Australians ‘to land 60pc of work on submarines’

The French company building Australia’s $80bn subs says local firms will get at least 60 per cent of work on the boats.

Naval Group Australia chief executive John Davis. Picture: Roy VanDerVegt

The French company building Australia’s $80bn Future Submarines says Australian companies will get at least 60 per cent of work on the boats but it won’t make a contractual commitment to the target for another two years.

The assurance to the Senate on Monday night by Naval Group’s Jean-Michel Billig followed the company’s warning less than a fortnight ago about unforeseen challenges with Australian industrial capability, and its refusal to commit to 50 per cent local ­content.

Mr Billig, the company’s executive director for the Future Submarine program, said the company had exceeded local content expectations building submarines in Brazil and India, and was “extremely confident” it would do the same in Australia, which he ­described as “a much more ­demanding customer”.

“Therefore, herewith, we commit to a level of Australian industry capability that will have the effect of at least 60 per cent of the Naval Group contract being spent in Australia,” he told the Senate’s naval shipbuilding inquiry. “We are confident this can be achieved as we will be building the entire fleet of submarines in Australia.”

Mr Billig said the majority French government-owned company was not yet ready to put the 60 per cent target in its contract with the Australian government, but expected to do so in 2022 when the build started.

Defence Minister Linda Rey­nolds said she had also received an undertaking of 60 per cent Australian content in the 12 subs from her French counterpart, Florence Parly, after talks last week.

“While I welcome this commitment, the Morrison government will hold Naval Group to account on their contractual commitment to maximise Australian industry involvement in this program, as per the objectives outlined in the strategic partnering agreement,” Senator Reynolds said.

Defence’s general manager of submarines, Greg Sammut, told the committee the 60 per cent commitment was new. “Naval Group has put it in terms they have not expressed before,” he said. However, he added that the commitment was “entirely consistent with the government’s push to maximise Australian industry content”, which was a contractual obligation for Naval Group.

“It’s linked to another contracted objective, and that is to ensure we have the sovereign capability in this country to not only build the boats but to sustain them,” he said.

Mr Sammut said while the contracts for the supply of the main motor, the electrical switchboard and the weapons discharge system had been awarded, all to offshore companies, Naval Group was now required to approach the Australian market to identify suppliers “for all the remaining equipment in the boat”.

The hearing followed a storm over comments by Naval Group Australia CEO John Davis to The Australian this month, warning of “specific challenges” regarding Australian industry that were “new to Naval Group”.

“We didn’t know the Australian market ­before we joined the program,” Mr Davis said. “Now we have a much deeper insight, and we recognise there is a lot more work to be done than we anticipated.”

Asked whether the value of Australian contracts would reach 50 per cent of the build, Mr Davis said: “I don’t have the ability to prophesise on (content).”

He also conceded the company was still working to bridge cultural ­problems that had set back its ­relationship with Defence, ­predicting “difficult and hard ­conversations” as the project ramped up.

Mr Billig said The Australian’s coverage was “disappointing and inaccurate”. However, neither Naval Group Australia or Defence raised any issues at the time of February 13 report.