Austal: Rising Star?
Australia for many years has created companies that can punch beyond their weight on a global stage. Examples of these have been Westfield, CSL, Afterpay, Cochlear and Blackmores. These companies have greatly improved local employment and driven innovation here in Australia, carving out a niche in increasingly competitive markets.
Indications are that the Australian government has the opportunity over the next five to 10 years to create a new global champion through Austal. This Western Australian-born ship building company has slowly been building a presence on the world stage over the years. You don’t have to go far to see examples of the innovation coming out of their facilities. The Australian Navy sending soldiers to East Timor on board its new high-speed ferry, and Austal-built ferries selected for their superior design replacing the famous Hong Kong to Macau hydrofoil, are but two of many.
The most recent example, the US Navy’s LCS (Littoral Combat Ship), demonstrates management’s willingness to take a risk and innovate on a global stage. Lockheed Martin and its partners responded to the challenge of developing a vessel capable of operating in shallower waters, with frigate capability by slightly tweaking its standard vessel design. Just like most new ships, the first design blew out in cost to the tune of $700 million but after some soul searching, management was able to bring costs back to the budgeted design for the US Navy.
COVID-19 has found Canberra exchanging strong words with Beijing, in response announcing billions of dollars for long range naval missiles. In a world looking to stimulate local economies to get things back to pre COVID levels, this presents a good opportunity to create jobs, while improving our naval capacity.
In a move set to improve productivity, Canberra recently transferred the shipyards to UK owner, BAE systems, to get more certainty out of management of these complex large projects. The more recent Collins class submarine replacement project has led Prime Minister, Scott Morrison, to pick up the phone to French President, Emmanuel Macron, to ease tensions on the project. A smart commercial deal to allow a company like Austal to build some of these local projects and a combined privatization of ASC (Australian Submarine Corporation) to them would create a local global battler. With the transfer would come valuable experience in traditional ship design, submarines and aircraft carriers combined with new proven management. A disciplined approach would be applied to bring projects in on time and on budget. A workforce team would emerge with a broader set of skills to design all required class of ships for the global navies. The cherry on top though is the fact that this management team have demonstrated they can operate in a global commercial world bidding for foreign navies and winning!
To me, this just seems like a sound and logical step for Canberra to take. We appear to now have something in Canberra that we haven’t had in years, as recent events have shown. We have a government willing to take risk and lead. Perhaps with our coming budget and a focus around our defense force planning for the new world order, Canberra can unleash the global potential of Austal.
At the time of writing this article Austal was $2.50.