Keeping Up With the Joneses

The Future of Shipbuilding

In recent months there has been a renewed chorus of criticism of the failure of free-trade agreements between countries and regions to actually assure free trade – though it should not surprise any observer of the so-called ‘globalisation’ of trade over the last two decades or so…

What are generally known as ‘non-tariff barriers’ are a well-known dodge for governments to circumvent the rules they themselves sign up to. They take many forms (some people reckon the different rail gauges between Australian states constituted one); alleged security concerns are a frequently cited example. Thus the US is able to assert that it is for national security that any marine vessels built for the US forces must be built in the US by companies registered in the US. This is the “Jones Law” that dates back to 1920 and has, despite the welter of free trade treaties, never been repealed.

A Jones Law is what the Australian Manufacturing Workers’ Union (AMWU) wants here at home. National assistant secretary, Glenn Thompson, said in a March statement that through the 1920 Jones Act and other procurement policies, the US government has protected American jobs and their national security. “Australia must follow the USA in this regard,” said Thompson. “While the US government stands up for their shipbuilding industry, the Australian government is allowing our shipbuilding work and jobs to be off-shored.” The AMWU, and the shipbuilding industry, are wary of what the media has begun to call a ‘valley of death’ at the end of current naval shipbuilding programmes, and the consequent loss of jobs and domestic expertise – not to mention the security implications of having to buy your navy from somewhere else.

Canberra has a history of being relatively fair in its free trade dealings. Indeed, its agreements with places like Korea and Thailand in respect of automotive imports (seen by many as a refusal to keep in place decent tariffs and dropping them to a nugatory five per cent) are often alleged to be a major cause of the imminent demise of the domestic car manufacturing industry. The strategic implications of not having local automotive manufacture have been a topic of frequent discussion. The similar implications – if any – of losing domestic shipbuilding capacity are now coming under scrutiny.

According to the authoritative ‘Asia-Pacific Defence Reporter’, although major projects such as the Air Warfare Destroyer and amphibious warfare vessels have kept the local industry afloat since the Anzac frigate, Armidale patrol boat and controversial Collins submarine programmes, “vital skills have been lost to other industries, in particular the mining sector, which has enjoyed sustained and massive growth for several years… the ‘boom and bust’ cycles of major defence warship programmes also takes its toll on the design and technical management companies divisions.”

So should Canberra fight to keep its ability to make large ships? Given the extent of Australia’s coastline, is it vital to be able to make vessels locally? Or is it inevitable that other places, with lower labour rates (and more plentiful labour pools) should become the manufacturers of our navy? If so, is that just a matter of lost pride – or a serious breach of Australia’s security?

The shipbuilding sector has been under attack for many years. As regards smaller vessels – inshore, pilots, tugs and the like – and pleasure craft, the market has migrated. Competition comes from Asia, mainly; Taiwan and China are mentioned frequently, although South Korea remains the region’s major shipyard. Cost of labour in Taiwan has reduced that nation’s threat but China is king on the water just now, particularly if you want a well-equipped motor yacht.

For heavier, commercial or naval vessels, Korea is the place. Seven of the top ten shipbuilding companies in the world are Korean; it was an industry fostered by the government in the 1970s as a means of earning foreign currency and led by the giant chaebol (multi-faceted conglomerate, in which the country specialises along with Japan) Hyundai.

How to compete with this? Hyundai Heavy Industries builds 15 per cent of all the new ships in the world; its shipyard stretches over four kilometres along the coast of Mipo Bay in Ulsan. The company is capable of building all types of ships and has ten large-scale dry-docks with nine huge ‘Goliath Cranes’. Since the shipyard’s groundbreaking in 1972, HHI’s Shipbuilding Division has won many global awards and set many records within the shipbuilding industry.

The division reached the 10 million DWT production mark in 1984, and 100 million DWT in 2005. It has delivered more than 1,800 ships to 268 shipowners in 48 countries since 1972 and has a standalone Special & Naval Shipbuilding Division, a licensed National Defence Industrial Shipbuilder and engineering consultant for Korea’s navy. This unit has the technology to design and build submarines, naval ships and auxiliary service vessels of various conventional and advanced hull forms.

At home, there is the Australian Marine Complex (AMC) just south of the Western Australian capital Perth, recently celebrating its tenth birthday. AMC features the Common User Facility, part of the Fabrication Precinct, a large, integrated fabrication and assembly facility with extensive load-out wharves that is available to multiple, concurrent users. The facility includes a dredged, deepwater harbour, a state of the art fabrication hall with 24-hour all-weather access, a ready to use on-site project office, workers’ amenities, warehousing and 40 ha of lay-down and construction land. It also has five wharves – a load-out wharf and marine services wharf with notional capacities of 3,000 and 15,000 tonnes respectively and a newly developed marine maintenance wharf, floating dock, transfer system and distributed services to the lay-down and construction areas. In addition, there are established engineering and shipbuilding precincts nearby.

The AMC also features a Technology Precinct, planned to become “the leading centre for innovative research, education and technology development for the marine, defence and resource sectors in Australia.” A number of top global names are already there, such as Raytheon Australia, which moved part of its Systems Group into a new purpose built headquarters in early 2005. This is Raytheon’s primary facility in Australia for naval systems software design and engineering. Another top name is BAE Systems – but neither of these, nor any of the global big boys, is Australian owned.

Korea, not wholly by coincidence, makes and exports a whole lot of mobile phones, tablets and cameras – and some 4.5 million cars per year. “I don’t hear Australians calling for an all-Aussie computer, or camera; why the need for Australian-built cars, or ships and boats?” was the comment of one senior industry executive.

The F35 fighter aircraft is built in the US, and no one expects otherwise. The aircraft contains a surprising amount of equipment and systems that either originate or are developed in Australia. Also, in evidence submitted to a US congressional committee, it is currently rated as “unaffordable” because of reliability issues. Nevertheless, PM Tony Abbott confirmed in April the increased order of a total 72 of these aircraft at a cost of more than $12 billion (although he affirmed his confidence that the cost would come down over time, apparently defying gravity). He is unlikely to be still occupying Canberra when the fleet is operational (the hoped-for delivery is 2023) but told media the F35s will “ensure our edge as a regional power.”

If F35s can do that for the skies over Australia, could Korean (or US or German) destroyers and subs do the same for its territorial waters? Or, to put it round the other way, how could Australian industry support a shipbuilding sector that could compete with the likes of Hyundai without bankrupting the nation more effectively than the F35? As with all such arguments, you pay your money and take your choice. But the most realistic outcome would be that Australian companies, innovative, compact and flexible, would continue to provide the systems and ‘cleverness’ for vessels (and aircraft, and cars) that are constructed in places where it makes more economic sense.

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

July 19, 2018, 7:51 PM AEST