South Australian naval shipbuilding a bedrock of economy

A defence industry creating thousands of South Australian jobs was born during World War II and, a century after that, will be a bedrock of the state’s economy.

Paul StarickChief Reporter

8 min read

September 29, 2017 - 10:00PM

Digital technology underpinning defence ships

A defence industry creating thousands of South Australian jobs was born during World War II and, a century after that, it will become the bedrock of the state’s economy.

The linchpin is naval shipbuilding, which began at Whyalla in the 1940s, thriving for a time before closing in 1978. Less than a decade afterwards, Adelaide secured the multibillion-dollar contract to build Collins Class submarines for the navy.

The Osborne shipyard, created as a result, will be the epicentre of Australian naval construction until at least the 2050s. Two giant projects will be based there — the $35 billion future frigates build and $50 billion Future Submarines project.

If war can prove beneficial, it did for SA’s defence industry. The-then premier, Sir Thomas Playford was almost obsessively pushing to industrialise the state. Helpfully, his Burra-born friend Essington Lewis, arguably Australia’s greatest industrialist and BHP’s long-term chief, had been appointed as the director-general of munitions and aircraft production.

Whyalla’s shipbuilding industry was a direct outcome of Playford’s close relations with Lewis, according to the premier’s biographer, the late award-winning Advertiser journalist Stewart Cockburn. An explosives and filling factory at Salisbury was already being built by the federal government and that precinct later would become the government’s Defence Science and Technology Group’s Adelaide research centre.

Even before world war broke out, Lewis had promised Playford a tin-plating industry and blast furnace. “The tin-plate industry fell through and Lewis then offered the premier a shipbuilding industry as a consolation prize,” Cockburn wrote in his 1991 biography, Playford — Benevolent Despot.

“Some consolation prize! The first corvette for the Australian navy came off the new slipways there as early as 1941, before the Japanese bombed Pearl Harbor. “By the time the Japanese and Korean competition killed them in the 1970s, the Whyalla shipyards had built 58 ships of up to 80,500 tons deadweight.”

After the war, these were commercial ships, yet the seeds had been sown for a naval shipbuilding industry that would, years later, become a vital part of the state’s long-term quest to transform its economy.

Work to replace the navy’s ageing Oberon submarines began in earnest in the early 1980s and Labor premier John Bannon sensed an opportunity. Back then, a $5 billion program to build six Collins Class submarines was on offer. Luring the project to SA became a key part of Bannon’s drive to transform the economy and, ultimately, was a lasting legacy for a premier whose reign was marred by the State Bank collapse in 1991.

The decision to build the submarines in Australia to an Australian design, rather than buy them overseas, triggered furious lobbying by the states, emphasising the industrial outcomes in the final selection of the contractor and site.

“Nor did the states merely advance their claims for the siting of the construction facility,” says a federal parliamentary library analysis of the project. “The South Australian submarine task force was particularly active, sending study teams overseas and reporting to the (then) Department of Defence Support.”

Former premier Mike Rann, who was Bannon’s press secretary at the time, described the lobbying campaign in a 2012 speech at Flinders University. “So, when Premier John Bannon launched the campaign in 1985 to have the Collins Class submarine project located in SA, we didn’t follow other states who announced their bids in a speech or news conference,” Rann said.

“We did it in a submarine. ... We had John Bannon lowered by winch from a navy helicopter off the New South Wales coast into a surfacing submarine with media helicopters filming and reporting. Later, we held a news conference 500 feet below the sea. We followed up, during an investment mission to Europe, with Bannon doing TV interviews on top of Germany’s biggest crane, looking over a submarine manufacturing facility that 40 years before had built U-boats!”

Ultimately, Swedish firm Kockums was selected as the builder and Osborne, near Outer Harbor, was chosen as the site to build a shipyard. Along with consortium partners, Kockums formed the Australian Submarine Corporation.

On June 3, 1987, the $5 billion contract between the federal government and ASC was signed. ASC would design and manufacture six Collins Class submarines. It was, at the time, the nation’s largest defence contract in history.

The Osborne shipyard was opened in November 1989. The site was chosen because it offered easy access to the Port River, had good road and rail connections and, also, plenty of room for expansion.

A year later, a keel laying ceremony was held for the Collins boat. The submarine, the first of six, was launched on August 28, 1993 and handed over to the navy on July 15, 1996.

While the Collins Class would later come to be considered among the world’s leading conventional submarines, the early years were plagued by problems. These included industrial disputes and mishaps. The submarine was handed over to the navy more than a year later than originally scheduled.

ASC was 49 per cent owned by Kockums. The remainder was Australian-owned — 48.5 per cent by the Industry Development Corporation, a financial institution partly owned by the Commonwealth, and 2.5 per cent by James Hardie Industries. The structure contributed to excessive secrecy, which fuelled public relations blunders.

In 1995, ASC came under fire for spending more than $200 million to buy a share of a Qantas jumbo jet. Shareholders received a 880 per cent return on their investment — all before the Collins was handed over to the navy.

In 1999, the Collins Class boats were infamously branded “dud subs” amid revelations of serious noise problems, rhetorically likened to an underwater rock concert. About $1.6 billion was allocated to fix the problems, including installing an off-the-shelf combat system. The Salisbury-based DSTO was later credited with solving complex problems with minimal resources.

By late 2004, the Australian Submarine Corporation tag was shed and the company became ASC. Much more importantly, it was awarded Australia’s highest engineering honour for its refurbishment of the second submarine, HMAS Farncomb.

The ASC had been considering cutting open the Farncomb’s hull — 35cm thick in some parts — in a dramatic attempt to fix problems with its main electric motor, which would have allowed it to remove the motor from the $500 million submarine to work on it while the boat was in dry dock at the ASC’s Osborne base. Instead, the motor was “suspended’’ on a rig inside the boat and the maintenance work completed without the hull being cut — something never previously attempted anywhere in the world.

Attention had been publicly drawn to the Farncomb’s engine problems in 1998, when it was stranded in Darwin Harbour for more than a week with flat batteries. Engine problems prevented the submarine’s batteries being recharged, so a 13-tonne battery charger had to be trucked from Adelaide.

By the mid 2000s, ASC was fully owned by the federal government, which had acquired the shareholding it did not own in 2000. Its future had been secured with a 25-year, $3.5 billion submarine maintenance contract awarded in 2003. The bulk of the work was to be done at Osborne and the company was being prepared for sale in 2006 — a move later abandoned.

In late 2004, ASC was considered the hot favourite for a $6 billion contract to build three air warfare destroyers for the navy. It was competing against Melbourne-based Tenix, which was constrained by limited room for expansion at its Melbourne shipyard.

The-then defence minister Robert Hill, a South Australian senator, was seeking to restructure the Australian naval shipbuilding industry and concentrate work at about two shipyards. Osborne was the obvious favourite. It was helped by the state’s extraordinary influence around the Howard government cabinet table. As well as Senator Hill, there were three other senior ministers — Alexander Downer, Nick Minchin and Amanda Vanstone. Rann, by then the premier, seized upon this advantage with the same zeal displayed by his one-time boss, John Bannon.

Waging a highly public campaign to highlight the state’s defence industry advantages, Rann also appointed former Defence Materiel Organisation maritime systems head Kevin Scarce to head a state defence unit. Scarce, who Rann later would appoint as Governor, helped Rann leverage contacts to push the SA case and emphasised the national interest was best served by an Adelaide build.

The South Australian bid was based on existing world-class infrastructure at Osborne, a large workforce skilled in naval design and construction, a revolutionary pact with unions designed to secure industrial harmony, and abundant land for expansion of the shipbuilding industry.

The state celebrated in May 2005, when ASC Shipbuilding beat Victorian-based Tenix. ASC vowed to double its workforce from 1000 to 2000 people. Rann said SA had “won what will be the biggest project in the history of the state”.

Recognising the significance of naval shipbuilding being consolidated in his home state, Hill declared the $6 billion contract “can obviously play a significant part in building the skills base in South Australia for the future”. Osborne became Techport Australia, with common user facilities, including the largest shiplift in the southern hemisphere.

Ultimately, though, political indecision and bitter rivalry about replacing the Collins Class fleet entangled the AWD project, which was stung by delays and budget blowouts. Years passed as both Labor and Coalition federal governments vacillated. In 2007, Labor leader Kevin Rudd vowed to build the next generation of submarines in Adelaide. But, in government, Labor could not commit.

It did release a White Paper in May 2013, saying an expanded fleet of 12 conventional submarines would be built in Adelaide. Days later, the-then Liberal Opposition defence spokesman David Johnston declared the Coalition “today is committed to building 12 new submarines here in Adelaide”.

Unfortunately, the politics were not that simple. Liberal prime minister Tony Abbott wanted to build them in Japan. Johnston in 2014 infamously declared he would not trust ASC “to build a canoe” after revelations of cost and timeline blowouts during construction of the three AWDs.

The indecision created a so-called “valley of death” between shipbuilding contracts as the destroyer contract started a slow jobs decline. Just as it did with the AWD contract, The Advertiser campaigned for a South Australian build of the latest submarines.

Abbott in February 2015, was forced to promise to open a contest for the $50 billion submarine contract in a bid to protect his leadership from a party room spill motion. That August, Abbott declared confidence in ASC’s workers, outlined a $1.2 billion air warfare destroyer project blowout but, crucially, cemented Adelaide defence shipbuilding. He unveiled an $89 billion naval shipbuilding program centred on Adelaide, including a $35 billion frigates project starting in 2020 and some offshore patrol vessel building from 2018.

Abbott staved off that threat to his leadership that day but lost the top job to Malcolm Turnbull in September, helped by a crucial switch in support by senior SA Liberal Christopher Pyne.

In April 2016, Turnbull revealed French company DCNS had won the $50 billion contract to build 12 new submarines in Adelaide, securing thousands of local jobs for generations. The scale of these projects is extraordinary, despite political debate over the extent of Australian involvement and even when compared to the Collins and AWD projects.

Nine frigates and 12 submarines will be built at Osborne, as well as the first two offshore patrol vessels before the project transfers to Western Australia, under the $89 billion shipbuilding program. The shipyard will be transformed through a $1.2 billion injection in new infrastructure, with another, larger upgrade to follow for submarines once designs are finalised next year.

According to the Naval Shipbuilding Plan released in May, submarine construction will start in 2022-23 and the last of 12 boats is likely to enter service in the early 2050s. For much of this time, the frigates project will be running at Osborne, too.

As the Shipbuilding Plan says, the length of the submarine construction process means Australia will need to be planning for the next boats well before the final submarine enters service.

Adelaide would, by then, be the undisputed home of naval shipbuilding. This would put it in the box seat for the next generation of submarines.

More than a century after naval shipbuilding began at Whyalla, the defence industry will have forged a powerful position in the state’s economy, with the strong prospect of more to come.