‘Legitimate policy differences’ and ‘personality clashes’ said to be stalling negotiations with Naval Group, tasked with building Australia’s $50bn new fleet

This article is more than 1 year old

This article is more than 1 year old

The Australian government has summoned the head of the French company tasked with building a $50bn fleet of next-generation submarines for crisis talks in Canberra.

Naval Group chief executive Hervé Guillou travelled from Paris to the national capital for two days of discussions which kicked off on Thursday.

The federal government is yet to finalise a strategic partnering agreement with Naval Group, which is designing Australia’s fleet of 12 new submarines. There are hopes to have the agreement sorted by Christmas.

A defence insider said there are tensions between Naval Group’s executive director in charge of the Australian submarine project, Jean-Michel Billig, and senior Defence officials.

The source characterised the negotiations as tracking “poorly”.

“There are some legitimate policy differences that have been greatly exacerbated by personality clashes,” the source said.

It’s understood Defence secretary Greg Moriarty and acquisition boss Anthony Fraser are also involved in the crisis talks.

If no headway is made soon, the talks could be escalated to ministerial level or up to prime minister Scott Morrison and French president Emmanuel Macron. The pair are expected to meet on the sidelines of the upcoming G20 leaders summit in Argentina at the end of the month.

It’s understood the sticking points on negotiations include warranty issues, the level of Australian content, as well as a potential sale or merger between Naval Group and Italian shipbuilder Fincantieri.

Christopher Pyne insists Australia's $50bn submarine deal is not in trouble Read more

In October, the defence minister, Christopher Pyne, dismissed reports the submarine project was in trouble.

In 2016 the Turnbull government agreed to purchase a dozen Shortfin Barracuda-class submarines to replace the ageing Collins subs, which were launched in 1998. The subs are due to be built in Adelaide, starting in 2022.

Australia’s lead negotiator, Rear Admiral Greg Sammut, told the Submarine Institute of Australia conference in Canberra earlier this month that the first submarine won’t finish trials until 2034 or 2035.

The final sub is expected to be delivered in the 2050s.

Meanwhile, the federal government’s shipbuilder ASC, which is in charge of keeping six Collins subs operating until the new fleet is ready, warns Naval Group is poaching key staff.

The ASC wants Naval Group brought into the fold on a submarine enterprise.

“While Naval Group remains separate from the submarine enterprise, its growth and impact on the sector poses a serious risk to … the Collins class,” the ASC said in a submission to a Senate inquiry.

There are also ongoing concerns about the small size of Australia’s pool of submariner crew.