February 16, 2016

Yet Another Japan - Australia Meeting - Submarines - Japan's Lead?

Australia's Foreign Minister Julie Bishop in Tokyo, February 15, 2016, responding to a question with the correct Competitive Evaluation Process (CEP) form of words.
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In concurrence with Submarine Matters' articles back to September 2015 here is an excellent commentary from Australia Network News, February 16, 2016 concerning http://www.australianetworknews.com/australia-submarine-deal-america-manipulating/ :

“Australia Submarine Deal: Is America Manipulating?

Australia’s Foreign Minister Julie Bishop has denied reports that the United States is pressuring Australia into buying Japanese submarines. Bishop said she was “amazed” at such reports. The foreign minister’s denial comes in the midst of reports that the US is lobbying for Japan.

Bishop’s response on submarine deal was reported by Adelaide Now. Australia is in the process of acquiring new submarines to replace its ageing Collins-class boats.

Media reports had suggested Washington’s preference for Japan in the Aussie submarine deal. The US reportedly indicated that it would provide the US Navy’s most advanced combat systems to Aussie submarines, only if Japan is handling the submarine production.

This is Japan’s trump card in the three-way race for the deal. The other two contenders are Germany and France. The estimated cost of the submarine project is more than US$36 billion (AU$50 billion).

The US believes that Japan’s Soryu submarine would offer the best inter­operability between Australian and American submarines. It would also enhance the “trilateral strategic co-operation” among the US, Japan and Australia.

The Australian reported that the US harbours doubts about Germany’s ability to protect critical defence technology from the industrial espionage of China.

The US reportedly discussed the matter with Prime Minister Malcolm Turnbull during his US trip in January. It also figured in the PM’s discussions with the US Pacific Commander Admiral Harry Harris and other military figures.

For public consumption, Washington’s official line is that it would respect any decision made by Canberra. But the rider that the decision has  a “strategic dimension” is the real code showing its preference for Japan.

An analysis by US think tank, Centre for Strategic and Inter­national Studies (CSIS) also said Australian subs have a “vital capability.” It also said “further delays in decision making” could risk serious gaps in Australian capability. The review noted that China’s massive military expansion and the cuts in the US defence budget are affecting the US capability deployment in the region.”

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Further reporting from Sky News, February 16, 2016: "Japan and Australia have signed an agreement to increase defence, diplomacy and development co-operation to support the economic future and stability of Pacific island nations.

...[Foreign Minister Bishop] is in the region as part of a four-day tour of Japan and China.

She is expected to meet with Chinese officials tomorrow and urge them to do more to rein in North Korea, which launched a long-range rocket this month in defiance of international laws."

COMMENT

With the undercurrent of US preferences and joint Japanese-Australian concern about China it would be very surprising if the technological merits of the French and German submarine contenders are enough.

In the Pacific alliance system, as in the EU's multilateral defence procurement and NATO, alliance loyalty and political realities count for much.

It will be interesting if any criticism comes out of China over the next week concerning Australia - Japan strategic friendship or China's fear of encirclement.

Pete

41 comments:

BK said...

Hi Pete,

interesting to watch the press. Seems like they stick to the rule "the more often I say something the more truthful it becomes"...

Again, as already repeated at other places, I am missing the counterarguments. There is absolutely no critical thinking here, no weighing of arguments etc.

I think China does not interfere because it is not of the opinion that Australia receives the best subamrine when it goes Japan ;-)

Regards,

BK

Peter Coates said...

Hi BK

It would be a brave group of Australian selectors that would oppose the will of the US and Murdoch Press.

The counter-arguments generally rely on secret information from Japan, DCNS, TKMS with not much being revealed by LockMart and Raytheon. Then this non-public information is even more secretly assessed against complex generally secret criteria with many personal and political compromises - also secret.

The most accessible information is relative strategic importance between the three and also jobs.

Do you think a wide public debate can be held on the various claims of AIP vs LIBs vs LABs (with various combinations) against propulsion and combat system electrical needs?

Cheers

Pete

Anonymous said...

Hi Pete

I show price of 23SS (total price 53,147,170,650 yen [1]) and open tendering (bracket). Only few items ([2], [3]) are open tendering. The open tendering price is 4,642,575,000 yen and its percentage is less than 9% of total price. Open tendering percentage excluding diesel generator and batteries become less than 2% (In 27SS, single tendering will be applied for diesel generators and main batteries). Half of building cost (32,235,000,000 yen) will be spent for material and parts purchasing. Japanese submarine building is not a money-making business at all.

Command System 2,564,478,000 yen (918,225,000 yen [2])
Weapon and Sensor System 9,918,715,800 yen (0 yen)
Communication System 427,888,650 yen (0 yen)
Propulsion, Batteries, Generators and Building Costs 40,236,088,200 yen (3,724,350,000yen [3])

[1]Including cost of Harpoon and torpedo
[2]MFICC (Multi Function Intelligence Control Console), IP sub-system.
[3]Diesel generator, main batteries

Regards
S

Vigilis said...

Hi Pete,
re: "Do you think a wide public debate can be held on the various claims of AIP vs LIBs vs LABs (with various combinations) against propulsion and combat system electrical needs?"

A very interesting question in the context of Australia's 'Silent Service'. Were the actual answer to that question to become "yes", the next questions that should be considered might be:
1 - The U.S. has considered critical details of submarine capabilities provided in a vague manner (e.g. "in excess of") sufficient for public (and therefore potential enemy) consumption. Certainly, the mission success and even survival of RAN submarine crews also depends upon advantages of surprise beyond visual stealth. So, do you agree public examination of key, state-of-the-art submarine capabilities could be contrary to RAN submarine force's ultimate successes?
2 - Smart fellows like yourself and your readers must realize why the press reported U.S. reluctance to share state-of-the-art systems details with potential French and German sub builders, right? So why else does would anyone think the U.S. is trying to "manipulate" Australia's soucing decision? If anything else has even hinted U.S. steering of the decision, I would really appreciate knowing.

Regards,

vigilis

Peter Coates said...

Hi S

Thanks for the information of the cost of building a Soryu for the Japanese Navy.

For the Australian submarine sale many of the costs will be different and greater:

- due to expensive Australian labour productivity and union rules
- cost of rebuilding and adjusting facilities in Adelaide
- long period of training technicians and managers
- profit expected by Australian companies building the Australian Super Soryus and their many Australian local content suppliers
- the cost of the US combat system and weapons (especially the Tomahawk cruise missiles)
- the cost of managing integration of the US combat system into the Australian Super Soryus in Adelaide

Just a few questions.

Re "Japanese submarine building is not a money-making business at all."

1. Are MHI and KHI companies that rely on sufficient revenue to pay shareholders?

2. Are MHI and KHI's submarine divisions being cross-subsidised by other MHI/KHI shipbuilding activities?

3. Do MHI and KHI now need exports to function?

Regards

Pete

Peter Coates said...

Hi Vigilis

Much of my reason asking "Do you think a wide public debate can be held on the various claims of AIP vs LIBs vs LABs (with various combinations) against propulsion and combat system electrical needs?"

was bringing up how extremely technically complex submarine issues are even for dedicted blogger/journalists.

Unlike the highly successful US SSN and SSBN programs which don't appear to draw much public or political criticism the Collins project has/is proving an economic failure:

- in the build stage, and in

- yearly sustainment cost of about A$520 million a year

- unreasonable number of years for sustainment overhauls in dry-dock. Even if there was not a major Australian crew shortage, too many Australian subs are being overhauled due to poor choice of engines and other major defects

It is up to the Australian government to release what details it can to help avoid the some national disaster.

2. You and I probably both suspect that even multi-billion dollar international arms purchases involve some issues of international relations and alliances.

The US sees an Australian purchase of Japanese submarines as a means of alliance cement between Australia and Japan. This will make it easier for the US to net reduce its military power in the Asia-Pacific compared to rising China and new strategic problems/threats from Russia and North Korea.

Evidence includes the words of US Admiral Thomas who was proconsular cheeky enough to publicise the advice he gave to a mere Defence Minister http://www.onlineopinion.com.au/view.asp?article=17065 :

" "Vice Adm. Robert Thomas, commander of the U.S. Navy's 7th Fleet, reportedly said Oct. 24 [2014] in Tokyo that then-Australian Defense Minister David Johnston was very interested in Japan's Soryu-class subs. "I talked to him about it four years ago and I said: 'You want to find the finest diesel-electric submarine made on the planet - it's made at Kobe works in Japan,'…" http://www.japantimes.co.jp/news/2015/01/18/national/stealth-tech-no-given-in-japanese-sub-deal/#.VMXl3v6Uen9

Also in that Japan Times article retired Japanese submarine admiral Masao Kobayashi said, "The U.S., which has close but separate security pacts with Japan and Australia, probably wants Australia to buy Japanese submarines because it would greatly strengthen their strategic military ties."" see http://www.japantimes.co.jp/news/2015/01/18/national/stealth-tech-no-given-in-japanese-sub-deal/#.VMXl3v6Uen9

Cheers

Pete

Archimedes said...

Hi,
in the Australian, dated 11 Feb 2016, Greg sheridan states "Similarly, given that the Soryu actually exists, whereas the German and French subs are completely new builds and exist so far only on paper, there is less technical and commercial risk with the Japanese as well."

I am gobsmacked by the poor level of understanding displayed by the media, unless it is just acting on orders.

Greg Sheridan has obviously made the assumptions that Soryu's design will only be marginally affected by the Australian requirements. That is merely impossible due to the range requirements (assuming Collins equivalent) and the astronomical quantity of diesel-oil to be stored onboard to that end.
On top of that, the Japanese design philosophy has been proceeding with incrementations from one class to another. As a result of that, the Japanese Soryu is still without platforms providing a better stealth or modular build. They are stuck into a no-through road and cannot "jump" to another design philosophy that would enable them to fulfill the Australian requirements. it is against the Japanese way of doing things.

So, what is this fuss about Japanese "stealth" and "secret" technology about? Let's put it this way: do you think that the Japanese have the slightest idea about the technology used on Collins or German and French boats? The answer is NO. So, how could they be aware that the technology they have on Soryu is decades behind the others?
That is the right question to ask...

so assuming it is only about geostrategy, we will end in a situation with a submarine whose initial design is outdated and that will be stretched to accommodate some Australian requirements, basically range only as stealth with elastically mounted platforms will not fit without an increased diameter, which would mean a totally different submarine and moreover some technology the Japanese do not master. We will ultimately have a poorer stealth than on Collins.

Dud subs will be back in the media, potentially through the same journalists that put Japanese technology and mature design on a shrine recently.

How can the Navy accept that?

Some high-ups will have to answer treason charges for this.

Archimedes

Anonymous said...

Hi Pete

1. Are MHI and KHI companies that rely on sufficient revenue to pay shareholders?

I do not know. MHI, KHI and IHI are the big three heavy industries of Japan. Especially MHI is one of the representative manufactures, submarine building is not main business.

2. Are MHI and KHI's submarine divisions being cross-subsidised by other MHI/KHI shipbuilding activities?

Cross-subsidy by other MHI shipbuilding activities is yet confirmed, but judging from recent statement by the President of MHI, Mr Shunichi Miyanaga who committed to build submarine in Australia, a certain kind of assistance by other MHI branches or companies may be expected.

3. Do MHI and KHI now need exports to function?

MHI is the huge multinational business groups consist of domestic 190 companies and abroad 223 companies. MHI is one of the three core companies of Mitsubishi group which is one of the biggest business groups in Japan and has nearly 4.5 million employees!

Regards
S


Anonymous said...

My 2 cents. Conglomerates rarely break down for investors the balance sheet of each operating divisions. So at the Group or conglomerate level, you will clearly be able to subsidize among divisions depending on the nature of the said strategic investment as long as you achieve the target P&L at the group level. This is true in Japan or in the US, etc.
I believe the Japanese government sets an objective to develop a defense export business and this is always supported by various keretsus. The relationships between Japanese conglomerates and Japan government is a special relationship that does not exist anywhere. One should not forget that the Japanese economic model is still an export driven model like the South Koreans or Chinese.
Although these Groups may be public, they do look and invest by taking in a long term view. US public companies are extremely short term in comparison. I am sure those who have P&L responsibilities for a US division or company would wish to have such flexibility.
KQN

MHalblaub said...

Dear Pete,

Problems with going public?

We just need to compare in public what RAAN can estimate from public available sources.

We might remember that RAAN wasn't even capable to look for US weapons used on German submarines.

We can compare the Diesel engines in public because these engines are also available for private use. Hint: there are no fast running Diesel engines designed by Japanese companies.

We can compare the basics of the air independent propulsion system according to stored energy.

We can compare the differences of weapon systems according to various public sources.
- available weapons or not
- world wide use
- price tag
- ...

What also should be on stage is the way Australia will use these submarines because this is a major democratic decision how to use a weapon. From this decision we can conclude what would be the best submarine for Australia.

Well, why not a public vote?

- 8 Soryus/DCMS/TKMS with US combat system.
- 12 Soryus/DCMS/TKMS with inherited system
- 24 Type 210mod

All for more or less the same price.

Anybody who thinks that THE PEOPLE do not have enough insight should explain why a few people with more insight did built Collins-class.

THE Ausralian PEOPLE will pay it not the few who think to be smarter than the rest.

Regards,
MHalblaub

Anonymous said...

Hi Pete

As proved by Mr Miyanaga’s commitment, MHI has a clear will to develop submarine business but KHI does not, because culture of KHI is national company-like. MHI as a submarine building partner of Australia is better than KHI

Regards
S

Peter Coates said...

Hi S [at 18/2/16 10:56AM and 17/2/16 9:14PM]

Thankyou for your responses to those questions.

It is of major importance that you say "As proved by Mr Miyanaga’s commitment, MHI has a clear will to develop submarine business but KHI does not, because culture of KHI is national company-like. MHI as a submarine building partner of Australia is better than KHI."

While Japan has a strong political will to sell to Australia Japan may have a weakness in having 2 closely bound companies (MHI and KHI) as the submarine sellers. This is in contrast to the experienced single company sellers from Germany and France.

If, as you imply, KHI does not have a clear will to develop a submarine export business this may cause major project problems for Australia in years to come. The possibility that KHI, in several years, might wish to drop out of any successful Japanese bid may be worrying Australian selectors.

At present KHI's will to commit problem may be at the heart of the "Gap in full pricing details from Japan" problem in Japan's response to CEP questions?

On the other hand it is encouraging that MHI and its parent company has large financial resources so up front (but maybe not for sustainment eg. welding) Japan can offer subs at the lowest price.

Regards

Pete

Anonymous said...

You cannot overestimate the difficulties of managing new developments for complex systems. MHI just lost about 1.6 billion USD on a cruise ship contract.

http://www.worldofcruising.co.uk/electrical-fire-breaks-out-on-aidaprima/
http://asia.nikkei.com/Business/Companies/Mitsubishi-Heavy-running-behind-on-another-cruise-ship

Anonymous said...

Hi Pete

I show business examples of KHI and MHI.

In the selection of next multi-utility helicopter (UH-X) for Ministry of Defense (MOD), KHI and the consortium of Fuji Heavy Industries Ltd. (FHI)-Bell Helicopter Textron (BHT) participated in the bidding. Almost every concerned personnel expected winning of KHI, because newly developing model by KHI model showed better performance than modified existing model by FHI-BHT. But, MOD was thinking the development of commercial helicopters which would result in cost reduction of military helicopters by mass production effect, and in this case, FHI-BHI model had major advantages. As MOD understood superior performance of KHI model, MOD tried to not bring disadvantages to KHI. But the top management of KHI could not understand MOD’s idea. KHI behaved business as usual and only working-level visited MOD. But, the top management of FHI-BHI repeatedly visited MOD and showed extremely serious effort.

In the bidding, FHI-BHI showed superiority in most assessment (feasibility, time to delivery, lead time of parts supply, life cycle cost, contribution to domestic production, participation of domestic industries, sales plan to private market), and won the tender. KHI got one point, i.e., performance of airframe.

MHI is now developing Mitsubishi Regional Jets based on clear plan and vision, and is going to deliver them in world wide. KHI believes that its raison d'etre is contribution to Japan through defense industry.

MHI cannot proceed submarine business without cooperation of KHI, because KHI has key technology of snorkel generation system (integrated system of snorkel and diesel generation).

Regards
S

Anonymous said...

Hi Pete

MHI analyzed cause of delivery delay of cruise ship and President Miyanaga directly explained situation to shareholders & investors as “Implementation Status of 2015 Project Planning” in Feb/4/2016. http://www.c-hotline.net/Viewer/Default/MHIC18376a32761710d4f57c1345cb069dbf

At contract in FY2011, MHI judged that they could handle the ship building based on past performance of cruise ship building, and they started the cruise ship building as involvement of Ship Building Division, not as involvement of engineering, procurement and building. But there were the issues such as difficulty in building of the first batch, lack of insight into needed latest technology, and lack of consideration in quality and quantity of workers and equipment.

These issues resulted in lack of communication with customer, “increased delay of drawing approval and confusing of purchase/material arrangement” and “hand back building, purchase/material rearrangement and further delay”.

Mr Miyanaga also pointed out underlying causes. Ship Building Division judged only based on past performance/experience, and misunderstood that the division could handle the issues. MHI management did not show enough validation of judgement by the division and lack of monitoring of issues from building preparation to processing.

Next, Mr. Miyanaga proposed preventive measures: Establishment of Shared Engineering Division. Establishment of risk management system directly managed by CEO.

Submarine building by MHI is under different situation. Submarine building is based on past performance. There are less difficulty of the first batch, enough insight into related technology, and trained workers and good equipment.

MHI has high level of quality management system, it can be used in a text book. Top management deeply understands situation based on analysis of cause, pointer out underlying cause, and proposed preventive measures.

The top management of ACS promised improvement in performance of ASC without any analysis, plan and preventive measures. It can be also used in a text book, as a bad example.

Regards
S

BK said...

Pete,

I agree with MHalblaub about the public discussion, although I think a public vote goes a bridge too far.

But can somebody tell me the strategic relevance of the South China Sea for Australia?
It clearly has much more relevance for China and the neighboring countries, also for the US. But if you look at the amount of maritime traffic and the SLOCs that are being used, you get a different picture: see https://www.marinetraffic.com/en/ais/home/centerx:-245/centery:10/zoom:4 ; and click on the Density Map on the left to see the 2013 and 2014 data.

Kind regards,

BK

Anonymous said...

On projects like this, there are zillions of contractors and suppliers. MHI can be the overall project manager as the lead designer while KHI is a subsystem contractor/supplier for the snorkel subsystem.

No 2 ship categories are alike when you sweat the design details, knowing how to build an aircraft carrier or a super tanker does not mean one can build cruise ships well. The suppliers base is different to start complicating supply chains.
KQN

Peter Coates said...

Hi BK [at 19/2/16 8:38 AM]

The S China Sea (SCS) represents a common alliance mid-point (power center) for all the Western and ASEAN allies. That is geostrategic reality and a major reason for interest in SCS. Key Malacca Strait also carries much of China's vulnerable energy imports up through SCS.

Thanks. It is very useful to use https://www.marinetraffic.com/en/ais/home/centerx:-245/centery:10/zoom:4 and clicking on the Density Map on the left to see the 2013 and 2014 data.

It reveals that the Sunda and Lombok Straits are very important to Indian Ocean-SCS shipping. Area north of Java to Borneo is very congested.

Still, most Aussie sea traffic to Northeast Asia travels from Aus eastern seaboard then east of Philippines (not through SCS). Hence value of Guam Naval/Air Base to Aus - including US SSNs based there and probably Aus SSKs refueling there.

Regards

Pete

Peter Coates said...

Hi KQN [at 19/2/16 10:44 AM]

Interesting observation but KHI is basically in joint venture with MHI in building subs for Japan for decades. Half of Japans's subs are built in the KHI shipyard. See Oyashio-Soryu Table http://gentleseas.blogspot.com.au/2016/01/japanese-submarine-costings-oyashios.html

So KHI's importance to the Aus future sub project cannot be easily diminished to mere subcontractor.

Cheers

Pete

Peter Coates said...

Hi S [at 19/2/16 4:12 AM]

Thanks for the case studies. It is most interesting about MHI and KHI warship building. And within warships submarine building is the key interest.

So as you said earlier KHI is less committed to submarines. Does KHI want to stop building submarines for the Japanese Navy?

Does KHI feel that building subs for the Navy is too unprofitable?

Regards

Pete

Peter Coates said...

Hi MHalblaub [at 18/2/16 6:02 AM]

I've been thinking long about your insightful comment.

I'll write a response as an article over the weekend.

Regards

Pete

Peter Coates said...

Hi Archimedes [at 17/2/16 5:12 PM]

I think the Australian and the wider tightbound Murdoch network (much business and Rupert live in the US) do their own analysis and have geopolitical opinions. One opinion is that closer Australia-Japan strategic relations is a good idea, cemented by major weapons system sales (eg. submarines). So Greg Sheridan has an opinion.

Japan has made the largest political effort to sell (including Abe himself talking to visiting Australian Defence Ministers).

Also it is true that Japan can point to the Soryu – with an Aus Soryu being only about 600 tons heavier. France and Germany so far cannot point to similar sized conventionally powered subs.

But it is indeed a worry that Japan has only built subs for its own Navy in the last 78 years. So much more fuel, upgraded diesels and working for a foreign customer may present major changes beyond Japan’s ability.

Media ignorance is in part due to the technical complexity and need for secrecy (commercial and national security-in-confidence). Even expert areas like Lowy and ASPI don’t go into more detail than this blog. The Asia-Pacific Defence Reporter (APDR) regularly goes into more detail.

Much of the “fuss about Japanese "stealth" and "secret" technology” concerns Japan’s pressure hull steel and deep diving. Japan may also be developing Lithium-ion Batteries (LIBs) for submarine much more than its competitors. Japan has a definite plan to newbuild in and operational trial submarine LIBs (from 2019) unlike its competitors.

Regards

Pete

Anonymous said...

Hi Pete

KHI and MHI are both committed to submarines as builders, and they originally involved in development of NS-110 as developers of engineering method. Except building, KHI and MHI offer key equipment, i.e., propulsion motor and main generation system, respectively.

Does KHI want to stop building submarines for the Japanese Navy?
No. KHI is going to increase investment in submarine [1].

Does KHI feel that building subs for the Navy is too unprofitable?
Yes. MOD knows extremely low profit results in loss of motivation and high profit causes increase in budget, and MOD is tries to balance the motivation and the budget. Future weapon business of Japan will become more profit-oriented. Current discount pricing of Japanese submarine is based on three factors, i.e., trust on Australia, needs of defense strategy by submarines, and investment/scaffold for the future weapon business.

[1] http://www.nikkei.com/article/DGXLASDZ03HOP_T00C15A9TI1000/ (translation)
KHI is in preparation for the building up of the submarine, to enhance the repair equipment invested 15 billion yen by FY2019. MOD is going to increasing submarines, and increase in demand of submarine repair is expected. KHI is going to sequentially rebuild the five buildings in its Kobe Works to enhance to repair efficiency.

Regards
S

Anonymous said...

Before collection
“profit causes increase in budget, and MOD is tries”

After collection
“profit causes increase in budget, and MOD tries”

Anonymous said...

According to the Council on Foreign Relations, 50% of the world oil traffic transits through SCS, 3X more than the Suez Canal and 5X more than the Panama Canal enough to give folks plenty of shudder.

For Australia, all oil routes from Middle East (not for India but today India represents < 1% for Aussies) pass through the Strait of Malacca. After that depending on destinations, the traffic goes through the Sunda strait or the strait of Lombok. The reason is Singapore is the hub.

Now there are clear moves to build the Kra Canal in Thailand and funding is likely coming from the new AIIB bank. When that happens and will be finished then the new hub will likely be in Thailand. Then traffic to Asutralia will pass thru from the Indian Ocean to the Gulf of Thailand, just south of Vietnam's southernmost tip, Camau and that will be quite a bit closer to any conflict in the Spratly's for example.

Still one can see the moment there is a conflict of sufficient scale, insurance rates on oil shipments that transit anywhere thru the SCS will skyrocket the minutes after war breaks out.
KQN

Peter Coates said...

Hi KQN [at 20/2/16 8:45 AM}

The strategic and eeconomic impact of a Kra (or Thai) Canal is mighty interesting.

https://en.wikipedia.org/wiki/Thai_Canal#Recent_plans

China's slowing economy may benefit from such a huge construction job. It would also boost Chinese political and economic power in the region.

Like the logical conclusion of China's S China Sea China tendencies a Kra Canal could allow China to bestow lower toll-rates on China aligned nations - especially China flagged tankers.

All good for a future article.

Regards

Pete

Peter Coates said...

The Diplomat - Subscription Only?

Is everyone finding The Diplomat http://thediplomat.com/ has become a Subscription only site in the last week.

Or is this a geographic specific change - with only Australia now having to pay to view The Diplomat?

Regards

Peter

Anonymous said...

Hi Pete

As contract price of submarine [1] occupies 2% of the sales account [2], KHI never stops submarine business. Also, the maintenance work of submarine contributes to the sales.

[1] Contract price of submarine for every two years is about 32 billion yen.
[2] According to the latest report (FY2015 third quarter financial statements of KHI, Jan/28/2016), FY2015 sales account of KHI is expected to be 1,570 billion yen.

Regards
S

Peter Coates said...

Thanks S

For your responses at 19/2/16 10:30 PM and 19/2/16 10:39 PM and earlier responses in this thread.

I'll do an article on this next week.

Regards

Pete

Archimedes said...

Hi Pete,

I concur with your analysis.

I would like to comment one of your assumptions about Soryu's displacement.

I have been doing some calcs that check out with Soryu's draft and here is a secret for you: contrarily to what is said in public domain, Soryu's surface displacement is not 2,900 tons but 3,700 tons (roughly) with a submerged displacement around 4,200 tons.

So, the Australian Soryu is likely to come very close to the "big" displacements that the French and the German display (and let's remember the French said they will shorten their Barracuda to get a "Shortfin" Barracuda).

anyway, if we go Japan, this is going to be a painful and perilous journey.

Happy to help you write the new Steel, Spies and Spin Pete !

Archi

Anonymous said...

Hi Pete

In Japan, the predetermined price of procurement goods is calculated based on the law, i.e., “Instruction on calculation standards of predetermined price of procurement goods” and the Board of Audit strictly checks its adequacy on regular basis. I introduce calculation item and its definition & scope in this law. The predetermined price is summation of calculated values of following items ((1)-(10)). Calculation is conducted according to specified equations.

(1) Direct material cost (material/raw material cost, parts cost)
(2) Direct labor cost (wages including overtime pay, allowance)
(3) Direct cost (design cost, inspection cost, specialized jig & tool cos, machinery & equipment cost, construction cost, experimental research cost, development cost, technical collaboration fee, royalty usage fee, various expense)
(4) Manufacturing overhead (indirect material cost [1], indirect labor cost [2], indirect cost [3])
(5) General administrative and selling expenses (all of the costs incurred in common with respect to management of the entire business and sale of goods [4])
(6) Selling direct expenses
(7) Interest (cost of capital necessary for the accomplishment of manufacturing & selling of procurement goods and benefits of the contract)
(8) Profit (reward for the accomplishment of manufacturing & selling of procurement goods and benefits of the contract, and expense profit of compensation for the risk bearing)
(9) Packing cost
(10) Transportation cost

To be continued

Anonymous said...

Continued

[1] (a) Expense of consumable tool, equipment, fixtures and equipment expenses, (b) auxiliary management material costs (such as fuel for the power), (c) factory supplies cost (such cost of chemicals and nails), (d) office supplies cost

[2] (a) Indirect wage (wage for indirect workers, wage for indirect works of direct workers), (b) wage for waiting time wage, (c) salary (salary for supervisor), (d) indirect allowance (allowance except that in direct labor cost)

[3] (a) Ancillary labor expenses, (b) retirement benefit expenses, (c) depreciation cost, (d) real estate rent, (e) movable estate rent, (f) insurance fee, (g) taxes & dues, (h) repair fee, (i) electric rate, (j) gas rate, (k) water rate, (l) transport cost (except delivery cost of goods) , (m) storage fee, (n) travel expense, (o) communications expense, (p) meeting expense, (q) stock losses & shrinkage (r) processing fees for subcontract, (s) petty expenses.

[4](a) Directors’ salaries & allowances, (b) employees’ salaries & allowances, (c) welfare expense, (d) retirement benefit expense, (e) office supplies cost, (f) depreciation cost, (g) real estate rent, (h) movable estate rent, (i) insurance fee, (j) taxes &d dues, (k) repair fee, (l) utilities, (m) transport cost (except delivery cost of goods), (n) storage fee, (o) travel expense, (p) communications expense, (q) meeting expense, (r) advertising expense, (s) sales commission, (t) research and development expense, (u) petty expense.


The Board of Audit has strong authority and can request correction against unjust or violation of related laws & regulations, and also request improvement from view point of laws & regulations, institution and administration.

Regards
S

Peter Coates said...

Hi Archimedes [at 20/2/16 11:16 PM] Books invited.

If there is some pretty good evidence pointing to a 3,700 tons (surfaced) Soryu I would be happy to run it as an article.

The fact that the Soryus are double hulled (in places) may mean they can vary their surfaced weight (specially using water ballast) in some parts of their mission. The need to counterbalance loss of weight of the AIP chemicals may be a reason.

Re a "A new version of Steel, Spies and Spin Pete!". I thought the book was a bit dry, with a limited audience, mainly of Aussies who worked on the project.

The presumption of direct access to Collins project details (and time delay for security reasons) played out with that book first published in 2008. A similar factual book about the new submarine
may be published in 2035-38!

I can't wait that long. A more contoversial book without those dry details, but educated speculation in the early stages of New Sub Program (eg. 2019-21) may find a much wider audience.

This blog would (in part) be an ideal marketing vehicle for a submarine book or books. People from all over the world (even Russia) read my blog each day.

If you, and others, have book ideas please contact me on my email in my profile.

Regards

Pete

Peter Coates said...

Thanks S [for 20/2/16 11:37 PM and 20/2/16 11:39 PM]

I'll run them as a separate article in a few days.

Regards

Pete

Anonymous said...

Very recently, a series of interesting anonymous texts were posted in 2Ch, the biggest text board in Japan. Judging from content of the post, the poster has deep insight into status of Australian submarine development. Partial summary is as follows.

The competitive tender of next submarine by Japan, Germany and France is a fixed match deeply associated with US Department of Defense.

Japan covers hull and propulsion system, and carries out guidance of submarine building/welding and sales of diesel engine, LIBs and other parts. Japan cannot be expected profit. US covers combat and other systems. Australia carries out submarine building.

Australia and US have already agreed on adoption of AN/BYG-1 as combat system (300-400B yen). US does not offer AN/BG-1 and sonar system to French or German submarine. US is most vigilant about secret leaks of AN/BG-1 and sonar system. US requests compliance of US defense security standard as prerequisite condition at both submarine building and maintenance, which are carried out at BAE Systems Adelaide plant not at ASC.

BlueScope is decided as steel maker, and provides BIS812EMA correspond to HY-100. And submerged depth of next submarine is expected to be from 480 to 600m. Australian sound absorbing tile is also used.

(Reference)
yomogi.2ch.net/test/read.cgi/news4plus/1456397195/
“Australia procures 12 submarines to oppose “rising China” and selects tender by Japan, Germany or France”, posts 107-112

Anonymous said...

300-400B yen ---> yen 30-40B yen

Anonymous said...

Hi Pete

According Nikkei Asian Review (March 3, 2016 7:15 am JST), Mr Hideaki Omiya, Chairman of MHI said MHI might invest in key builder in Aussie submarine project.

http://asia.nikkei.com/Japan-Update/Mitsubishi-Heavy-may-invest-in-key-builder-in-Aussie-submarine-project?page=1

Regards
S

Archimedes said...

Hi Pete,
email sent to you yesterday with some evidence about Soryu's 3,700 tonnes surface displacement and other stuff.
cheers
Archi

Peter Coates said...

Hi Archi [at 8/3/16 9:51 AM]

I would aim to run it this week, Once you've responded to my Reply question to your direct email.

Regards

Pete

Ztev Konrad said...

Isnt the adoption of AN/BYG for future submarine a bit old hat. Its currently in use in Collins class, which are overhauled in ASC yard. So much for the security problems that will cause.

Peter Coates said...

Hi Ztev

Associations with Collins should yield necessary caution but:

The AN/BYG-1 is mainly used on US SSN and SSGN nuclear submarines. US SSNs are being built/launched every year with this Combat System.

Also software on the AN/BYG-1 is constantly updated.

I see this Combat System as the technical and financial key for Australia to use the SeaWeb system - see left top search box for "SeaWeb".

Also see https://gdmissionsystems.com/wp-content/uploads/2015/07/GDAIS_TCS_Datasheet_press_.pdf?utm_source=gdmissionsystems.com&utm_medium=pdf&utm_campaign=link

Regards

Pete