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  October 15, 2018 | International, Aerospace, Naval, Land, C4ISR, Security

  Harris and L3 CEOs talk merger, divestitures and why we all should have seen this coming

  By: Jill Aitoro If you ask Chris Kubasik, CEO of L3 Technologies, the company's pending merger with Harris Corp. should not come as a surprise to anyone. Such a move made sense on paper for years, even if the timing was never quite right. Now it is: Both companies are on an upswing, and both companies are led by individuals with an inclination to get it done. The result will be a deal — the largest defense merger in history, if you look at market capitalization — to create the seventh largest defense prime in the world. Defense News spoke to Kubasik and Bill Brown, the CEO of Harris, to find out more about the newly rechristened L3 Harris Technologies. Chris, you called this an acquisition that many felt made sense. So what were the challenges to making it happen, and why is now the perfect time? Chris Kubasik: I think in reality, people thought for years that this combination made sense. It was due to Bill and I working hard that we actually got it done. I think that now is the perfect time because of the customer's needs and demands for innovation and solution. Like I said, with the upswing in both companies, and both companies being strong, I think that gives us the opportunity to put this together, generate the cash and the synergies and position us for long-term value creation for our shareholders. The challenges of all these acquisitions [are so often] culture and leadership. Here, the cultures are aligned. Bill and I are completely aligned. We've known each other for years. We have a clear understanding of roles and responsibilities. We're going to jointly chair the integration committee to make sure we get the best of the best — best people, best processes, best system. I'm sure I've never been more excited in my career than I am today, so it's going to be a lot of fun. The stakeholders are all going to benefit. Bill, how much was the 2015 acquisition of Exelis a building block toward this deal? Not necessarily a merger with L3 specifically, but really big merger that would really transform the company? Did you see this coming? Bill Brown: I've been here for seven years, so we really started early on in developing a culture of operational excellence. I think that has been pretty well embedded within the company. We've made some good progress here. We've leveraged a lot of those tools, effectively integrating Exelis. We reached the cost savings targets we thought we would deliver and we delivered it a year early. So I think we built a little bit of a muscle on how to do an integration. I think this is a great potential combination for us. It does position us well within the defense industrial based hierarchy. We'll generate a lot of savings. But more importantly, the portfolio capabilities is going to allow us to do different things, to provide different capabilities to the war fighter and different things that are clearly laid out in the National Defense Strategy. So as I look at this, it's the right transaction. It's the right time. It's the right environment to do this. A lot of this comes down to the leaders of the organization, and Chris and I [are] completely aligned in what to do and how to create value. So much of this also involves combining and integrating in a smart and efficient way, so should we expect any more divestitures? I know L3 just did a couple recently. Any more to come? Brown: I think if you look at what L3 has done recently, and what we've done over the last five or six years, we both have taken a critical eye to the business portfolio we had. If there's assets we think that are better owned by somebody other than [ourselves], we take a dispassionate view of that. And we transition those assets to a different owner. I think Chris and I will take a look at that going forward. I think there will be [divestitures], given the diversity of the business mix we'll have together. It does create the optionality for additional portfolio shaping. Nothing to mention today, but something we'll be taking a close look at over the coming months and years. Okay, so the couple of years before the transition, in terms of leadership — should I figure that those two years are going to be spent really establishing the integrated company? Kubasik: Absolutely. The top two focuses of Bill and I and the team will be the integration, and continuing to execute on our existing programs and commitments. That is first and foremost. We're going to generate a lot of cash. It's going to take several hundred million dollars of investments to integrate these companies. Then the rest of the cash we're going to maintain a competitive dividend, consistent with what we've done. We're very similar in that regard. In the first year, we're going to use the excess cash to repurchase shares. So the likelihood of acquisition from those first two years are very low. As Bill said, we'll look at the portfolio. We've clearly spent a lot of time together, but the next few months we'll get into it more and more and see what makes sense. The way I sum it up is, the merger creates better benefits and growth opportunities than either company could have achieved alone. I know both companies are incredibly strong in terms of C4ISR and a lot of what you might call the future warfare capabilities. What kind of growth do you anticipate in that area? Brown: When I look at the next several years, you're hitting on the right spot. When you look at C4ISR, it's a broad category. When you look at the pieces underneath that, I think Chris and I, our companies, bring great capabilities [that are] complementary. When you think about what we do at Harris, we've got a very strong position in tactical radios — global leadership, U.S. leadership. A lot of it's ground, starting the movements to airborne tier, starting to provide systems. Chris's business is very strong in avionics. It's very strong in data links, very strong in satcom, very strong between the two of us in optical capability. When you look at all of that broad way of getting better ISR information, I think we bring the right capabilities to the fight. Kubasik: We'll be spending about 4% of our revenues on R&D, which I think is aggressive. And we talk about the customers, just to clarify — we have two sets. We have the usual industry partners, who I think will benefit from this combination, the same way that our end-user DoD customer will as well. Are there any programs that you both were competing on, where there's going to need to be some sort management to eliminate conflicts of interest? Brown: Very, very small. It's almost negligible in terms of where we compete head to head. Again, it's a very complimentary set of businesses, so we don't see that as being a big concern. What kind of layoffs are you all anticipating? Brown: We expect half a billion dollars of cost savings, and half of it is going to come from supply chain and facility rationalization — consolidating our mutual footprint. About half of that other half, so 25 percent, is split from corporate and segment overhead reduction in functional efficiencies, shared services — things that we've done and Chris is now driving at all three. But we're in a market today where the unemployment rate's very low. We both were out there hiring people, trying to hire talented engineers and scientists, get people through clearances. So fortunately, we're in an environment where we need more people, not fewer people. Okay, so you think it'll be relatively modest, getting rid of where there might be overlap? Brown: There's going to be some overlap. There'll be some movement of people, but we're not prepared to talk about any employment reduction today. But again, look, it's an environment today where we're looking for more people, especially in the STEM field. The decision to make Melbourne, Florida the headquarters — will that be permanent? Brown: Yeah, it'll be as soon as we close. It'll be the headquarters in Melbourne, and Chris is going to move to Melbourne. We have about 7,000 people in Brevard County. We've been there for 40 years, very deep, entrenched infrastructure. If you know the area, a lot of the defense players, aerospace defense players, are moving now to the Space Coast. It's a very vibrant community. Again, we've been there for a while. We're deeply embedded into the community with a lot of infrastructure at Harris, so that's what we decided to do. Bill, I was convinced you guys were going to move to Washington for a while, but you proved me wrong. Brown: You know, it's interesting. Look, that came up for us, when we did Exelis, but Chris and I've talked about this. It just doesn't make sense for both companies to move headquarters at the same time. That provides an additional risk in a deal. We thought we need to move to one place or the other. We both thought that Melbourne was a better place for the headquarters of the company. Chris, you get to move again. Kubasik: You know, it's been a couple of years, time to move. I'm getting used to it, so if things slow down this week, maybe one night at 10:00 I'll log onto a real estate website and try to be a first mover before the prices increase down there. [laughter] I know you said in the next couple years no acquisitions would be on the horizon, but do you anticipate even more areas of business that would meld with those that you already play well in? Brown: Look, I would say you started out the question the way I'd answer it, which is: it's too soon to determine that. I think the next couple of years will be about integrating the companies. It'll be about divesting. If we see opportunities for portfolio shaping, making sure that happens, so we stay focused on the business where strategically it makes sense for us to be in longer term. But I think Chris and I both have talked very publicly, individually as companies, about M&A is a part of our long-term growth strategy. So over time, we do anticipate, under Chris's leadership, that there'll be other M&As that will happen over time. But I think in the next couple of years, unless it's something exceptional, must have, we're going to stand down on M&A and really focus on integrating the portfolios that we have. Kubasik: Now the organic growth opportunities, and the beauty of having two leaders at the top, will allow us to focus on our customers, not only in D.C., but globally. And you know how much I love to travel internationally — we're going to have customers in over 100 countries. I still look at that in amazement. We'll be able to deepen those relationships. We both work in a lot of the same countries, but when you have a larger combined content, I think we'll be able to advance internationally maybe further, quicker than we would have individually. So I think one of my focus areas is going to be to help grow the business and meet with those customers around the globe. Chris I've spoken to you a couple of times on the big plans and aspirations to be a non-traditional six prime. You got there way faster than I thought you would. Kubasik: Oh, thank you, I'm an impatient person. I know you also said to me that you didn't envision, and I quote, “building multi-billion-dollar satellites, airplanes and ships.” Does that vision of what the company is, and will be, as a six prime remain intact with this merger? Kubasik: We don't really have any major platforms, [but] when I look at the different domains that we're going to be able to serve, whether it's air, space, land or sea or cyber, that's the exciting part. On the air side, as an example, on a combined basis we have some pretty exciting capabilities with avionics and electronic warfare, as an example. So we'll be able to be on the legacy programs, like the F-16 and F-18, which we already are, and we'll have more content on the next-gen platforms like an F-35. So if we go domain by domain, you see the ability to better connect the different platforms to focus on the secured communication. I think we're well positioned for the multi-domain, command and control and communication systems. I'm excited about the small satellite business that Harris had. I think that's great. You know about our UUVs, our UAVs. I think it's going to work well in conjunction with the industry prime. It'll be a collaborative, cooperative relationship. Brown: I think we're not a company that does or will do a lot of these big, major platforms that the big primes are doing today. The way we look at it, 72 percent of the combined business will be prime, meaning sales to and customers. I think that's an important point to make. Bill you've talked to me about space superiority. How key is space to the combined business? Brown: We have a pretty broad business in space in terms of space superiority. A lot of it, it's ground-based capabilities that provide offensive and defensive capabilities to that space architecture. We've developed a lot of exquisite systems and components that have now moved into end-to-end mission solutions for small satellites. We've got a lot of capabilities on our end, in optics. Chris's business, L3, is also strong in small optics, and they've got really good signal intelligence capabilities that I think can augment the things that we do with some of the space architecture. So I see that as helping us continue to broaden that set of mission solutions in the space domain, that I think we spent the last several decades, actually, developing. What does this merger mean to the top primes? Brown: We have at Harris a great relationship with all of the primes. [We] do a lot of work particularly with Boeing and Lockheed. We do quite a bit now with Raytheon as well, so I think we have great partnerships, and I think if anything [this] is going to be additive to that partnership. I think it'll be favorably received by those guys. Kubasik: I agree a 100 percent. I think they're going to be equally excited as the DoD customer for the same reasons. We'll have the money to innovate the R&D, maybe bundle some solutions. They'll also share over time in the affordability of this synergy. I think it's a win-win for the industry and the DoD customers. Bill, in two years you hand the CEO spot to Chris. I'm asking you to look at a couple years down the road, and I know you're remaining on the board, but any other big plans? Brown: Look, that's three and a half years down the road. If I look at six months between sign and close – that's a lifetime year, as you can imagine. I've been CEO here for seven years. That puts me 10 years at the company. I think with Chris, we'll put the company together on the right track. Look, I'll find something productive to do with my life at that point. https://www.defensenews.com/interviews/2018/10/15/harris-and-l3-ceos-talk-merger-divestitures-and-why-we-all-should-have-seen-this-coming

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  October 11, 2019 | International, Naval

  A quiet Hunter - Navy's Future Frigate

  Valued at $35 billion over its program life, Navy's Future Frigate project, Sea 5000 Phase 1, is second only to Future Submarine in terms of cost to the Australian taxpayer. Navy will receive nine Hunter class frigates, built in South Australia to BAE System's Global Combat Ship (GCS) design and, although optimised for the Anti-Submarine Warfare (ASW) role, they are intended to be equally adept at Air Warfare and a number of other roles. A number of sovereign features will separate the Hunter variant of the GCS from the UK's City class ASW frigates (Type 26), including integration of CEA Technologies' new generation CEAFAR2 radar, Lockheed Martin's Aegis Combat System and an Australian tactical interface developed by Saab Australia. The program calls for steel to be cut on the first vessel in Osborne in late 2022 with the lead ship, HMAS Flinders, launched in the 2027-2028 timeframe and entering service between 2029 and 2031. The nine ships form part of the Commonwealth's Continuous Naval Shipbuilding Strategy and will be built in three flights of three vessels, to ensure the design keeps abreast of rapidly evolving technology. Completion of the last frigate is not due to occur until the early 2040s and the class will form the backbone of Navy's major surface combatant fleet for decades to come. The Hunter class will follow the Type 26 by around five years and will benefit from lessons learned during completion of at least the first two ships, before Flinders enters the water towards the end of the next decade. The GCS design has been touted as the world's most capable ASW ship and in Royal Navy service it will be the successor to the Duke class (Type 23) frigates, long regarded as the benchmark in the domain. BAE Systems has also sold the design to Canada, where it will be known as the Canadian Surface Combatant (CSC) and the family now includes no fewer than 32 ships across three of the world's leading navies, all members of the Five Eyes community. The good news for Australian taxpayers, at this early stage at least, is that Sea 5000 remains on schedule for the first steel to be cut at Osborne in 2022. Around 50 per cent of the first UK ship, HMS Glasgow, is now in production and steel was cut on the second, HMS Cardiff, in early August. Acquiring the Future Frigate The Future Frigate competition was fiercely fought by BAE Systems, with a version of the Global Combat Ship referred to within the company as GCS-A (Australia); Fincantieri, with a version of the ASW-optimised Fregata Europa Multi-Missione (FREMM) frigate in service with the Italian Navy; and Navantia, with an evolution of its F105 design (which forms the basis of Australia's Hobart class destroyers), known as the F-5000. Following the release of a Request For Tender (RFT) in March 2017 the three shipbuilders submitted bids in August 2017 and each design was then subjected to a rigorous Competitive Evaluation Process (CEP). At the RFT release, then Minister for Defence Industry Christopher Pyne made it clear that all nine frigates would be built in an Australian shipyard, using an Australian workforce. Furthermore, he stipulated each of the three shipbuilders would be required to demonstrate their ability and willingness to develop a local supply chain to support the shipbuilding enterprise. In addition, each was required to provide local industry with opportunities to bid into their existing global supply chains. From a capability standpoint, the Commonwealth mandated the CEAFAR2 radar, a next generation radar based upon the highly successful CEAFAR fitted to post Anti-Ship Missile Defence (ASMD) Anzac frigates. In October 2017 then Prime Minister Malcolm Turnbull also announced that Aegis, together with an Australian tactical interface, would be mandatory for all future major surface combatants. BAE System's GCS-A proposal was formally announced as the preferred tenderer on June 29, 2018, at which time it was also revealed the nine ships would henceforth be known as the Hunter class. The first three ships of the Hunter class will carry the names of three major Australian regions, all with strong historical maritime and naval ties. HMA Ships Flinders (II) (SA region named for explorer Captain Matthew Flinders - first circumnavigation of Australia and identified it as a continent); Hunter (NSW region named for Vice-Admiral John Hunter – first fleet Captain and 2nd Governor of NSW); and Tasman (state and sea named for explorer Abel Tasman – first known European explorer to reach Tasmania, NZ and Fiji). When announcing the GCS-A as the preferred design, then Defence Minister Marise Payne said the GCS-A design was selected because it represented the most capable ASW platform. “This is decision based entirely on capability; the best capability to equip Navy in Anti-Submarine Warfare, with range and endurance to operate either independently or as part of a task group,” she said. Payne also revealed that government-owned ASC Shipbuilding would become a subsidiary of BAE Systems during the Hunter class build program, with the Commonwealth owning a sovereign share in the entity but reverting to government ownership at the end of the project. “We were really pleased with that as an outcome, because ASC has great capability. We always wanted to use the workforce, but this allows us to join ASC and BAE together much earlier and we think that will be very positive,” explained BAE Systems' then Global Maritime Systems business development director, Nigel Stewart. “We cut steel for the first Type 26 in the UK in June 2017 and we'll cut steel for full production of the Hunter class in 2022.” On October 5, 2018, the Commonwealth signed an interim Advanced Work Arrangement (AWA), with BAE Systems Australia to enable the company to continue with workforce mobilisation activities. This contract also represented the initial step towards transitioning ASC Shipbuilding into BAE Systems for the duration of the Hunter project. The Head Contract between ASC Shipbuilding, as the prime contractor, and the Commonwealth was signed at Osborne on December 14, 2018, at which time the government estimated Sea 5000 would contribute around $17 billion to the national economy and have create over 6,300 jobs by the program's peak in 2028. Speaking in late August, Craig Lockhart, ASC Shipbuilding's managing director, said the build program is currently on track. “We're exactly where we thought we would be in the program, bang on schedule, after coming through the preferred tenderer announcement in June 2018, to achieve contract signature in December – something I believe is a gold standard in terms of negotiation between the Commonwealth and industry,” he said to ADM. “We signed the contract in December 2018 and we're really only eight months into the program, but we've mobilised very rapidly. We have over 400 people in the Hunter program right now and we have 50 people seconded to the UK Type 26 team in Glasgow, both managing the evolution of the design maturity and managing the transfer of technology from Glasgow over to ASC Shipbuilding.” Global Combat Ship heritage According to the Royal Navy, the Type 26 is designed “without compromise” to excel in the ASW role, as a successor to the Type 23 frigates. The UK Government announced in the 2015 Strategic Defence and Security Review (SDSR) that it would acquire eight ‘advanced ASW ships' and in 2017, BAE Systems was awarded a ₤3.7 billion contract for the construction of the first three ships. Plate steel for the appropriately named HMS Glasgow was cut at BAE's shipyard in Govan, on the banks of the River Clyde on July 20, 2017 and is due to enter the water in the 2019-2020 timeframe, prior to entering service in the middle of the decade. HMS Cardiff will enter the water about two years behind her sister ship and the first steel for her was cut at Govan on August 14. A UK Government decision on the second batch of five ships is expected around the time Glasgow is launched. The UK ships are 149 metres long, with a beam of 20.8 metres and displace around 6,900 tonnes. A standard crew will comprise 157 personnel, including an embarked aviation element, but the ship has enough accommodation space to embark up to 208 people. According to BAE Systems the frigate is ‘an advanced ASW warship designed for the critical protection of the Continuous At Sea Deterrent and Carrier Strike Group'. In simple terms, this translates to providing protection for the Royal Navy's nuclear submarine deterrent force (currently Vanguard and later Dreadnought class boats) and the two new 65,000-tonne Queen Elizabeth class aircraft carriers. With ASW as their primary role, signature management is a very important consideration and every component within the ship is designed with this philosophy in mind. Its primary ASW sensors will be an upgraded version of Thales' 2087 towed array low frequency active and passive sonar, which is the subject of ‘de-risking' activities aboard a Type 23 vessel, and a hull-mounted Ultra Electronics Type 2150 hull-mounted sonar system. In day to day submarine warfare operations, the ships' sonar will be combined with sensors aboard the Royal Navy's embarked AgustaWestland Merlin HMA.2 ASW helicopters. Each Type 26 ship can carry a single Merlin, but the flight deck on the stern is able to accommodate even larger helicopters, including the Boeing CH-47 Chinook heavy-lift helicopter. A large multi-purpose integrated mission bay forward of the helicopter hangar can be used for a number of roles, including carriage of small watercraft and unmanned aerial, surface or undersea vehicles. The UKs Type 26 ships will also come with a formidable air defence capability, for which the primary sensor is BAE Systems' Type 997 Artisan 3D medium-range air and surface surveillance radar. Principal effectors will be the MBDA Sea Ceptor missile defence system, launched from Mk.48 cannisters, and BAE Systems Mk.45 Mod.4 5-inch medium calibre gun, but the ships also have 24 Mk.41 Vertical Launch System (VLS) cells for other weapons. Propulsion is a combined diesel-electric or gas (CODLOG) system based around the Rolls-Royce MT30 Marine Gas Turbine. Brochure figures claim a maximum speed in excess of 27 knots and a range of more than 7,000 nautical miles in electric motor-drive. An Australian Hunter The changes to the Type 26 reference design which define the GCS-A or Hunter class are largely confined to the ship's weapons and sensor systems, including substitution of the Artisan air surveillance radar with CEAFAR2 and Aegis combat system. Other changes will include increasing the number of Mk.41 VLS cells, reconfiguration of the ship's aviation capabilities to allow embarkation of the Navy's Sikorsky MH-60R Seahawk helicopter, and the integration of Harris Corporation's Hawklink Ku-band data link, as used by US Navy major surface combatants. Australia's Hunter class ships will be easily identifiable by their unique mast configuration, which is being redesigned to take the CEAFAR radar into consideration, together with the integration of Hawklink and other sensors and communications systems. “The Artisan radar of the UK's Type 26 is different to that of Hunter, so the approach to positioning the masts with CEAFAR radar needs careful consideration. The CEAFAR radar is heavier and has a higher power requirement, so it will require a more considered integration,” explained ASC Shipbuilding's Craig Lockhart. “So, we're changing the mast structure and moving some UK-specific technology out in favour of Hawklink and other systems, which will allow Hunter to enjoy a much broader interoperability with partners and allies. “The communications masts are provided by Rohde and Schwartz and again are subject to trade studies to consider their interoperability with the Hunter configuration.” ASC Shipbuilding has created a mast working group within the integrated design team to study solutions, which may result in a different solution to mounting, structure and materials being used. Because the CEAFAR radar is significantly more powerful than Artisan, the Hunter design will also require modifications to the heating, ventilation and cooling (HVAC) and spatial management. “It produces more heat in certain modes, so it requires improved cooling management and at the same time it's heavier, so stability and displacement is being modelled,” Lockhart added. “It's well within our design parameters, but the biggest challenge will be making sure the dynamics of the ships' power system work as well as planned and we can supply enough capacity to all parts of the ship. “Whilst we're completely confident that the generating capacity is more than enough, we are making sure we model the system is such a way that we don't dilute the power supply to other parts of the platform – even when we need to operate the radar in conjunction with all the other platform and weapons systems.” Other topside changes to the basic design will include removal of the forward Sea Ceptor silo and an increase in the number of Mk.41 VLS cells from 24 to 32, which will accommodate the Raytheon RIM-162 Evolved Sea Sparrow Missile (ESSM) and Standard Missile 2 (SM-2) weapons currently used by the RAN and its US ally. Further aft, two four-cell missile launchers will be added for either the Navy's current anti-surface Boeing RGM-84 Block II weapon or, more likely, an advanced surface to surface missile which will be acquired in the future to replace the venerable Harpoon. Combat system As noted earlier, the announcement by government in October 2017 that it would mandate the Combat Management System enterprise across Navy's future major surface combatants, has resulted in Lockheed Martin being selected to supply its Aegis Combat System, with Saab Australia providing the sovereign tactical interface. Together with a common Co-operative Engagement (CEC) capability across the future fleet and standardised ESSM & SM-2 weapons, Hunter will enjoy close integration with US surface combatants. The ship's aviation facilities will also be modified to accommodate the MH-60R, which will be Navy's primary combat helicopter for many years to come. These changes include the reconfiguration of the hangar bay itself, an Aircraft Ship Integrated Secure and Traverse (ASIST) track-mounted helicopter recovery system, which is currently also being fitted to the Hobart class Air Warfare Destroyers, and changes to the ship's air weapons magazine to accommodate the MH-60Rs Mk.54 torpedo and Lockheed Martin AGM-114N Hellfire missiles. In RAN service, the standard ship's complement (with an embarked aviation element) will be 180 personnel, but the design still permits this number to grow to 208 if required. Other modifications may be required as the detailed design of the Hunter evolves to incorporate future capabilities. One example of this is the Unmanned Aerial System (UAS) being acquired under Navy's Sea 129 Phase 5 (Maritime Tactical UAS) program, which may select a fixed wing or a rotary wing platform, or maybe even both. “As we continue with the maturation of the final design process, part of our discussions with the Commonwealth – and with the various capability development groups in particular – is getting a detailed understanding of the through life upgrades they either have in the pipeline, or are considering as options,” Lockhart explained. “We are looking at what's being done in other Navy upgrade programs such as the ASMD configuration changes that have been made to the Anzac class frigates and the aviation upgrades we've just completed on the Hobart Class. All of those are being assessed against the Hunter design space and we're taking as much opportunity as we can to de-risk the build program by making sure we have enough people in the upgrade programs of other platforms that we can transfer that thinking, learning and skills across. “We're taking every opportunity to consider their relevance to Hunter, either as a design or build strategy, or as a through-life management consideration.” Build in Australia The planned drumbeat for shipbuilding at Osborne will see a little over three years between the start of work on HMAS Flinders in 2022 and that of the second ship (HMAS Hunter), reducing to two years between Hunter and the third ship (HMAS Tasman). This will progressively reduce throughout the build, resulting in an estimated gap of just 18 months between the eighth and ninth ship in the late 2030s or early 2040s. But before construction can begin, a new digitally-enabled shipyard at Osborne South has to be completed, having been built from the ground up to be (arguably) the world's most advanced naval shipbuilding facility. Construction of the new facility was announced as part of the government's continuous naval shipbuilding strategy, under a $535 million contract with Australian Naval Infrastructure (ANI) – see P44 for more on ANI. Progress on the facility is progressing to schedule and ASC Shipbuilding hopes to begin gaining access to the yard in March 2020. “I walked through the shipyard yesterday and it's coming along quickly, they were putting the last side section on the main, 50-metre high, final assembly building and then the roof structure goes on,” Lockhart said on August 28. “The key challenge is for us to get in early and integrate what I call the ‘shipyard production process' within the infrastructure. We'll get progressive access from March next year and we're on target for a successful handover in the middle of next year – and by then we'll have tested a large part of our digital production processes. “We are setting up a highly efficient, digitalised shipyard and when we get our hands on it – certainly over the next few years – we'll have the world's most advanced shipbuilding facilities.” Fully digital design The Global Combat Ship itself has now migrated to a fully digital design, which provides BAE Systems with the capability to embed all aspects of the design and supply chain, right down to single fasteners. This design is controlled from a single configuration, which is updated at midnight every night. However, this live design concept will prove a challenge in the future when the Hunter is itself a mature design and therefore achieves ‘separation' from the reference ship. This will be further exacerbated when the third variant (the Canadian Surface Combatant) reaches the threshold level of design maturity and the concept will require careful configuration management going forward. “That configuration management process is what our engineering teams are working on right now, so when something is changed on Type 26 that has a platform implication on Hunter (or CSC), how will it be updated in the parts of the design that are common and still managed that live 3D configuration?” Lockhart said. “But it's a huge step forward for design evolution (and) it's a huge step forward for BAE Systems also and I think our customers are already seeing the benefit of managing data on a real-time basis.” The Hunter design process has recently successfully achieved the Systems Readiness Requirements (SRR) milestone. Craig Lockhart said the review made 42 recommendations – fewer than the Type 26 design at a similar stage and reflecting the growing maturity of the GCS family design. “Each of the recommendation categories were things that we were already actively working on with the Commonwealth and they were all broadly related to the changes above the main deck,” he said. “Things like, how is the radar going to interface with the rest of the ship? It has a very high power consumption, so modelling the power dynamics is a key characteristic we have to get our heads around. Also, things like, how is Aegis being delivered through the Foreign Military Sales (FMS) agreement? How well will it integrate with parts of the CMS such as guns, sensors, sonar, coms etc?” The next major milestone will be a System Design Review (SDR), to be conducted in the fourth quarter of 2020 and which will be a major test of Hunter design maturity. 2020 cut steel From a manufacturing process standpoint, ASC Shipbuilding will begin the construction of five hull blocks in December 2020, as a prototyping exercise to both verify capability but, more importantly perhaps, to test the digital production process at the shipyard. The first block to be completed will be to the baseline Type 26 design which, thanks to the lead in fabrication by BAE Systems in Glasgow, can be readily quantified. The following blocks will be to the Hunter design and together they will be used to train the local workforce in South Australia, verify the skills balance and qualify the shipyard itself. “Prototyping is a reason to test the end to end process. People think that it is about just making sure we can cut steel and weld it together,” Lockhart said. “It's not. It's a test of the design itself; it's a test of the design in the supply chain, to make sure we have the materials available when we need them; It's a test that we have design guidance information that is relevant; It's a test of the ability to produce an accurate digital work order for the relevant trades; it's the ability to schedule at the right time. It really is the ability to test without the fear of it going wrong – I'd rather have it go wrong and have the ability to appraise, amend and improve through prototyping.” ASC Shipbuilding has already begun work on prototyping, long before steel is cut on the first hull block at the end of 2020 and is now actively engaged with local South Australian companies to work on the development of the digital work order process. AIC and the Australian supply chain Local industry was invited to bid for work in the prototyping phase of the Sea 5000 build program in late June, with an estimated $20 million in contracts up for grabs, but in the meantime Australian small to medium enterprises (SMEs) are already winning work supplying components and services to BAE System's GCS supply chain. On July 9 for example, Defence Minister Linda Reynolds used a visit to BAE System's Govan shipyard to announce that Adelaide-based Airspeed had become the latest Australian SME to win work on the GCS program. Airspeed will provide the Replenishment At Sea (RAS) ‘stump mast' for the Royal Navy's first three ships between now and 2023. Minister Reynolds noted that Airspeed was the second supplier from South Australia to join a number of Australian companies already working on the program, including CBG Systems (Moonraker), Electro Optic Systems, Liferaft Systems Australia, Mackay Consolidated Rubber, Rowlands Metalworks and prime, Thales Australia. BAE Systems has broken the supply chain down into four categories: Categories A & B are large subsystems, such as propulsion systems, drive train, shaft line etc; Category C covers the supply of smaller components such as pumps and valves, pipes and fittings; and Category D covers the supply of services, such as paint, scaffolding etc. “We have hard targets for Categories C & D to maximise what is delivered from the Australian supply chain component, but equally we are working with Category A & B suppliers to provide opportunities, with some notable successes,” Lockhart explained. “We're working with companies including Rolls-Royce, MTU, Penske Power Systems etc. to bring work onshore to Australia. We're working hard with Rolls-Royce in particular to transition to a fully onshore solution over the course of the program and we're working to bring even more auxiliary component supply onshore as well. “We're looking to use companies like Marand to supply into Rolls-Royce and to position Australian industry to sell into companies like Rolls-Royce, General Electric and Naval Group – these are all companies where we're well advanced in terms of their supply chain commitments, but also their commitment to help us deliver Australian Industry Content (AIC) and that's been well-received.” A further opportunity for local industry participation will come with the development of a ‘Cruiser in a Cornfield' land-based test facility to test the CEAFAR2 radar, Aegis combat system and other sensors in an integrated environment and which is part of the de-risking activity for the Hunter program. ADM understands that ASC Shipbuilding is currently working with the Commonwealth to develop proposals for the design and construction of the facility, which will also be used throughout the life of the ship in the development of future upgrades under the Ship Zero concept – see P36 for more on this. ASC Shipbuilding already has 900 local suppliers signed up through its Supply Chain Qualification Initiative, with around 450 in SA, 150 in WA and the remainder distributed throughout the country. The first Expressions of Interest – in support of the $20 million prototyping activity - are due to be released before the end of this year. Seven indigenous suppliers are already on the company's books and have benefited from mentoring to ensure they are ready to supply into the defence contracting environment, but the biggest challenge faced by the prospective supply chain, according to Lockhart, is cybersecurity. “I think that's an unsighted challenge within the supply chain and one that will come with some cost and effort,” he said. “As BAE Systems and ASC Shipbuilding, we have to provide the customer with an assurance that when this platform comes together, the whole platform is cyber-accredited - and that inevitably flows through the supply chains. That's probably the challenge that will test us hardest.” CSC and future sales The Canadian Government originally selected the GCS design as the basis for its future Canadian Surface Combatant vessel in October 2018 and upheld its selection February this year, following a lawsuit brought on by one of the losing bidders. Canada will acquire 15 ships, to be built locally by Irving Shipbuilding at its yard in Halifax, Nova Scotia under a C$45 billion deal to replace the Royal Canadian Navy's current fleet of 12 Halifax class and three Iroquois class destroyers. The prime contractor will be Lockheed Martin Canada, in partnership with BAE Systems, CAE, L3 technologies, MDA and Ultra Electronics and the first steel is expected to be cut in the early 2020s. This brings the GCS order book to 32 units (eight for the UK, nine for Australia and 15 for Canada) across three variants and the mass of the combined order provides additional supply chain opportunities within the three countries. BAE Systems has already formed a GCS user group community with the three governments and three navies involved to look at a range of common issues, including supply chain management. “BAE Systems negotiating with a supplier with a 32-ship proposition perspective is a much more advantageous position to be in, rather than individual customers ordering in small batches,” Lockhart said. “The other thing is that it really gives the supply chain some long-term certainty and the ability to make investments.” The prospect of increasing the GCS family further is also promising in the near term, with countries like Japan embarking on ASW frigate replacement programs. The Royal NZ Navy will also need to begin replacing its two Anzac frigates in the mid-2030s, despite their current upgrade program. ADM is also watching the US FFG(X) program closely, with the possibility that it will be rescoped and rescheduled in the future. The Hunter class ship, with its pedigree of ASW capability, together with its state-of-the-art CEAFAR radar, US Aegis combat system, Hawklink datalink, CEC capability and US weapons, would arguably make a compelling reference design, should the US Navy seek alternatives to FFG(X) in its current form. “This ship will be the most modern advanced ASW frigate in the water. The reason it won against its competitors was the unique capabilities it offered the UK, Australia and Canada for the roles that they require,” Craig Lockhart said. “Hunter has the ability to operate as part of a global task force and it will have an interoperability with the US that is an advance of Type 26 and, as far as the CEAFAR radar is concerned, this is a very capable radar that is drawing the attention of the world's superpowers.” https://www.australiandefence.com.au/news/a-quiet-hunter-navy-s-future-frigate

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  September 13, 2018 | International, Aerospace, Naval, Land, C4ISR

  New Swedish government advocates for greater defense spending

  By: Gerard O'Dwyer STOCKHOLM — The Swedish military can expect to see a sizable increase in its annual budget regardless of the composition of the new government that will be formed in the wake of parliamentary elections. All of the mainstream parties, including the ruling Social Democrats (SDP), the Moderates, the Center, Liberals and the Sweden Democrats' right-wing nationalist party, campaigned on delivering a stronger national defense and channeling a much higher level of spending to the Swedish Armed Forces over the next 10 years. "Sweden needs a more resilient national defense capability that is better funded and resourced," said Stefan Löfven, the SDP's leader and Sweden's prime minister. The SDP is hoping to assemble a new government in partnership with the Leftist and Green parties. These three parties secured a 40.8 percent share of the popular vote in the recently concluded September 2018 election. Löfven's main challenge is the center-right Alliance group, which includes the Moderates, the Center, Liberals and Christian Democrats. Together, the four Alliance parties won 40.3 percent of the popular vote. The Alliance is looking to form a new government that excludes both the SDP and the Sweden Democrats. The Sweden Democrats raised its share of the popular vote to 17.6 percent. All mainstream parties have ruled out forming a coalition that includes the Sweden Democrats. Defense will be very much on the minds of Sweden's new government, against a backdrop of an unpredictable Russia and a domestic military that is unable to either fund major new procurement programs or work within the tight parameters of the current budgeting framework. By: Aaron Mehta “Sweden's national defense has been neglected for decades. What has happened is shameful. The budget allocated to the armed forces must reflect needs, operational realities and the requirement to replace outdated equipment. The goal should be to raise spending on defense to 2 percent of GDP, the recommended NATO level, inside 10 years,” said Ulf Kristersson, leader of the Moderates and someone being widely tipped to become Sweden's next prime minister. The Alliance supports a more ambitious spending plan for the military that would increase the armed forces' budget by $2.3 billion in the 2019-2021 budgetary period. “The [Swedish Armed Forces] needs to be able to afford to run essential equipment-replacement programs. We need more Army brigades, more fighter aircraft, and among other things an increased cyber defense capacity,” Kristersson said. Restoring the military's budget and finances to levels that actually reflect the force's capability requirements will take time. The organization's budget has been in decline since the Cold War era of 1963, when defense spending amounted to 3.68 percent of Sweden's gross domestic product. Spending as a ratio of GDP had dropped to 1.1 percent by 2015. It currently stands at about 1.03 percent, a historic low. A force development plan endorsed by the armed forces favors an increase in annual spending on defense to between $7.36 billion and $9 billion by 2025. In the longer term, and by the year 2035, the military would like to see defense spending rise to more than $12.1 billion. At the same time, the Swedish Armed Forces would be strengthened from the current 50,000 personnel of all ranks to 120,000 by the year 2035. This proposed new look, improved capability and reinforced organization would comprise at least four brigade-level units, a light infantry special forces regiment, a fleet of 24 surface combat naval vessels and six submarines, eight fighter squadrons, and 120 Gripen combat aircraft. Stefan Löfven's SDP-led government adopted new measures in 2017 to increase annual spending on the military from about $4.7 billion to $6.6 billion by 2019. Under the spending plan supported by the Alliance, defense expenditure would grow year on year after 2019, reaching $8 billion by 2024. Full article: https://www.defensenews.com/global/europe/2018/09/12/new-swedish-government-advocates-for-greater-defense-spending