New Depths in Australia-US Relations: The Collins Class ...

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Maryanne Kelton: New Depths 36assessment and modification. Moreover, the Commonwealth argued that asKockums did not have the resources to resurrect the propellers then they wereentitled to seek assistance elsewhere. As submarine technology is tightly held, theEuropean conventional submarine technology is of particular commercial andstrategic interest to the US. As Australia had shipped submarine propellers to the USfor modification in 1998 and 1999, Kockums were concerned that Defence haddeliberately passed on confidential submarine technology to the US. 194 Thecompany duly protested to the Department of Defence. They contested the claimsmade that a) the propellers did not meet the specifications, and b) they did not regardUS modifications as an improvement under the specifications. Nonetheless, Defenceremained dismissive. Although these early problems regarding authorisation weredropped, they resurfaced again in 2001.In March 2001, Kockums sought federal court assistance to withhold therelease of a propeller about to be shipped to the US for modification. Concerned thatthe propeller technology would be leaked to third parties, Gunnar Ohlund, executivevice president of Kockums submarine division, claimed their federal court action wasbased on both the protection of commercial intellectual property and a desire toprotect the interests of the Swedish Navy. Kockums had worked closely with theSwedish navy in the development of the technology. 195 Justice Wilcox of the FederalCourt found in favour of the Commonwealth, but also found that the intellectualproperty rights belonged to Kockums. 196 No doubt, by 2001 the increasing tensionbetween Kockums' new owners and the Australian government over the sale of theASC itself and then the related issue of ownership of design property, did little toameliorate relations between the groups involved. Through 2003 the issue remainedin dispute.Alliance issues, however, were clearly not the only seas to be navigated. 197Employment and economic issues were also at the forefront of the ASC sale. For thegovernment the complexity of the problem was to marry its strategic priorities (oncedecided) with the exigencies of a commercial sale and a satisfactory employmentoutcome. 198 Yet, already in circumventing HDW's participation in the sale, strategicconcerns had overridden economic interests that included maximising bothemployment opportunities and the prospects of a profitable sale. Marginalisation ofHDW, had initially relegated economic and possibly employment concerns assecondary to the alliance relationship.Persistently problematic has been the sale of the ASC. 199 By January 2002,Robert Hill, (now Defence Minister) was continuing to explore the relationship withElectric Boat. Whilst discussions ranged over their option of a 40 per cent share194 Lincoln Wright, 'Defence gave sub secrets to US, say makers: More choppy waters for troubledCollins', Canberra Times, 20 August 2000.195 'Swedish submaker seeks to keep propeller from US', Reuters Business Report, 18 February 2001.196 Department of Defence, 'Federal Court decision allows submarine propeller modifications to goahead', Media Release, Departmental 93/01, 11 April 2001.197 Sale of the ASC was also dependent upon the resolution of the set of IP, design and businessissues, see Department of Defence, The Australian Naval Shipbuilding and Repair Sector StrategicPlan, Canberra, 2002, pp. 40-41. Most significant in the ongoing maintenance and alterations inequipment and weaponry was that safety issues should remain the priority. On the subject of Kockumspossible separation from the ongoing maintenance of the submarines, Patrick Walters claims that a‘deeply troubling aspect of the pending breach with Kockums, according to some defence and industryexperts, is the risk it could pose to the long term safety of the navy’s submarine fleet’. See PatrickWalters, ‘Skirmish for the Collins Class’, The Australian, 15 November 2003, p. 27.198 Geoffrey Barker considers the 'unanswered strategic, technological, economic and employmentquestions' in 'Suboptimisation', in the Australian Financial Review, 25 July 2000, p. 42.199 Mark Thomson assesses the options for naval shipbuilding in Australia in ‘Setting a Course for NavalShipbuilding and Repair Industry’, A Presentation to the Maritime Building, Repair and MaintenanceConference, 26-27 March 2003. In each of these options the sale of the ASC assumes centrality.Paper accessed via the Australian Strategic Policy Institute.
Maryanne Kelton: New Depths 37holding and a consultancy service role, the privatisation deal remained in doubt. 200Later that year, the government stated that it sought to assign Electric Boat, 201manufacturer of nuclear submarines, as a capability partner. To that end, thecorporation commenced a ‘scoping study of the ASC’s capabilities in order to assesswhere it might be able to add value to the corporation.’ 202 By October 2002, ElectricBoat had agreed to provide specialist management and technical advice for theongoing maintenance of the submarines at a cost of $20 million 203 . However, thecorporation declined to purchase shares in the ASC. Logically for the nuclearsubmarine builders there were few persuasive reasons to purchase the ASC shares.Technically, as capability partner, it would have access to the submarines butcommercially, the sale was complicated.In 2003 the unresolved intellectual property issues with Kockums were stilloutstanding, there was an absence of orders for new submarines and theDepartment of Defence took some time to settle its budget allocations for thethrough-life maintenance of the Collins. Endeavouring to focus the process inJanuary 2004, Ministers Hill and Minchin appointed Carnegie Wylie to advise on thesale of the ASC. At this point it was unlikely that Electric Boat was either interestedor able to locate an appropriate Australian partner. Tenix, a seemingly suitablecandidate, desired a controlling interest and remained in private ownership, and ADIwith its French partner Thales, again raised the question of European ownership. 204The US had continued to remain sensitive to any prospective loss of intellectualproperty. Late in the day Australia’s Leighton Holdings emerged as a contender forthe ASC and also thus as a major contractor in naval shipbuilding in Australia. 205Privatising the ASC is also closely connected to the consolidation of thenaval shipbuilding sector in Australia. Spending on major naval projects over thenext fifteen years is anticipated to be half that of the previous fifteen. Consequently,this sector will be subject to significant structural adjustment. Nonetheless, it ispossible that under the new strategic plan for naval shipbuilding that the new AirWarfare Destroyers (project SEA 4000), future Amphibious Transport Ships(JP2027/2048) and/or future Replenishment Ships (SEA 1654) could be constructedby an upgraded ASC. 206One of the features of the Collins project, (and as embedded in the originalvision) had been the extraordinary opportunity it offered Australia to realise,demonstrate and reward the technological expertise and entrepreneurial elements ofits educated workforce. Only occasionally in the life of a small country does it havethe opportunity to pursue a project of this enormity and deliver upon its aims so well.As a multibillion dollar project it could act uniquely in the attempt to redress some of200 Senator, the Honourable Robert Hill, Minister for Defence, Doorstop transcript, The Jefferson Hotel,Washington, DC, 10 January 2002, Department of Defence.201 Electric Boat, together with Northrop Grumman’s Newport News, are the two nuclear submarinemanufacturers for the US Navy.202 Senator Robert Hill, Minister for Defence, and Senator, Nick Minchin, Minister for Finance andAdministration, ‘Australian Submarine Corporation – Engagement of capability partner for a scopingstudy’, Media Release, Joint 134/02, 9 April 2002.203 Senator Robert Hill, Minister for Defence, and Senator, Nick Minchin, Minister for Finance andAdministration, ‘Electric Boat Corporation signs as capability partner to Australian SubmarineCorporation’, Media Release, MIN 536/02, 3 October 2002.204 Robert Garran, ‘Sub deal sinks beneath US secrecy’, The Australian, 20 December 2001, p. 2.Geoffrey Barker, ‘Suboptimisation’, Australian Financial Review, 25 July 2000. Reputedly, the Tenixpartnership with ADI failed to proceed because of the concerns that US export licences fail tomaterialise for those with French associations.205 Geoffrey Barker, ‘Leighton sub deal charts new course’, Australian Financial Review, 20 February2004, pp. 1 and 6.206 Department of Defence, Defence Materiel Organisation, The Australian Naval Shipbuilding andRepair Sector Strategic Plan, Canberra, 2002, in particular pp. 3 and 190.
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