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How France sank Japan's $40 bil Australian submarine dream

By Tim Kelly, Cyril Altmeyer and Colin Packham

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how a series of missteps by a disparate Japanese group of ministry officials, corporate executives and diplomats badly undermined their bid.

Which pretty much says it all. The Japanese probably thought that their way of doing business would carry them over the top but failed to realize that the rest of the world does not play the same way.

“We thought up to the end that we could have won,” another source in Japan said.

This is probably what you told your bosses. However from within the article there are just too many, and probably more as well, details and obvious things you should have done to keep yourselves competitive.

You lost, and now is the time to go back and learn from the mistakes, but it will probably take a generation or two for the lessons to be learned here to sink in.

16 ( +17 / -1 )

Australia’s political instability would erode Japan’s advantage with the old guard.

What? Australia's political instability? They have changed PMs four times in ten years! Unlike Japan who has had 16 prime ministers in as many years. Japan missed this contract because they failed to properly prepare their bid and were relying on Abbott's polished apples to secure it. Well, guess what Japan? The boat sailed without you, again! Stop crying over spilled milk and suck it up buttercup! You only have yourselves to blame!

15 ( +17 / -2 )

This is a great opportunity for Japan to learn about where they sit in many walks of life. While reading it, I was reminded of other examples of Japan's complacency - most prominent of which being the electronics industry and the failure of companies here to counter the rise of Korean competitors.

Or Sony in the last decade - being first-to-market with music players only to be trumped by Apple. The Sony Walkman was a fantastic comercial success, but the late 70's are a long time ago and the rules and players are different.

While on the international sporting stage, I often get the feeling Japan are going to lose a football match when... they score first. Their psyche to get to number 1 or in front is admirable but thereafter, adapting to or reading changes in 'the game' - sporting, industrial or otherwise - leaves them soul-searching.

14 ( +15 / -1 )

As much as the Japanese approach was weak, the product itself also had question marks.

2 ( +5 / -3 )

Japan's bid was the favorite until early this year when they failed to attend several conferences regarding the submarine bid and the logistics associated with building the submarines. The Australian government realized that Mitsubishi Heavy Industries/Kawasaki Heavy Industries lacked experience in building submarines overseas. Furthermore, the French submarine is technologically superior over the Japanese submarine. The Japanese submarine isn't very fuel efficient and has less range. So there were many reasons why the French won and the Japanese lost, but the most significant reason was Japan Corp's lack of communication. This is unfortunate as this was a mega deal. $50 billion deals don't come easily. Most deals these days in the shipbuilding deals are worth $500 million to $2 billion at most. Furthermore, Australia is a country where strikes and other workplace mishaps are controlled, such that foreign companies are compensated for in terms of work time lost. So Australia is an excellent place to manufacture, if the final product is going to stay in Australia. The reason why Australia's manufacturing industry hasn't been doing well these days is because they weren't able to export many products overseas- a result of years of the strong Australian dollar, although that has changed these days.

12 ( +12 / -0 )

Odds that Japan Inc. will learn and grow from this?

3 ( +4 / -1 )

Why do I have this image of a meeting in Tokyo;

Japan Defense Minister: "OK, let's hold an event in Sidney and bring AKB48 and sushi."

Staff1: "Great idea! Sugoi!"

Staff2: "Subarashii!"

Staff3: "Ii desu ne."

0 ( +5 / -5 )

Other Japanese officials still want Australia to explain why they lost so they can learn from the painful and bewildering experience.

how many foreign companies have lost business chances in Japan due to the "bewildering" way the Japanese companies do business?? Welcome to the club boys....

10 ( +10 / -0 )

It seems that most Japanese are glad Japan lost the game whatever reasons there. It has banned to sell weapons overseas before Abe made new war law.

2 ( +2 / -0 )

Excellent article. It's reads like the plot to a movie.

6 ( +7 / -1 )

Japan needs to learn from this.

As for Australia; By the time these submarines are built, and if they are successfully built, given Australia's industrial, technological and manufacturing limitations, they will be well and truly obsolete.

-3 ( +3 / -6 )

Basically Japan drew a line in the sand saying we will not go beyond the line and will not pursue win for the sake of winning sacrificing production.

Japan was skeptical in ASC's level of competence and wanted to train their personnel before they go on their own because after all the Japanese boat's reputation is also on the line.

-9 ( +2 / -11 )

Japan has been outsmarted, outnegotiated and outmaneuvered by the french. They failed to identify what were the key points to address thinking that 'being japanese' (I.e in their mind technologically superiors to anyone) was enough to get the contract. I feel for them but they have to realise the rest of the world does not think nor act the way they do, they/we have other criteria.

Great article btw.

10 ( +11 / -1 )

Article should be retitled: How Japan sank Japan's chances at a $40 bil Australian sub deal

12 ( +13 / -1 )

Looks like France wanted it more, did their due diligence, prepared a better plan and made all the right moves. Kudos to them.

13 ( +13 / -0 )

The Japanese did not attend a conference for the Future Submarines project in March

Japan's first major chance at exporting arms, and they don't even attend the crucial conference?

Tokyo, don't ask Australia to explain.

Just print out this article and keep it in mind for next time.

8 ( +8 / -0 )

When ASC is having these kind of problem I don't blame Mitsubishi being skeptical.


Soon after construction on the AWDs began in 2010 with the fabrication of pre-fabricated hull blocks at three widely-distributed locations in Australia, reports began emerging of challenges facing the process. These reportedly were primarily related to workforce inexperience with Equid estimating that 95 percent of the workforce was new hires who needed to be trained in the specialized roles they were working in, but also because of issues with drawings available for the alliance to work with.

-4 ( +1 / -5 )

Could be a good thing. IMHO, I wouldn't feel comfortable earning a lot of money by putting people in perpetual fear that my product will "work".

-2 ( +1 / -3 )

Unfortunately I doubt Japan will learn from this.

The fact they still 'want Australia to explain themselves' despite the reasons being obvious to any reader of this article, says it all.

7 ( +9 / -2 )

Japan looks like its going to have to be a PARTS supplier, like it is to the I-phone etc, rather than a maker of products.

Japan totally blew this one & seems they didn't see it coming...........yeow!

4 ( +5 / -1 )

Readers in this venue keep banging on about how the Japanese lost the bid due to their incompetence. Would it be out of place to remind commentators that the Germans also lost out? If it was patterns peculiar to the Japanese people and Japanese corporations, what lost it for the Germans? Did they make the same mistakes as the Japanese?

I would also note that it is far too early in the game to decide whether this bid was something worth winning. As the article and some commentators in this venue have noted, this contract was largely about providing jobs and training workers in Australia. Even when weapons systems are built in your home country with a workforce you know, projects have a way of falling behind schedule and costs skyrocketing. The potential is even greater when you are doing this through a language barrier thousands of miles from your home base.

Ten years down the line this might look like a really great deal for the French or it may look like a black hole into which more and more time and money is disappearing. Take a look a look at the French track record with nuclear power plants. Staggering cost overruns both in France and in Finland. Whether the French can translate and transplant their submarine building technology is something that remains to be seen. They have not done well with nuclear power plants.

As a Japanese taxpayer, I'm quite happy the French got this one. Even if Japan had won the contract, the contribution to the economy would be minor because even $40 or $50 billion spread over decades is not all that much. But, if Japan had won the project and it got delayed or costs started going up, you can bet that I and other Japanese taxpayers would end up subsidizing the loses.

-6 ( +5 / -11 )

bullfighter: You said the other day as well that Japan did not lose to incompetence, but CLEARLY they did.

"Japan’s belated attempt to engage with potential local suppliers at a follow-up event in August 2015 went badly."

"The Japanese group, which included Mitsubishi Heavy Industries (MHI) and Kawasaki Heavy Industries (KHI), also failed to clearly commit to providing skilled shipbuilding jobs in Australia."

'“Even though we were in the competition we acted as though nothing had changed,” said one Japanese government source involved in the bid. “We thought we had already won, so why do anything to rock the boat?”'

"Yet, convinced the deal was still in the bag, Japan’s bidding group dithered."

"Had the Japanese called first, Costello would have likely have accepted an offer to head their bid, according to a source who knows Costello. “They didn’t pick up the phone,” he said. Costello declined to speak publicly about the bid."

"The Japanese did not attend a conference for the Future Submarines project in March, failing to understand the importance of the crucial lobbying event and leaving the field to their German and French rivals, sources within the Japanese bid said."

The question is how Japan did NOT screw this up based on incompetence, because they screwed up every step of the way from the moment they felt they were entitled to the contract to the last ditch efforts, when the deal was done, to finally act. Sorry, bud, but Japan dropped the ball BIGTIME, and as for Germany you don't see them demanding to know why they lost; they know they were outbid. In Japan you have people like tinawatanabe playing victim instead and saying it's some big conspiracy and declaration of war against Japan in a bid for MILITARY HARDWARE.

5 ( +9 / -4 )

Asia”, as he had previously described Abe, to tell him about the new bidding process. Abe sympathized and said he would do his best to comply, two sources with knowledge of the conversation said.

I had no idea this was how Abbott described Abe. I had held Abbott in slightly higher regard than Abe - but no longer. Birds of a feather flock together. At least the Japanese government doesn't get to profit from arms deals either. The French played smart - they put an Australian face to their campaign - and they won. Japan would do well to study how the French won, instead of demanding why they lost. It would serve them well in future.

4 ( +4 / -0 )

I think Japan forgot that Australia was a customer wanting value for money and there were no obligations involved, unlike a lot of deals done in this country. My friend got a house built a few years ago. he had plans and specs drawn up and sent the project to three builders to get quotes. His best friend from high school was one of those builders and his quote was 15% higher than the next highest. When he lost the bid his friend got angry and asked why he had chosen another company that had no connections to him. It was a telling case and i have experienced such in my own business cases. "don't do business with friends" is a good lesson to remember.

5 ( +6 / -1 )

True. The Germans at least have taken it on the chin. Respect to them

4 ( +5 / -1 )

After reading this article, it reminds me of a documentary by PBS. It is titled "Inside Japan's Nuclear Meltdown".

It seems that the Japanese have become complacent in many areas.....

5 ( +7 / -2 )

"The Germans at least have taken it on the chin". Indeed. And they also said their Submarine order books are full. Sad thing being, Australia has lost out on a very sophisticated submarine system. They instead choose the French underwater bulldozer still using antiquated diesel/electric power propulsion. Concerning German submarines, ask any US aircraft carrier commander what he thinks of them, and you will see him very quickly disappear toward the next toilet to change his underpants.

-10 ( +2 / -12 )

this pretty much sums up Japan all the way back to WW2, Japan had a superior naval fleet to the US, but it was superior tactics that defeated the Japanese naval in key battles of the pacific war. same thing has happened with the French on this sub deal

0 ( +3 / -3 )

They instead choose the French underwater bulldozer still using antiquated diesel/electric power propulsion.

Actually, the pump-jet propulsion system on the French sub is state of the art. It doesn't use a noisy conventional propeller like the other two subs. I think this played a huge part in winning the bid.

The fact that it's diesel/electric doesn't make it worse. One of the benefits of a diesel sub is that you can turn off the engine and sit underwater in complete silence. You can't completely shut down a nuclear reactor. The real advantage of a nuclear sub is that you can put your nuclear deterrent onboard and lurk in the oceans for months at a time. Australia doesn't really need nuclear subs since they don't have nuclear weapons.

5 ( +6 / -1 )

Just like when a lot of us were kids our parents taught us to learn from our mistakes. I hope japan can and not just come to some "safe groups approved opinion" as to why they lost.

1 ( +3 / -2 )

The so called pump jet on a sub is actually just a screw with a cover on it. The cover regulates the flow of water so the wash at the tip of the screw does not goes sideways resulting to better thrust.

The downside is if something get's sucked in, it jams the screw and/or damages the screw. It also becomes the prime source of target when active sonar is initiated since it is basically a hallow shell made of steel and chimes like a bell resonating sound.

-3 ( +2 / -5 )

A concentrated course of Ozzie ben and culture for every top pen pusher in the Japanese MOD will have the problem sorted in a few years...,

0 ( +2 / -2 )

France, on the other hand, mobilised its vast and experienced military-industrial complex and hired a powerful Australian submarine industry insider, Sean Costello, who led it to an unexpected victory.

This really was the turning point. A genius move by France, not to mention sending their delegation to both the Future Submarine forum & the ANZAC Day service. Japan certainly has a lot to learn in 21st century diplomacy & business.

3 ( +5 / -2 )

Indeed Japan did not need France to sink the deal.

Abe’s push to develop an arms export industry as part of a more muscular security agenda after decades of pacifism.

Finally some truth about the real muscular security agenda is transpiring...kind of scary.

4 ( +5 / -1 )

Reading this, I feel that the mentality is still that of the 80's - when Japanese goods were highly attractive and Japan couldn't do any wrong. There are so many people still around from back then that they cannot get their minds around why it would be different now. Cool Japan, daro! Unfortunately for Japan, since it takes forever understanding and embracing change here, I think it will take some time before they learn from this. A wake-up call, perhaps, but Japan needs a 100 of those before they get it.

4 ( +7 / -3 )

Japanese Big Corp are so much used to rigged bid here that they simply do not know how to handle competition , remove price fixing, monopolies and rigged (in bed) bid and you'll end with pretty crap INC. The fact that they believed all along that the deal was already done and they did not have to attend main event speaks volume. They did their Japanese way and French did their French way.

4 ( +6 / -2 )

This is a thoughtful, thorough, and exciting article. More like this please. A second part explaining the German bid would be interesting too

6 ( +7 / -1 )

Japan, if you want to learn from this disaster, get rid of the "old boy network philosophy" were in the 21st century and the modern world does not roll like this any more. how many people have fallen in disgrace on to there old tantos this week?

4 ( +6 / -2 )

Finally some truth about the real muscular security agenda is transpiring...kind of scary.

I'm not sure how it's scary. Japan wants to develop its defence industry and lower costs through international deals, making it cheaper to defend Japanese interests, especially against a more aggressive China.

-3 ( +1 / -4 )

Follow-up: It seems many people will think Japan Inc. will not learn from this. One must understand the learning curve is quite shallow for countries not accustomed to 'free-will'. What they take from this will make for a better chance of success, as long as the government wills it.

-2 ( +2 / -4 )

There are politicions and business people in Oz who would bend over (backwards or forwards) to facilitate business with and influence in China. Don't do anything to upset China!

-2 ( +0 / -2 )

The Japanese are smart enough to realise that any technology transfers to Australia would likely have ended up in the hands of their arch nemesis, the Chinese, via fifth column infiltrators embedded within the Diaspora who would likely have played a major role in the project.

-7 ( +2 / -9 )

once again, reuters reporters teamwork delivers the goods. job well done. thats real newspapering.

0 ( +2 / -2 )

Sorry, bud, but Japan dropped the ball BIGTIME, and as for Germany you don't see them demanding to know why they lost; they know they were outbid.

Since I do not read German, I cannot report on what the Germans are saying. But, I do read Japanese and English and there was no demand for an explanation. I checked a large number of English language papers. The word "demand" was used in headlines in Australian newspapers but when they quoted the Japanese they always used the term "request" or "ask for." So, when you see "demand," you are seeing the words of Australian headline writers, not Japanese officials who are are quoted more or less accurately.

Moreover, the dozen or so Australian reports that I looked at all emphasized that the issue was Australian jobs and Australian internal politics with a bit of China on the side. And, there are already Australian reports questioning whether the French are actually going to do as much building in Australia as they claimed.

Further, if you are going to see this as a "defeat for Japan," you also need to see it as a "defeat for the US" because the US wanted the subs built by Japan. This is mentioned in numerous articles. Since the Americans are presumably everything the Japanese are not and since the Japanese are utterly incompetent at everything and everything as is repeatedly stated in this venue, the real failure and defeat is on the American side.

Since I am pushing seventy, I probably will not be around to see how this contract pans out, but I would imagine that there is at least as much of a chance that this project will go the way French nuclear power plant construction has gone: years behind schedule with astronomical cost overruns. As I've stated previously, I'm glad Japan lost this one.

Incidentally, European newspapers commonly reported this in terms of "how France defeated Germany," a reminder that there is more than one take on this issue.

-7 ( +2 / -9 )

Incidentally, European newspapers commonly reported this in terms of "how France defeated Germany," a reminder that there is more than one take on this issue.

Probably because Japan dropped to third in the running, Japan REALLY blew this badly, its embarrassing, I would like to have seen them win, but they blew, because in large part the thinking is STUCK in the 80s & the 80s are LONG gone but too many in Japan still cant see that & the country is continuing to pay a heavy price for it & that they ask for explanations................clueless, Japan CAN & SHOULD do better but we see that less & less over time since the 80s don't we.

2 ( +3 / -1 )

I'd like to know, were the Japanese going to learn English for this job or were the Oz supposed to learn Japanese? How many Japanese are knowledgeable in the submarine-making business AND fluent enough in English to transfer technology? Knowing what I do of people around me I wonder how many COULD do the job?

0 ( +4 / -4 )

It will put a major spoke in the wheel of Japan's desire to profit from arms profits

0 ( +3 / -3 )

French designed, Australian built, US armed.

0 ( +1 / -1 )

bullfighter: "Incidentally, European newspapers commonly reported this in terms of "how France defeated Germany," a reminder that there is more than one take on this issue."

Well, there's only ONE take on the fact that you said Japan did not drop the ball on this one, not only on this thread but on the one in which the news that they lost the bid first broke. You have said time and again it is not Japan's fault they lost the bid, when it IS Japan's fault JAPAN lost the bid. They blew it, BIG TIME, and that has been proven nearly a dozen times in this thread alone! You can try and backtrack all you like, it doesn't change that fact that you were dead wrong.

"As a Japanese taxpayer, I'm quite happy the French got this one."

And that's called sour grapes, my friend.

1 ( +5 / -4 )

I think the word "dithering" as stated in the article — otherwise known as "tooth-sucking" among other terms commensurate with non-communication — says everything that needs to be known about the failure to secure the contract.

The higher echelons of economic diplomacy may inquire into the cause of their failure all they want — as the report indicates. But, in the end, 'dithering' may be all they need to learn about in order to understand how their failure occurred. Dithering — or Byzantine obscuration — is a national passion that is past its stale date.

Personally speaking, I'd rather see the genius of the Japanese national collective put towards more useful and beneficial purposes such as the preservation and welfare of the environment and and its living creatures. Japan has an astonishing amount of talent and knowledge to offer in this area. This will have increasing interest and value in this crucial period of the world's history. Better than the nation committing itself to the creation of yet more weapons on the planet. But ... what might we expect of the favourite grandson of the minister of munitions for the Empire of Japan during the 1940's after his return from helping to brutalize a part of Northern Asia?

If any reader does not know about what I refer to, let she/he look it up. The web is heaving with history and insights as to who this political dinosaur really is. And he is not alone, as we can clearly see in the antics of the current circus in the USA.

6 ( +7 / -1 )

Can 'Disillusioned' please tell us who the 16 Prime ministers have been over the last 10 years.

1 ( +1 / -0 )

Excellent article. It's reads like the plot to a movie.

Ironically, there was a Japanese drama a few years back dealing with the arms industry. Can't think of the name of it, but the theme song was "Waltzing Matilda" it was very popular on Japanese TV. My wife was glued to it.

1 ( +1 / -0 )

The Japanese did not attend a conference for the Future Submarines project in March, failing to understand the importance of the crucial lobbying event

This piece tells it all. A deal worth $40 billion and they don't attend a conference ON the subject? Well, it's clear that the Europeans didn't need to make a big effort to outsmart the Japanese "team". Problem is that they negotiate as if they were dealing with one of their equals, i.e, China, South Korea, Singapore, where a subtle "yes" a la Abbot could mean a solid commitment to seal the deal months later. They didn't understand that Australia makes business like the Americans and Europeans do: work hard till the last minute to get the deal.

3 ( +4 / -1 )

I'm not sure how it's scary. Japan wants to develop its defence industry and lower costs through international deals, >>making it cheaper to defend Japanese interests, especially against a more aggressive China.

Maybe if some stopped being stuck in 1940's and opened their eyes on the present time, they'll understand Japan is not longer in war therefore does not need a "more muscular security agenda".

0 ( +2 / -2 )

French industrial war complex is A-OK

0 ( +1 / -1 )

I am honestly glad they didn't get the bid considering how much Australia kisses china's ass. It just would not be a good move by any means. To those of you REALLY EXCITED about it (lol) It also means no US arms support for the sub fleet. Not saying that is a great loss, but it ain't good either...

-2 ( +2 / -4 )

Japan has serious problems with international business. I heard this nugget from a business associate who opted for Taiwan rather than Japan; "I can talk with one guy from Taiwan for 15 minutes and get a definate 'yes' or 'no' or I can take with 15 Japanese for 15 days and get a nebulous 'maybe.'"

3 ( +4 / -1 )

The French contract is not an export of subs but a joint development of a sub not designed yet and it includes local production in Australia with technology transfer as well as creation of employment in the country. What Aussie demands seems inappropriate for a contract of sub building which is a security matter rather than business and includes military secret technology. Soryu a sub in active service (not a hard sell plan) is a result not only of numerically calculated design and technology but by the seat of the pants workmanship in the dockyard. Sheet steel and screws are often hammered and lathed and fine-tuned manually by a skilled workman. Such artisanal knowhow unlike secret technology cannot be digitalized and informed methodically to others. That might be what Mr. Costello was not aware of.

-1 ( +1 / -2 )

Japan made a mistake with the deal. So what company and government hasn't? Japan and Abe are pursuing a critical plan. Japan and its neighbors must have a modern military, the Chinese ONLY respect STRENGTH.

-1 ( +2 / -3 )

What? Australia's political instability? They have changed PMs four times in ten years!

That's nothing to brag about, though.

0 ( +1 / -1 )

When Australia will default payment Japan and Germany will be enjoying payment of subs they made for oil rich countries. How many years French prime minister willvacate from France?

-1 ( +0 / -1 )

"To say it in plain English, if the Collins were to fight the Soryu today Collins would kill it every time."

That's what defense community said about Japanese Soryu Submarine regardless of Collins Submarine was useless in combat. They took very serious about former Navy General words about Australia does not have technology and skill peoples to build Submarine.

We Australian Tax payers' money was wasted for to build Submarines for $ 50 billions. If Australia Government bought foreign made Sub and then it will cost $ 6 billions as former PM Tony Abbott plan. I bet, Australia can never sell single Submarine that made in Australia because Australian Company even couldn't make train ticketing system. Read detail on below link about what Australian defense source revenge for former Japanese retired Navy General words. Sometime truth hurt badly.


0 ( +1 / -1 )

It will be interesting to see if the new Australian boats are better constructed than the COLLINS Class. Sometimes better is the enemy of good enough and I think the SORYUs would have been good enough especially as it is already in existence while the Franco-Australian effort is a theoretical proposal that may not stand the test of reality. Maybe there will be a redo if things unravel down under so the SORYUs may still be able to win out.

0 ( +0 / -0 )

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