Chris Jenkins became the CEO of Thales Australia in 2008, during which time the company has been transformed from five separate businesses into one of Australia’s biggest defence suppliers. Here he discusses the work his company is engaged in, the state of the industry in Australia, and the opportunities it can offer for manufacturers.
The defence sector in Australia is changing, and it’s a very positive outlook – that’s the short story. And Thales in Australia is changing too. It’s changing to be more agile and competitive, and some of our key projects offer evidence of that.
Thales is a global organisation with 3,200 people in Australia and more than 60,000 worldwide. We draw on that expertise to manage complex risks, working together in integrated teams. We’re also a long-term investor in Australia, having been here for 30 years.
Our business model has changed since I became CEO in 2008. When we acquired ADI Limited back in 1999 it was a vertically integrated organisation that was trying to do everything itself. That just doesn’t make sense. It’s not competitive, efficient or agile, so we’ve moved more work into our supply chain. The Hawkei protected mobility vehicle is the best example, with around 80% of the work done outside of Thales. We increasingly rely on our supply chain as a fundamental contributor to our business.
We are planning to invest more than $100m in our self-funded Research & Development program over the next three years. That will generate solid revenue growth, not just for us but also for our supply chain. In fact, most of the workforce increase will occur in our supply chain.
The defence environment today benefits from an alignment between the Government and Defence policymakers around: how can we create a stronger capability proposition for our soldiers, our servicemen and servicewomen? How can we do it more rapidly and more cost-effectively? Defence needs superior capability, to be at the cutting edge of technology while properly managing risk and availability. They’re willing to invest in these outcomes, and the Government is driving to invest more in Australian industry.
The one absolute challenge is not to fail. I’ve been in the industry for 35 years and seen fluctuating policies towards local industry. When big projects hit Australia, they bring opportunity and risk. If we fail as an industry to manage these risks and deliver well, then the positive policies supporting local spending will fall away and more equipment will be bought from overseas. We must never fail on delivering quality products on time to our customer.
Thales’ approach is to innovate: to share knowledge and create a collective enterprise between Primes like us and our supply chain. The key is to bring our partners into the design phase of a project as early as possible. This is not about us doing the design and handing it over; it’s about a sophisticated level of integration. That shift with Hawkei, with 80% of the work undertaken outside the company, is significant compared to Bushmaster, Hawkei’s predecessor, where only something like 40% of the work was performed externally.
Innovation is key. We need the engineering skills in Australia to support the know-how, and the know-why. We have to invest, and in Hawkei we invested $55m of company money. In our ordnance business, we made a multi-million dollar investment to produce mining boosters in Benalla for a local customer, replacing Chinese imports. We won that contract on cost and reliability. We’ve also put $35m into our Melbourne air traffic management business to develop Australia’s next air traffic control system. Investing in capability, and above all building that capability through an enterprise with our supply chain, is fundamental to this approach.
All these innovations must be globally competitive or they will not be sustainable. What Australian industry does exceptionally well is produce high-quality products that we can sell into the world market based on performance discrimination and cost-competitiveness. It’s not a race to the bottom in terms of price, but a race to the top in terms of performance and quality.
Building supply chain strength
Our supply chain enterprise is growing steadily. We are increasingly reliant on Australian industry, and as a consequence I’ve seen our product offerings into Defence reduce in price. The reduction across several of our projects is around 25%. These supply chain relationships are working, and we want to form very long-term relationships with our partners.
In the Hawkei project, we’ve got key companies that put their own time, money and knowledge into creating the vehicle. Albins Performance Transmissions, the makers of the cross-drive and steering gear, help make that vehicle a success. Companies like RPC and Cablex are involved, as are several others across Australia. We depend on these companies to be successful.
Lives depend on our protected vehicles. Our work on Bushmaster and Hawkei has consequences that go beyond business. Our soldiers are asked to do the hardest possible task that any country can ask of any person, so we have an obligation to deliver the highest possible personnel protection. We have a moral duty, and our supply chain partners have to be ready for that commitment. I’ve met with the families of soldiers that have been in Bushmasters in Afghanistan, and their stories bring home the realities of their work.
Hawkei is currently going through its reliability test phase and is achieving all its objectives extremely well. It’s a $1.3bn contract for the ADF. This is world-beating, world-competitive technology. We’ve exported $250m worth of Bushmasters, and we hope Hawkei will also be an export success bringing significant revenue into Australia.
Australia is a world leader. If we innovate, invest and stay globally competitive, there is an extremely bright future for Australian manufacturing.