ASC to Split into 3 - Media Release and Comments

ASC is to be split into 3 in 2017. Above is an ASC bloke in front of HMAS Hobart, the lead Air Warfare Destroyer (AWD). 

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The confusing Defence Ministerial Duumvirate of Payne and Pyne, with Finance Ministerial endorsement from Cormann, have produced the following Joint Media Release on the long expected separation of ASC into 3 new government owned companies.

JOINT MEDIA RELEASE

Supporting Australia's future shipbuilding capability

MC 48/16

Senator the Hon. Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia

The Hon. Christopher PyneMinister for Defence Industry

Senator the Hon. Marise PayneMinister for Defence

11 October 2016

ASC plays a crucial role as part of our naval shipbuilding, repair and maintenance industry. To ensure that it is best placed to support the future needs of Australia’s future shipbuilding capability, the Government will separate ASC into three individual Government owned companies.

These three new companies will support the key capabilities of:

• Shipbuilding;
• Submarine sustainment; and
• Infrastructure.

The separation of ASC will deliver a more flexible approach to managing the investment required in shipbuilding infrastructure to support the Government’s historic continuous shipbuilding program.

The new submarine sustainment and shipbuilding companies will continue ASC’s important role in the sustainment of the Collins Class submarines and finalisation of the Air Warfare Destroyers respectively.

The creation of these three new companies follows a strategic review of ASC, which was conducted in 2015. The review sought to identify the best possible corporate, capital and governance arrangements to help maximise the future success of ASC and the Australian naval shipbuilding industry.

It is important to note that the Government does not have a plan to privatise these three new companies.

These changes will have no impact on ASC employees’ current terms and conditions and will provide the right structure for the growth of the workforce as a result of major infrastructure investment and the construction of Offshore Patrol Vessels, Future Frigates and Future Submarines. 

Work will begin immediately to separate ASC into the three new companies, with the full separation expected to be completed in 2017.

The Government will also enter into discussions with the South Australian Government on the future of the Common User Facility at Techport to ensure a cohesive approach in support of future naval projects.

The Government recognises the significant value to our nation of a skilled naval shipbuilding workforce. The Government is prepared to invest in the skills and knowledge base of the Australian naval ship building industry, and is prepared to commit to a long-term investment to make sure this important industry enjoys a sustainable future in Australia and that these critical skills are maintained. 

For more information see Q&A [which is the Factsheet: ASC Structural Separation]  [ENDS]

COMMENT 

Andrew Davies and Mark Thomson at ASPI Strategist made some useful comments on October 12, 2016, including:

"...Yesterday the Australian government (with the PM and three cabinet ministers in attendance) announced that it’s going to split ASC into three separate but still government-owned companies, to ‘support the key capabilities of shipbuilding, submarine sustainment and infrastructure’. It was heartening to see some movement on the issue. It’s vitally important that government gives serious thought to the industrial arrangements for projects that will cost the taxpayer tens of billions of dollars—something we noted last year.

At yesterday’s announcement, the government was at pains to note that it ‘does not have a plan to privatise these three new companies’. So what’s been gained and lost by the split? On the positive side, the newly created businesses will be able to focus single-mindedly on their respective specialisations. And the separation will provide greater public transparency into the business performance of the three components (though the government won’t necessarily see that as a benefit).

On the negative side, we’ll see corporate overheads (including board positions) multiplied by three. At the same time, interactions between the three newly created companies will generate additional transaction costs... 

...It’s interesting that yesterday’s announcement made no mention of submarine building. That’s probably because there’s no submarine construction at the moment, and likely won’t be for some years, given that the contract with DCNS for the commencement of the design phase for the future submarine was signed only two weeks ago. By retaining ownership of the infrastructure in Adelaide, the government now has the option of simply letting some space to DCNS for the construction phase, rather than once more going into the submarine building business itself. And it can also opt to move the now separate submarine sustainment business to Western Australia (where ASC already has a maintenance facility) if space at Osborne is at a premium...."

See the whole ASPI Strategist article Interpreting The ASC Split, October 12, 2016 by Andrew Davies and Mark Thomson.