The Japanese bid for the $50 billion contract to build Australia's 12 new submarines has upped the ante on its competitors, floating plans to use facilities built for the project as the base for a major innovation centre in Adelaide that would exploit new business and research links to move into a range of global non-defence commercial businesses.
In a late move clearly designed to appeal to a prime minister and government promoting innovation, Mitsubishi Heavy Industries – which is the prime contractor in the Japanese government-sponsored bid – has outlined the 11th-hour proposal amid increasing pressure and lobbying over the massive contract from Japan, Germany and France, with more high-level visits and with the release of last week's Defence white paper lifting the temperature of the political debate about the submarines even further.
A new internal brawl sparked by former prime minister Tony Abbott over the timing of the submarine build came as Defence Air Chief Marshal Mark Binskin foreshadowed the service life of the current Collins Class submarine fleet would be significantly extended, delaying the date for the new submarines to be introduced into service.
Mitsubishi said the submarine project is "just the start of a wave of investment" into Australia across its diverse industries, arguing there are opportunities for Australian industry to participate in a range of global projects including wind turbines, chemical plants and aircraft parts, in addition to Mitsubishi's existing heavy investments in Australian LNG, Coal, Aluminium, mining and air conditioning. It would seek to connect its work at the innovation centre with government, research institutions, universities and private industry.
It is linking the move with an agreement by Prime Minister Malcolm Turnbull and Shinzo Abe in December to encourage the development of innovation connections between the two countries.
Early perceived weakness overcome
The Japanese push comes as it argues that an early perceived weakness in its bid – of not having sufficient domestic linkages with Australian suppliers – has been overcome, in an intensive round of meetings with Australian companies who would be locally engaged in everything from building to components and processing. It claims that it can now build even the first of its Soryu class submarines in Australia instead of Japan.
The chairman of Mitsubishi Heavy Industries Hideaki Omiya also foreshadowed the possibility that other parts of the Mitsubishi Group could become involved.
Mr Omiya said the 29 Mitsubishi companies "regularly meet so we can invite others in as well who cover a further range of industries including IT and biochemicals", he told The Australian Financial Review.
As Mr Omiya was unveiling the proposal for an innovation centre, the German company wanting to build Australia's new submarine fleet was once again emphasising that its contract was being offered on a fixed-price basis, and committing to a full location construction plan.
Philip Stanford, the chief executive of ThyssenKrupp Marine Systems Australia, said the firm has factored in all costs including rising electricity prices in its "sail-away" fixed price bid that should give the federal government confidence there will be no defence cost blowout.
Very confident in pricing
He said TKMS is very confident in its pricing and that's important for Australia's future budgetary situation.
"We get it right. If we got it wrong and there were cost blowouts we wouldn't be in business anymore," he said.
Mr Stanford said the Techport site at Osborne near Port Adelaide, where the ASC facility is located, is the ideal place to build the next 12 submarines for Australia, with the German firm wedded to a full local construction plan, which will also involve dozens of Australian firms being part of the supply chain.
"We're committed to a local build from day one, boat one," he said.
He wouldn't comment specifically on the impact of rising electricity prices on industries operating in South Australia, but said all aspects of the German bid were fully costed over a long future period.
A formal competitive evaluation process for the submarine contract began last year after initial indications the former prime minister had made an agreement on the submarines with his Japanese counterpart, with the encouragement of the United States.
However, uproar about the lack of competition forced the government to call a competitive evaluation process, which also involved bids by German and French companies.
Japan's perceived early lead in the race was based on strategic considerations about relationships in the region. But it was seen to be in trouble because it appeared less able or prepared to commit to a local build in Australia.
Euro bidders would have to convert from nuclear
The Japanese argue that their bid is based on the only submarines in contention that are currently in the water, with the Germans and French having to respectively double the size of their boats or convert their systems from nuclear to conventional power to meet the Australian specifications.
Mr Omiya confirmed to the Financial Review on Wednesday that Mitsubishi was now confident Japan could construct its Soryu class subs in Australia "from the very first submarine".
The company had interviewed more than 200 Australian companies about providing parts for the subs locally, and he downplayed past suggestions that there may be problems with technology transfer, arguing that MHI had experience in major projects including defence projects.
He diplomatically evaded answering a question about whether any delay in commencing the build would have any impact.
There was speculation in Tokyo on Tuesday that Japanese electronics firm Toshiba may opt to build a lithium ion battery plant in Australia as part of a push to ensure Japan won the submarines contract.
The government's naval ship builder, ASC, on Wednesday afternoon told its workforce that it would cut 110 jobs, with 70 positions coming from the Air Warfare Destroyer project and 40 from the Collins Class submarine maintenance program.
The submarines jobs were being culled as the company moved from having two submarines in "deep maintenance" to just one.
Japan launches innovation torpedo in submarine war | afr.com
In a late move clearly designed to appeal to a prime minister and government promoting innovation, Mitsubishi Heavy Industries – which is the prime contractor in the Japanese government-sponsored bid – has outlined the 11th-hour proposal amid increasing pressure and lobbying over the massive contract from Japan, Germany and France, with more high-level visits and with the release of last week's Defence white paper lifting the temperature of the political debate about the submarines even further.
A new internal brawl sparked by former prime minister Tony Abbott over the timing of the submarine build came as Defence Air Chief Marshal Mark Binskin foreshadowed the service life of the current Collins Class submarine fleet would be significantly extended, delaying the date for the new submarines to be introduced into service.
Mitsubishi said the submarine project is "just the start of a wave of investment" into Australia across its diverse industries, arguing there are opportunities for Australian industry to participate in a range of global projects including wind turbines, chemical plants and aircraft parts, in addition to Mitsubishi's existing heavy investments in Australian LNG, Coal, Aluminium, mining and air conditioning. It would seek to connect its work at the innovation centre with government, research institutions, universities and private industry.
It is linking the move with an agreement by Prime Minister Malcolm Turnbull and Shinzo Abe in December to encourage the development of innovation connections between the two countries.
Early perceived weakness overcome
The Japanese push comes as it argues that an early perceived weakness in its bid – of not having sufficient domestic linkages with Australian suppliers – has been overcome, in an intensive round of meetings with Australian companies who would be locally engaged in everything from building to components and processing. It claims that it can now build even the first of its Soryu class submarines in Australia instead of Japan.
The chairman of Mitsubishi Heavy Industries Hideaki Omiya also foreshadowed the possibility that other parts of the Mitsubishi Group could become involved.
Mr Omiya said the 29 Mitsubishi companies "regularly meet so we can invite others in as well who cover a further range of industries including IT and biochemicals", he told The Australian Financial Review.
As Mr Omiya was unveiling the proposal for an innovation centre, the German company wanting to build Australia's new submarine fleet was once again emphasising that its contract was being offered on a fixed-price basis, and committing to a full location construction plan.
Philip Stanford, the chief executive of ThyssenKrupp Marine Systems Australia, said the firm has factored in all costs including rising electricity prices in its "sail-away" fixed price bid that should give the federal government confidence there will be no defence cost blowout.
Very confident in pricing
He said TKMS is very confident in its pricing and that's important for Australia's future budgetary situation.
"We get it right. If we got it wrong and there were cost blowouts we wouldn't be in business anymore," he said.
Mr Stanford said the Techport site at Osborne near Port Adelaide, where the ASC facility is located, is the ideal place to build the next 12 submarines for Australia, with the German firm wedded to a full local construction plan, which will also involve dozens of Australian firms being part of the supply chain.
"We're committed to a local build from day one, boat one," he said.
He wouldn't comment specifically on the impact of rising electricity prices on industries operating in South Australia, but said all aspects of the German bid were fully costed over a long future period.
A formal competitive evaluation process for the submarine contract began last year after initial indications the former prime minister had made an agreement on the submarines with his Japanese counterpart, with the encouragement of the United States.
However, uproar about the lack of competition forced the government to call a competitive evaluation process, which also involved bids by German and French companies.
Japan's perceived early lead in the race was based on strategic considerations about relationships in the region. But it was seen to be in trouble because it appeared less able or prepared to commit to a local build in Australia.
Euro bidders would have to convert from nuclear
The Japanese argue that their bid is based on the only submarines in contention that are currently in the water, with the Germans and French having to respectively double the size of their boats or convert their systems from nuclear to conventional power to meet the Australian specifications.
Mr Omiya confirmed to the Financial Review on Wednesday that Mitsubishi was now confident Japan could construct its Soryu class subs in Australia "from the very first submarine".
The company had interviewed more than 200 Australian companies about providing parts for the subs locally, and he downplayed past suggestions that there may be problems with technology transfer, arguing that MHI had experience in major projects including defence projects.
He diplomatically evaded answering a question about whether any delay in commencing the build would have any impact.
There was speculation in Tokyo on Tuesday that Japanese electronics firm Toshiba may opt to build a lithium ion battery plant in Australia as part of a push to ensure Japan won the submarines contract.
The government's naval ship builder, ASC, on Wednesday afternoon told its workforce that it would cut 110 jobs, with 70 positions coming from the Air Warfare Destroyer project and 40 from the Collins Class submarine maintenance program.
The submarines jobs were being culled as the company moved from having two submarines in "deep maintenance" to just one.
Japan launches innovation torpedo in submarine war | afr.com
