Make no mistake – naval shipbuilding in Australia is facing a crisis from which it might never recovery. The so-called Valley of Death is real and it will be reached at a specific time – August 2015
26th Mar 2014
Playing the fiddle while Rome burns.
Make no mistake – naval shipbuilding in Australia is facing a crisis from which it might never recover. The so-called Valley of Death is real and it will be reached at a specific time – August 2015 – unless construction work is brought forward. It is at this point in seventeen months time that Australian owned Forgacs will close – after a distinguished 50-year history – with the loss of 900 highly skilled employees. BAE Systems will shut Williamstown dockyard in Melbourne at around the same time with the loss of 1,000 trained and experienced staff.
Amazingly, local defence industry does not want money from the Government – unlike Holden, Toyota, SPC, Cadbury, Alcoa and a myriad of other companies. All that is required is that the Department – and Government – get a move on and place orders for ships that the RAN actually needs. While it might be superficially attractive to buy a lower cost ship from an overseas yard, whatever initial savings are made disappear quickly when through-life costs are factored in. Economic theorists might squabble over some of the details, but the taxation benefit to the Government of local work is unarguable, as is the contribution to balance of payments. Local construction work keeps people off social security – something that is especially important in regions such as the Hunter Valley.
All sides of politics agree that Australia needs a navy of around 40 surface ships and this level of capability has been recognised in successive White Papers. Indeed the importance of the maritime domain is only going to increase in what in economic terms will be the Indo-Asia-Pacific century and this is being manifested in the acquisition of two very large and very capable LHDs. It also explains future ambitious plans for new submarines, frigates, patrol boats – and more. To risk deskilling our naval construction sector at a time like this seems folly of the first order.
To train a welder to undertake work in the naval sector takes two years; a boilermaker five years. And qualified people have to be retrained and reskilled so that they can continue to work at the highest levels of quality required for defence contracts. For tasks such as Air Warfare Destroyer module work, five separate categories of welding are involved – each of which has to taught and certified. If the failure rate for a particular welder starts to rise then that person automatically receives additional training. Forgacs alone spends $250,000 per month on this activity and in addition at any one time has 80 apprentices on the payroll to ensure that a steady stream of new tradespeople are being introduced into the workforce.
The three services and the Defence establishment understand the consequences of losing their own skills but seem incapable of applying the same logic to Australian naval shipbuilding. Navy bemoaned the loss of ASW skills with the retirement of Sea King helicopters with dipping sonars a decade ago – and now a huge effort is being made to train operators and maintainers so that Australia once again has that necessary capability. The situation with industry is identical – replacing lost skills is difficult, time consuming and very expensive.
And for the bureaucracy, imagine what it would be like if a Government for budgetary reasons decided to scrap a major entity – say, the DMO, with a loss of 6,000 jobs – and then ten years later decided that Australia needed to get back into the equipment acquisition and support business. It would take a massive effort to rehire, retrain and requalify thousands of people – and even then many staff with experience and corporate memory would be lost forever.
Such a scenario is so fanciful – so outrageous – that of course it would never occur. Yet it is to be believed that even if there is no continuity in naval work, then in five or ten years time Australia will still be able to build new submarines and new frigates with a brand new workforce and possibly brand new facilities. Indeed, Australia will be able to – if money is thrown at the sector – but with a repeat of all of the problems, pain and suffering associated with ramping up for the Air Warfare Destroyers, which can be partially attributed to the previous Valley of Death that occurred a decade ago.
The situation is so serious that the Government cannot afford to wait for the next White Paper because there simply is not enough time before industry starts to dramatically contract. We should not be facing this mess because companies have been highlighting this issue for at least four years, with BAE Systems in the lead because of their unhappy AWD experiences.
Defence Minister David Johnston has the opportunity to turn these circumstances into a benefit to himself, the Government, the RAN and Australian manufacturing industry. He needs to take a bold decision and break from previous project-by-project naval procurement. He should introduce a new paradigm: every two years the RAN will receive a new submarine and every eighteen months it will receive a new surface ship (with thanks to Chris Burns from South Australia). Forget the White Paper – this needs immediate action.
The only sensible thing to do is move to a continuous build program like many other countries and avoid the boom-bust cycle, which has been little short of disastrous for the Australian taxpayer, not to mention the RAN.