US Navy before pleasure for Austal JOHN PHACEAS Henderson...

US Navy before pleasure for Austal

JOHN PHACEAS
Henderson shipbuilder Austal has signalled it may pull out of the luxury super-yacht market after being named one of two prospective winners of a $US14 billion ($19.6 billion) contract to build a fleet of 60 attack boats for the US Navy.

Austal, which lost millions building the $70 million luxury cruiser Aussie Rules for golfer Greg Norman in 2002, said yesterday that it and giant US partner General Dynamics had been awarded $US78.7 million to produce a final design contract for the US Navy's planned Littoral Combat Ship project.

The contract, a prelude to a formal deal to build a full-scale $US100 million prototype next year, will put the Austal-GD consortium in a head-to-head battle with a rival consortium led by US defence contractor Lockheed Martin. A third contender, led by US group Raytheon, was eliminated from the race yesterday.

Lockheed Martin is expected to be awarded the first prototype construction contract as early as December, with a similar contract likely to be dealt to Austal in the second half of next year.

Formal contracts for follow-up vessels are expected to be awarded from 2007.

Yesterday's news sent Austal shares racing 8¢ higher to $1.11, lifting the company's market worth almost 8 per cent to $214 million. The LCS project calls for an ultra high-speed vessel, capable of speeds of around 50 knots and armed with the latest weapons.

Such a vessel would be able to cut the Bass Strait crossing in half to just five hours.

While the US Navy plans to buy 60 such vessels over 15 years, the US Army has also indicated its desire to acquire between 15 and 18 similar vessels, each costing more than $US100 million.

Austal chairman John Rothwell said Austal was now almost guaranteed to become a key supplier to the vast US war machine.

"In our opinion, it is reasonably likely that they will run with both the final bids in slightly different roles - I think there's certainly more chance of that than them cancelling one (bid) altogether," he said.

Austal's bid is based on a high-speed, triple-hulled aluminium design, while Lockheed is proposing a more conventional steel monohull.

Austal will design and build the basic platform of each vessel at its Alabama shipyard, while GD will fit the weapons and defence systems.

The US deal comes in the wake of Austal's $550 million contract to build the Royal Australian Navy's next generation patrol boat fleet at Henderson, various other patrol boat contracts with small regional navies and a raft of new high speed ferry contracts around the world.

Mr Rothwell said Austal would have to scale back its luxury yacht business.

"Private yachts are not high on my list right now, as you can probably imagine," he said. "We haven't closed the door to them because we've learnt a massive amount . . . but I'm cutting the marketing expenditure for them to hell."

Mr Rothwell said Austal had so far built five of what were considered the world's biggest, most advanced and luxurious aluminium yachts, including Aussie Rules, which Mr Norman offloaded last month.

"But that's not where our focus is," he said. "I think our business is going to get closer and closer to being divided between high-speed commercial ferries and military vessels."

Overruns by Austal's luxury yacht division, and ramp-up costs at its new Alabama shipyard were the major contributor to the group's disastrous $18.7 million loss last year.