the USS Stark in the Persian Gulf 1987, the US Defense Department engaged in programs to defeat the Exocet, one of which was the Nulka. It was put into the US-Australia Joint Property Office and when the technology's then-owner, AWA, was sold to British Aerospace, BAE became the ultimate owner. Nulka was installed in US and Australian ships from the early 1990s and has been an essential naval defensive measure ever since.
Yelland says the Nulka has been a "massive export" for the company and when pushed on the size, he says "greater than a billion dollars."
He says the Nulka is an example of how local industry and expertise can grow when the government commits to technology.
"The Australian government invested in Nulka, when no one knew what it was or what it could be," Yelland says. "Now we design and integrate and make the final round assembly for a technology relied on by the US Navy, from here in Australia."
He says the importance of a large, long-term contract is that the Nulka becomes essentially a continuous build and so the company invests in developing and improving it.
"The Nulka provides hundreds of jobs in Australia, and it's funded by the US Navy. Companies need to export to get the scale we have with Nulka."
Prime contractor partner
BAE Systems Australia also developed the Evolved Sea Sparrow air defence system for the NATO countries, and is a partner with prime contractor Raytheon in its manufacture.
"That requires a lot of highly skilled people," Yelland says.
He says the corrosion management system on the Joint Strike Fighter is a BAE Australia technology, totally home-grown in this country from R&D funding.
"The defence white paper has some good ideas in it and shows confidence in the industry," Yelland says. "The industry needs certainty to invest and to do its strategic workforce planning. The gadgets and technologies produced by the defence industry are really impressive but we need to hire the best people to design and build them."