by Peter Yule
pean companies, the contracts for the project definition study
were made with consortia formed by Kockums and HDW with
Australian industry partners.
The joint venture formed by HDW and Eglo Engineering was
not the result of love at first sight. In early 1983 Hans Ohff and
John White of Eglo visited all the major submarine builders in
Europe. Ohff recalls:
We were received with great courtesy by the Dutch, French,
Thyssen and Kockums. The exception was HDW. When we
asked for an appointment – with the recommendation from
the RAN – we did not receive a reply. A second attempt
resulted in ‘an audience’ with Mr Udo Ude (manager
acquisition HDW). The interview lasted a short 30 minutes,
at best. We explained our capabilities in off-shore oil and gas
production platforms, oil refineries, petrochemical plants and
shipbuilding (not submarines), and made Ude aware of the
important role Australian industry would have in this
project. Ude told us that HDW was a submarine builder and
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77
would only be interested in the Australian project if at least
two boats and subassemblies (packages) would be built in
Kiel. We left HDW with the impression that the company
was the least desirable partner for Eglo.1
HDW was equally unimpressed by its first encounter with Eglo
and began talking with large Australian engineering companies
such as Transfield and Johns Perry, but found little understand-
ing of what the submarine project would involve. Of the people
they talked with, only John Jeremy of Cockatoo Dockyard ‘knew
what he was talking about, but Cockatoo was no place to build
a submarine’.2 For some time HDW considered the idea of coop-
erating with Don Fry of North Queensland Engineers and Agents
in Cairns, as the most progressive Australian shipbuilder and also
because they were attracted by the conservative government in
Queensland ‘for union reasons and for general ease of doing busi-
ness’. However, after assessing all potential partners, the Germans
decided that Eglo, in fact, stood out above the others for its engi-
neering skills, its commitment to the project and the connections it
already had with Germany through Hans Ohff and Eglo’s German
shareholders.3
Of all the companies they visited, Ohff and White were most
impressed with the Swedes and joined with Kockums in a 50–50
partnership to bid for the submarine project, with the understand-
ing that either partner could leave the arrangement at any time.
However, in early 1985 after some ‘agonising debate’ Eglo can-
celled its arrangement with Kockums and formed a consortium
with the Germans, primarily because they seemed most likely to
win. Ohff recalls that the chairman of HDW, Klaus Ahlers, tele-
phoned him and said, ‘We would like you to join with us. The navy
says you’re the best of the Australian industry participants. We
control 90 per cent of the world’s export markets for submarines.
Together we will win.’ Ohff and White were not convinced of
HDW’s intentions and went to Kiel again to meet with HDW.
Hans Ohff was greatly impressed by HDW’s organisational skills
and method of submarine ‘manufacturing’, with the accuracy of
hull construction being far superior to anything he had seen or
known. The decision to join HDW was, however, swayed by its
associated design company IKL, ‘where Professor Gabler exuded
calmness, confidence and capability, which was underscored
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by Dr Ritterhoff in a four-hour dissertation on the company’s
submarine design capabilities’.4
With considerable regret Hans Ohff advised Kockums that
Eglo would work with HDW. Consequently Eglo and HDW
formed a joint venture called Australian Marine Systems to con-
duct the project definition study and, they were confident, to win
the contract to build the submarines.
Once Eglo had committed to the German bid, Kockums was
left floundering without an Australian partner. Roger Sprimont
recalls that the company then spoke with many companies includ-
ing Woodside, Lend Lease, Leightons, Johns Perry, Tubemakers
and BHP Engineering.5 Shortly before the beginning of the project
definition study, Sprimont and Olle Holmdahl went to Australia
to finalise an agreement with Tubemakers and BHP Engineering.
However, they soon decided that the Australian companies were
happy to take a share of the money flowing from the project, but
were unwilling to take any responsibility or risk their own cap-
ital. The negotiations collapsed, leaving Kockums in a position
where they had two days left to put together a consortium. Spri-
mont recalled that Hans Ohff had told him there were only two
companies in Australia that could build submarine hulls – Eglo
Engineering and Chicago Bridge & Iron – so he approached CBI.
Chicago Bridge & Iron was one of the world’s largest engineer-
ing contractors and had been operating in Australia as part of a
joint venture since the mid-1950s, setting up on its own in about
1970. Its Australian business had a similar profile to Eglo Engi-
neering, and like Eglo suffered from the resources downturn in the
early 1980s. CBI’s American parent had been involved in build-
ing hulls for nuclear submarines and thus it became interested in
the Australian submarine project. Ross Milton, an engineer with
CBI from 1971, recalls the company believed that ‘as far as steel
plate structural work went we were . . . better than anyone else in
this country’ and that it also had exceptional project management
skills.6 CBI talked with all the submarine companies in Europe and
decided it would prefer to work with Thyssen, HDW or Kockums.
Milton says that:
The Germans were thorough in the German manner, perhaps
bordering on arrogant (they knew what was best for
Australia) but nevertheless impressive. The Swedes came
S P I E S , L E A K S A N D S A C K I N G S
79
across as less worldly in a commercial sense, having never
built a submarine for export. Kockums was actively building
commercial ships, but the submarine division was populated
by ex-Swedish navy submariners who did not have the same
commercial toughness as the Germans. They were the most
open and we always got the impression they were very
straightforward which was refreshing when compared with
some of the other contenders. The Dutch – we thought they
had a terrific design but it seemed to be very expensive and
hard to build.
Once the short-list was announced CBI tried to sell itself to Kock-
ums, which was impressed with the company’s project manage-
ment skills, but worried by its American ownership, feeling that
this would be politically unpalatable with the focus so strongly
on Australian involvement. Kockum
s knew that the Australian
government would insist on at least 50 per cent Australian own-
ership. Ross Milton recalls that the CBI team was talking with
Roger Sprimont and Olle Holmdahl in the Wentworth Hotel in
Sydney when Sprimont suggested that they should call Geoff Davis
of Wormald International.
Wormald had grown from its origins as a fire protection com-
pany to be one of Australia’s largest diversified conglomerates in
the mid-1980s. By the late 1970s Wormald was trading in more
than 70 countries, with sales of over $1 billion and a workforce
of more than 20 000. Its main businesses after fire protection and
security were electronics and engineering, and it was looking to
develop its defence business.
Geoff Davis, Wormald’s managing director, had a close work-
ing relationship with senior members of the Labor Party and the
trade unions and he received strong hints that the government
would be happy to see Wormald involved in a consortium with
Kockums. He was at the Wentworth Hotel 15 minutes after being
called. He had already discussed with Industry Minister John
Button his view that a viable consortium would consist of
Kockums as designer, CBI as project manager and hull fabricator,
Wormald to manufacture mechanical and defence equipment, and
the Australian Industry Development Corporation as the financial
partner. Davis suggested calling AIDC, which quickly agreed to
join the consortium.
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AIDC was a government-owned merchant bank. It was one of
the later examples of the state socialism of the post-war Liberal
governments, founded in 1970 to promote industrial develop-
ment through loans to promising industries. AIDC’s involvement
enabled the Commonwealth to have a director on the board of
the consortium and achieved 50 per cent Australian ownership.
The new company was named the Australian Submarine Cor-
poration on the suggestion of Geoff Davis, who became the first
chairman. The initial shareholdings were Kockums 30 per cent,
CBI 20 per cent, and Wormald and AIDC 25 per cent each, and
the initial paid-up capital was $10 million.
Looking back on the establishment of ASC, Roger Sprimont
recalls that he had gone to Australia to form a consortium with
Tubemakers and BHP Engineering and, when this fell apart,
within two days he had reached an agreement with three different
companies. He says this could not have happened in an ordinary
company, but the problems in Kockums’ Swedish business were so
great that he could get away with all sorts of things. His authority
was far above his rank and ‘perhaps I always have a tendency to go
further than I’m allowed’. The original mandate he had from the
Kockums’ board was to take 10 per cent equity in the consortium,
but ‘this grew’.
During the project negotiations, a senior Swedish government
official was invited to a lunch at Duntroon. When he arrived sev-
eral army officers walked out of the room as a protest against
Sweden’s refusal during the Vietnam War to supply ammunition
for anti-tank rockets it had sold to Australia. Roine Carlsson,
then Swedish Minister for Defence, recalls an Australian member
of parliament who had served in Vietnam reproaching him for
the same reason. Carlsson knew the contract and ‘explained in a
very friendly way that when Australia had bought the Carl Gustav
weapons system it had promised to only use it in Australia and not
overseas’. Sweden never approved its use in Vietnam and under
the contract it had the right to refuse to supply ammunition. How-
ever, this point was never understood in Australia and one of the
most telling arguments against giving the submarine contract to
Kockums was Sweden’s supposed unreliability as a supplier.
The success of Kockums in reaching the project definition
phase of the submarine competition brought this issue sharply
into focus, although it had been discussed between the Australian
S P I E S , L E A K S A N D S A C K I N G S
81
and Swedish governments since the earliest days of the project.
Central to these talks was Sweden’s neutrality and the possible
security problems that followed. In 1980 the Australian govern-
ment wrote to the Swedish government in connection with other
defence matériel issues suggesting that there should be a ‘memo-
randum of understanding’ for the future supply of military equip-
ment, as Australia needed a guarantee that Sweden would be a
reliable supplier. The following year Australia suggested that there
should also be an agreement covering the security of classified
information exchanged between the two countries.
In March 1981 Australia asked whether it could rely on
Kockums’ security, to which the Swedish government replied that
Kockums was state-owned and all its personnel were security
cleared. If they continued with negotiations Australia was assured
that classified information would not be passed on. Over the next
two years Australia demanded more and more security arrange-
ments and the Swedes slowly responded, being restricted in what
they could offer by legislation on overseas arms sales.
The election of the Labor government in Australia, and in
particular the visit of the Minister for Defence Support, Brian
Howe, to Sweden in August 1983, opened the way to resolving the
problems between the countries. In November 1983 the Swedish
government agreed that Kockums and the Swedish navy could
forward classified information about the submarine project to the
Australian authorities and that Australia could forward informa-
tion to Canada and New Zealand (which both had liaison officers
with the project office). This meant that formal negotiations were
now possible and enabled Kockums to submit a formal tender in
February 1984 for the delivery of six submarines.
The Swedish government had not yet promised continuity of
deliveries but the parliament passed legislation to make agree-
ments between Swedish defence suppliers and foreign countries
binding unless the United Nations imposed sanctions on that
country. This would be unlikely to affect Australia so the way
for negotiations was opened.
In early 1986 Rear Admiral Barry West, Bill Rourke’s suc-
cessor as chief of navy matériel, and Fred Bennett, the Defence
Department’s chief of capital procurement, visited Sweden, fol-
lowed a few months later by another delegation consisting of Kim
Beazley, Ian MacDougall and Malcolm McIntosh. The Swedish
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government raised Kockums’ desire to build the first submarine in
Sweden if it won the contract, but the Australians ruled it out. Carl
Johan Åberg, the Swedish Secretary of State for Foreign Trade,
recalls that the Swedish government was trying to stay out of this
issue but was brought
in because Australia wanted it to be part of
the government-to-government agreement.
In March 1987 Åberg visited Australia, followed in April by
Minister for Defence Roine Carlsson. Both held discussions with
Kim Beazley, who interpreted their comments to mean that the
Swedish government was firmly behind Kockums and would sign
an agreement. This led to the establishment of a steering com-
mittee with representatives from both countries and the formal
signing of the agreement in March 1988.7
Like Australian Prime Minister Bob Hawke, Roine Carlsson
came to politics from the trade union movement and they were
on a committee together at the International Labour Organisation
in the 1970s. Carlsson met John Button – ‘a good talking man of
Melbourne’ – in 1984 and they became close friends, while he
spent many hours in Kim Beazley’s kitchen in Perth talking family
history.
A significant feature of the development of the memorandum
of understanding is that difficulties that appeared serious to diplo-
mats and bureaucrats were overcome by direct talks between
politicians. The close relations between many members of the
Labor government in Australia and their Social Democrat counter-
parts in Sweden had a deep influence throughout the early years
of the submarine project. Was it a factor in Kockums’ ultimate
victory? It is not necessary to give credence to rumours of cor-
ruption (for which there is no evidence) to think that defence
bureaucrats might be inclined to favour a result that would please
their political masters. There need be no obvious distortion of
the selection process for a subtle favouritism to be a factor in a
close contest.
In August 1986 a Czech spy was arrested in Sweden, exciting
the Australian press. The spy was alleged to have been seen near
Kockums’ yards in Malm ö, although no evidence was found to
support this. Ian Sinclair, the opposition defence spokesman, used
the incident to claim that the Soviet Union would now have full
knowledge of the Australian submarine and its ‘tell-tale noise pro-
file’, putting the effectiveness of the submarines at risk. Even after
S P I E S , L E A K S A N D S A C K I N G S
83
the Swedish government denied that there had been any breach
of security at Kockums, Sinclair maintained his concern about
Swedish security.8 For their part, the Swedes believed the story
