ADELAIDE-based shipbuilder ASC is poised to split in two in a bid to tackle problems with the $8.5 billion air warfare destroyer project.

In a move that also would boost ASC’s positioning for future submarine work

17th Oct 2014


ADELAIDE-based shipbuilder ASC is poised to split in two in a bid to tackle problems with the $8.5 billion air warfare destroyer project.


In a move that also would boost ASC’s positioning for future submarine work, it is understood the Federal Government will soon announce a breakup of its submarine and AWD arms.
This would mean separate management teams would run individual companies focusing on the two projects.


This would meet the Government's aim, announced in June, of urgently inserting an experienced shipbuilding management team into ASC.
But The Advertiser has been told the move also would free up ASC to pursue a deal to build Australia’s Future Submarines, without being hindered by the air warfare destroyer project.
Defence Minister David Johnston and Finance Minister Mathias Cormann, to whom the Government-owned ASC reports, in June said numerous unresolved structural and systemic issues with the destroyer program needed to be tackled. These included significant schedule delays and cost overruns.


Senator Cormann’s office says no decisions on the best approach to these reforms have been made.
But sources close to the project have told The Advertiser that the breakup of ASC is to be announced soon and senior managers have already been briefed at the Air Warfare Destroyer Alliance, which oversees the project.


The two companies would be formed on project lines — one to focus on the air warfare destroyer program, the other on submarine construction and maintenance.
However, running two separate businesses poses a cost issue and also potential workforce difficulties if employees switch between projects.
The case to construct the Future Submarines in Adelaide has been bolstered recently by closer scrutiny of the Japanese build option prompting warnings it would ultimately be more costly and problematic.


Dr John White, the co-author of the Government’s air warfare destroyer review, on Monday said building the Future Submarines would cost about $20 billion and sustaining them about $40 billion — but this could easily swell to $100 billion.
Both ASC and the AWD Alliance declined to comment on the looming breakup of ASC.


Senator Cormann’s office highlighted the so-called reform strategy for the air warfare destroyer project, which involves improving shipbuilding productivity at ASC and its subcontractors.
This also involves urgently inserting an experienced shipbuilding management team into ASC and then reallocating some work to make the project more sustainable.
A final decision on the submarine selection process will be included in the Government’s Defence White Paper, which is due mid-next year.


ASC has three major facilities, two in Adelaide and one in Perth. The Adelaide facilities, at Osborne, are used for submarine maintenance and construction of the air warfare destroyers.
The Henderson facility, 35km southwest of Perth, is a $35 million submarine support and repair centre.


ASC would split into two businesses:


Air Warfare Destroyers
■ $8.5 billion program to build air warfare destroyers.
■ Based at ASC South, a $120m shipbuilding facility at Osborne.
■ Cost overruns and schedule delays have prompted a Federal Government project overhaul.
■ Reform strategy will involve urgently inserting experienced shipbuilding managers at ASC.
Submarines
■ Two submarine maintenance facilities, at Osborne and in WA. These look after the Collins Class submarines, built by ASC.
■ ASC is chasing $20bn deal to build the Future Submarines.
■ Faces competition from Japan and Germany.

 

APDR at a glance