by Peter Yule
and Royal navies as it reduced the risk of their strategic nuclear
missile submarines being detected. Nonetheless, it was impossible
to keep the existence of the tiles a secret, as they regularly fell off
and submarines could be spotted with the gaps in their surface
clearly visible. Neither Britain nor America would share the tech-
nology and the usefulness of their tiles was questionable as the
characteristics of the temperate waters around Australia differed
from the cold waters of the far northern hemisphere.
Oldfield started from scratch by searching the literature, and
recovered a report on a German Second World War project,
code-named Albericht , that had experimented with triplex rub-
ber tiles.5 He was then able to trial some thin tiles on the cas-
ings of Oberon class submarines and was pleased they stayed
on. Oldfield’s laboratory had researched the fundamentals of
bonding and concluded that any bond is only as good as
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the interface. That is, the specific preparation of the surface
of the steel and of the rubber to be bonded to it determines whether
the two will stay together. It is usually corrosion of the metal
surface and water absorption at the adhesive interface that cause
tiles to fall off.
Oldfield asked David Wyllie, who was in America, to enquire
about US anechoic technology, but ‘the Americans refused point
blank’. As was to be the case on several issues in the future, the
US Navy was very protective of its specialised submarine tech-
nologies. Oldfield had no further contact with the United States
until the late 1990s, when the Americans became involved in the
Collins noise reduction effort and were interested in the Australian
technologies that had allowed the tiles to succeed.
By 1984 the navy had initiated a formal tasking to develop ane-
choic tiles, so Oldfield built a laboratory to measure the degree of
amplitude reduction achieved with various types of materials. He
mapped a close correspondence between the chemical properties
of rubber elastomers and their performance in absorbing sound
energy, but in the end Oldfield’s research reinforced his belief in
serendipity. He had found the most useful option for tile forma-
tion early in his research, but had thereafter studied the approach
of other countries in anechoic research. After trying out the ideas
of others he came back to where he had started. All this was done
in a Melbourne laboratory before the widespread application of
computer-aided techniques.
Although Oldfield was close to finalising the development of
his tiles, the navy had still not agreed it needed them. Kockums and
HDW/IKL were asked to provide information on fitting anechoic
protection to their designs but this was not assessed during the
evaluation. However, by early 1987 Admiral Hudson, head of the
navy, considered that the operational requirement for anechoic
protection had outpaced the ‘limited demands originally defined
in the RSC’.6 He directed that the design development of the new
submarine should allow for an additional weight margin initially
of up to 40 tonnes to fit tiles, and that the costs should be borne
by the project.
Oldfield, having determined the most appropriate compound,
designed moulds that allowed the tiles to be produced to fit
the shape of the submarine. A company in Mordialloc that had
already been selected by ASC to produce rubber mountings for
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179
various types of equipment was selected to produce the tiles. ASC
calculated the area and number of tiles, and it was found that
the shrinkage that occurred after moulding could be handled by
caulking between the tiles with the adhesive.
The epoxy adhesive used to attach the tiles was purchased
commercially from Ciba-Geigy, with no specific developmental
work required. It was simply a commercial building adhesive sold
mainly to stick cats-eyes on roads. The product was found by
chance but worked well. Again, serendipity was at work.
Oldfield investigated various paint systems to identify a high-
performance interface to provide the perfect bond between the
hull and tiles, and found that the abrasion-resistant epoxy primer
already used as the first, anti-corrosion coat on the Collins sub-
marines was the best surface for bonding. With the surface clad
in anechoic tiles, it was no longer necessary to apply a topcoat
of paint. Instead, anti-fouling paint – to retard the growth of
marine organisms on the hull – was applied directly to the rubber.
Oldfield’s colleague, John Lewis, did the research to show that a
new silica-based anti-fouling paint could be applied over rubber
without the risk that the surface would crack.
The industrial processes developed to apply the tiles were
equally simple. The adhesive mixture was prepared by hand and
the tiles applied manually and ‘grouted’ with the same adhesive,
in what was one of the few craft applications in the submarines’
construction. The sophistication lay elsewhere. Tiles were held
in place with a system of jigs designed by ASC with DSTO assis-
tance, during a project that stretched for six months. Such was the
precision with which they had been designed that the tiles were
applied to the hull sections before they were welded together. The
gap where the sections were joined was then filled with the preci-
sion of a jigsaw.
In 1991 Oldfield received the Minister’s award for ‘research
into anechoic materials for the Australian Collins class submarine
hull’. Ironically, permission to fit tiles still had not been granted
and Collins was launched without them. Money was eventually
found within the contract contingency, the polite name for Oscar
Hughes’ ‘slush fund’. Consequently, Oldfield saw his research bear
fruit with the launch of the first tiled submarine, Farncomb; under
its anti-fouling coating the boat looked no different from Collins.
He regards the success of the anechoic tile project as part of a team
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effort, owing much to engineering development by ASC and its
willingness to proceed and invest money even though the official
status of the project remained clouded. Oldfield worked at a time
when the project was driven by optimism and he thought ASC
displayed fresh thinking that seemed to be an outcome of the
company’s establishment as a ‘greenfields’ site, unencumbered by
tradition. For his part, David Oldfield’s research, independent and
equally unencumbered by convention, matched anything of its
type produced by the world’s superpowers. He was relieved to
hear in March 2007 that not a single tile had been lost from any
of the submarines up to that time.
C H A P T E R 16
‘On time and on
budget’
The four companies that made up the Australian Submarine Cor-
poration consortium brought complementary skills to the new
submarine project. They also brought conflicting cultures and atti-
tudes. In the early days of the project the complementary skills
proved invaluable, but within a short time conflicts began and by
1989 the consortium began to fall apart.1
The fundamental clash was between Kockums and Chicago
Bridge & Iron, with Wormald playing the role of peacemaker and
AIDC being a bemused and silent onlooker. While there is general
agreement at Kockums that CBI played a vital role in the early
years of the project, the two companies approached the project
with a starkly different attitude. Kockums from the start was look-
ing at developing a long-term relationship with the Australian
navy such as it had with the Swedish navy. CBI as a large engi-
neering contractor was used to setting up a project, completing
it quickly and efficiently and moving on. Ross Milton illustrated
the clash with the companies’ differing approaches to problem
solving:
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The Americans – their problem solving technique could be
characterised as coming at the problem with a baseball bat,
they confront problems. On the other hand the Swedes don’t
do that – they try to surround a problem and love it to death.
If you look at those extremes it almost creates national
incompatibilities.
In 1988 CBI decided that it wanted to either increase its share-
holding in ASC or sell out and leave the consortium. Its offer to
buy more shares was not accepted by the other partners, so it was
inclined towards leaving.
By late 1988 Malcolm McIntosh, the deputy secretary in charge
of capital procurements in the Department of Defence, decided
that CBI’s influence was becoming harmful. He reported to Kim
Beazley that CBI was always looking to minimise its liability and
had pushed ASC ‘to resile from some of its obligations under
the contract’. He believed that CBI was driving ASC ‘towards an
attitude that the Commonwealth should be exploited for the last
dollar of profit, without much regard for performance in terms of
the design and delivery of the submarine’. McIntosh alleged that
CBI had no long-term commitment but was motivated to ‘recover
costs, collect profits and then get out of the submarine business’.
He concluded that the other shareholders and Oscar Hughes, the
project director, ‘believed the project would benefit if CBI were to
dispose of their shareholding’.2
Oscar Hughes was already feeling ambivalent towards CBI
when he went to Chicago to call on the company’s president,
John Jones. Jones kept Hughes waiting and as he sat he read in
CBI’s latest report that the company had about 20 law suits taking
place around the world and was confident of success in all of them.
Hughes was convinced CBI had to be removed from ASC’s share
register.
By March 1990 CBI had sold its 20 per cent shareholding, with
Kockums and AIDC each buying half of the shares. CBI sought a
bonus on the share price, but Paul-E P ˚alsson of Kockums states
that it received only what it had put in. It kept its sub-contracts,
including the major one for hull fabrication, and its influence on
the company remained strong, particularly the philosophy that
‘changes cost – that’s where we make our money’.
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183
Within a few months of CBI’s departure, Wormald also sold its
shareholding, though under very different circumstances. During
the 1970s and 1980s Wormald had been one of Australia’s most
successful multinational companies, with operations in more than
70 countries and two-thirds of its earnings coming from overseas.
In the late 1980s it attracted the attention of the ‘entrepreneurs’
(the private equity barbarians of the era), who used borrowed
money to take over successful companies and then displayed their
managerial ineptitude by destroying them. Alan Bond was the first
to take a tilt at Wormald, followed by Ming Tee Lee and finally by
the Reil Corporation, the creature of three young ‘entrepreneurs’,
one of whom, Bob Mansfield, played a prominent role in a failed
private equity bid for Qantas in early 2007.
Wormald lost most of its senior management and the new
board had no knowledge of the business. They walked away from
$600 million of orders on the submarine project, keeping only the
ship management system and fire control contracts. Wormald had
owned Kelly & Lewis pumps, Australian Fibre Optic Research,
Johns Valve and Richards Valves, all of which had submarine con-
tracts, but they all went in the fire sale.
Reil Corporation had borrowed heavily to fund the takeover
and defaulted when interest rates soared in the late 1980s.
Wormald was broken-up and its electronics research laboratories,
among the most advanced in Australia, were closed. In June 1990
Wormald sold its 25 per cent share in ASC, with Kockums and
AIDC again buying half each. Wormald had originally put $2.5
million of equity into ASC, and sold its shares for $28 million.3
The takeover destroyed a great Australian company and had
serious consequences for the submarine project. Wormald had
worked closely with Kockums and provided invaluable assistance
in doing business in Australia. The loss of this Australian touch
was serious, but probably even more serious was the loss of the
leadership provided by Geoff Davis. Commercially astute and
yet totally dedicated to the submarine project, he provided the
commercial partners in the project with drive and leadership to
complement that of Oscar Hughes.
With CBI and Wormald gone, Kockums was left as the major-
ity shareholder with 52.5 per cent, while AIDC held 47.5 per
cent. Government policy was for majority Australian ownership
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of ASC, but it did not want this held by the Commonwealth. Con-
sequently, in December 1990 Kockums, somewhat unwillingly,
sold a 2.5 per cent holding to James Hardie Industries, a major
Australian industrial company, and in early 1992, following fur-
ther government pressure, it sold a further one per cent to AIDC.
James Hardie was never anything more than a passive investor
whose sole role was to maintain majority Australian ownership.
Kockums’ background of working very closely with the
Swedish navy and procurement organisation produced a corpo-
rate culture where it was ‘not interested in being the tallest pole
in the tent’.4 Even when Kockums became the majority share-
holder in ASC, there was a widespread perception (shared by many
Kockums personnel) that it was not willing or able to accept the
responsibility and challenges this involved.
The first significant dispute between ASC and the project office
was over issues with insurance left unresolved from the contract
negotiations. These had concluded that ASC should take out com-
mercial insurance, but the price of this became an issue. It had also
been agreed to divide risk between dry (in the yard, ASC’s risk)
and wet (at sea, Commonwealth risk), but even in the latter case
ASC retained liability for faulty design or workmanship.
Ron McLaren, now Oscar Hughes’ financial manager, felt ASC
was trying to use insurance as protection against the risks of the
project and push this cost onto the Commonwealth through the
premium. Oscar Hughes considered the cost of the ‘all risk’ com-
mercial insurance unacceptable as ‘it would kill my project’. He
recalls beginning the insurance negotiations soon after signing
the contract: ‘No sooner had we started than one of the Dutch
Walruses caught fire while it was being built and a Japanese sub-
marine rammed a ferry while on its sea trials with great loss of
life – it was not a good start to insurance discussions.’
ASC negotiated a cover with Lloyds for everything includ-
ing faulty design and workmanship, but for a price of about
$20 million per submarine. This was agreed with the Common-
wealth in a settlement in December 1988, to cover the dry risk for
the first boat, but was too costly for a general settlement. Hughes
insisted on separate quotes for dry risk and wet risk and ASC
was as insistent that the Commonwealth bear the full insurance
cost. It took four years of negotiation and litigation to resolve the
issue. Wet and dry risks were separated and the cost reduced to
‘ O N T I M E A N D O N B U D G E T ’
185
the original ceiling of about $75 million. P är Bunke, the commer-
cial manager of ASC, saw the insurance issue as one of the biggest
problems the project faced in its early years, and it inevitably
affected the overall relationship.
The insurance issue had a further unexpected resonance. One
major criticism of the project was that ASC was paid too much
too soon, allowing the company to pay excessive early dividends
retain while retaining insufficient money to fix the defects found
in the submarines in the later 1990s. This criticism was made in an
Auditor-General’s report in 1992 and is a view almost universally