The competition for a A$50 billion ($34.55 billion) contract to build
Australia's next submarine fleet is narrowing to a race between Japan and France
as a bid from Germany's ThyssenKrupp Marine Systems (TKAG.DE) (TKMS) loses
ground over technical concerns
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Australia is expected to decide the winner of one of the world's most
lucrative defense contracts within the next six months, ahead of a national
election in which the deal and the jobs it will create is expected to be a key
issue for the conservative government.
TKMS is proposing to scale up its 2,000-tonne Type 214 class vessel, while
Japan is offering a variant of its 4,000-tonne Soryu boats made by Mitsubishi
Heavy Industries (7011.T) and Kawasaki Heavy Industries (7012.T).
France's state-controlled naval contractor DCNS has proposed a
diesel-electric version of its 5,000-tonne Barracuda nuclear-powered submarine.
Australia has said it wants a boat in the
4
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2019 ,000-tonne class.
Scaling a submarine to twice its original size presents exponential technical
challenges, experts say.
That puts TKMS furthest from having the experience to offer what Australia
wants in a large, long-range, stealthy submarine to replace its aging
Collins-class fleet, said six industrial sources in Asia and Australia with
knowledge of the situation.
"The German proposal is an enlarged version of a smaller existing submarine,
and that technically is risky
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TKMS and one of the sources in Australia, who has decades of experience in
the global arms industry, cautioned against jumping to conclusions as each side
jockeys for the best outcome in what may ultimately be a political decision.
Australia wanted a partner to design and build a new submarine, which
neutralizes any perceived advantage with existing bigger boats, said TKMS
Australia Director Jim Duncan.
"The rumors could well be right. Who knows," Duncan told Reuters when asked
to respond to what the industrial sources said. "My only
advice
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Wholesale , having spent many years in this environment is: believe
nothing that you hear and only half of what you see."
Officials at the Future Submarine Program at the Australian Department of
Defence did not respond to a request for comment.
DCNS Australia CEO Sean Costello declined to comment on his competitors, but
said experience in large submarine design was critical for the Australian
project.
LEADERSHIP CHANGE
Tokyo was initially seen as the frontrunner, partly due to close ties between
Japanese Prime Minister Shinzo Abe and former Australian Prime Minister Tony
Abbott, who was ousted in a party coup by Malcolm Turnbull last September.
With Turnbull quiet on the matter, Japan is touting its offer as a way to
build military ties between two allies in Asia.
But Tokyo, which until two years ago had a decades-long ban on arms
exports
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Store , has been hobbled throughout the process by a lack of experience in
managing overseas defense contracts and the shifting political tide in Canberra.
With Australia facing an economic slowdown, that has put job creation and
innovation atop the political agenda.
Japan was slow to commit to build all vessels at South Australian shipyards,
a politically significant pledge that both DCNS and TKMS made quickly.
At the same time, DCNS and TKMS pledged to share sensitive technology with
the Australian government and promised packages of economic incentives.
Australia's Defence Department is formulating a recommendation based on
materials submitted by the bidders late last year and is expected to give that
to cabinet as early as March.
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