Exclusive: Japan eyes British help to sink German bid for Australian submarine

Thu Jul 23, 2015 10:58am EDT
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By Tim Kelly, Nobuhiro Kubo and Matt Siegel

TOKYO/SYDNEY (Reuters) - A Japanese government team is in talks with at least two top British firms to help a Japanese consortium land one of the world's most lucrative defense contracts, sources in Tokyo said, a $50 billion project to build submarines for Australia.

Germany's ThyssenKrupp (TKMS), a rival bidder, is wooing anxious members of Prime Minister Tony Abbott’s ruling Liberal Party with the economic and political benefits of its proposal.

Two Japanese government officials and a company source in Tokyo said Babcock International Group and BAE Systems had approached the consortium of Mitsubishi Heavy Industries and Kawasaki Heavy Industries with offers of help. Other British defense contractors may also be involved, they said.

All three sources spoke on condition of anonymity because of the sensitivity of the subject.

Both Babcock and BAE declined to say whether they would work with the consortium, the builders of Japan's 4,000-ton Soryu diesel-electric submarine, on the Australian project.

A spokesman for Japan's defense ministry said the Japanese bidders were responding to Australia's desire to have as much local participation as possible in the project.

"With Mitsubishi Heavy taking the lead, we are gathering information from both Japanese and foreign companies in regard to Australian industry but we are unable to disclose any specific names," the spokesman said.

Both Babcock and BAE Systems are well established in Australia. Industry sources in Europe said any decision by Babcock to work with the Japanese bid could unsettle TKMS and France's state-controlled naval contractor DCNS, which is also in the fray for the submarine contract.   Continued...

A security guard stands at the entrance to the naval dockyards, where BAE Systems is located, in Portsmouth, southern England November 6, 2013.  British defence contractor BAE Systems said it would start a consultation process to lay off 1,775 ship workers across the UK and would stop all shipbuilding at Portsmouth on the south coast of England next year.     REUTERS/Stefan Wermuth (BRITAIN - Tags: BUSINESS MILITARY POLITICS EMPLOYMENT) - RTX152FZ