From The Source: Chris Jenkins, Managing Director, Thales Australia | ADM Mar 08

1 March 2008

By Gregor Ferguson

A mechanical engineer by training, Chris Jenkins was appointed managing director of Thales Australia Pty Ltd in January, replacing Norm Gray who had held the post for just 20 months.

He has held a number of senior roles within Australia and the Netherlands, having previously worked for Racal, Plessey and GEC Marconi.

Chris Jenkins spoke to ADM's Editor At Large, Gregor Ferguson, in Sydney.

ADM: What are the parent company's expectations of Thales Australia?

Jenkins: Thales sees Australia as a significant market not just to sell into, but also to invest in.

Thales' approach has been to invest in key technologies and capabilities in-country and to actually create something - not just a shop front for international technologies, but to actually create a solid presence to be able to evolve, adapt and support systems throughout their life.

Thales' track record of high-end technology development is a global phenomena.

And in Australia, we are capable of developing the very best technology for that global market.

We've reached an important critical mass where all of the parent company's divisional interests are represented in Australia with real engineering capability and real ability to support those businesses into the future.

Thales is looking for us to consolidate and grow in some areas - specifically in our defence services offering, and also in the civil sector: security and electronic transportation systems, e-ticketing systems, communication systems and the like.

Thales knows this investment in capability in Australia is worthwhile and that we show good growth and good returns.

ADM: Did morale suffer following the failure to win the LHD contract and the loss of Norman Gray after only 20 months?

Jenkins: They're two different issues.

I wouldn't want to overstate how LHD affected the company - it was one of the things we went into originally not thinking that the smaller ship would win out against the Australian requirement.

It was something the company didn't really want to offer up.

We were convinced for a variety of reasons to bid, and we did, in good faith.

We modified the design to meet the requirement, and we lost and that's that.

We've moved on.

We've won some significant contracts in other areas, including Bushmaster and air traffic management systems, and we look forward to success on the AWD with the sonars and our communications and EW systems.

But our order intake during last year was very healthy for us so even though the LHD was lost it wasn't a mortal blow for the company.

For those people who worked on it, yes, it was tough, but we're a robust company so people move onto the next project.

Norman Gray did a great job in shaping the company and building the united Thales Australia.

We had the ADI business and a couple of Thales businesses, and we weren't getting the benefits of scale or of interactions between the divisions and we weren't as strongly connected to the international Thales organisation.

During the past 18 months there has been a huge improvement in terms of our consolidated structure.

Norm made a great contribution, everybody's very pleased by those changes that were made.

We're all very sad to see him go, for sure, but he left for his own personal reasons and that's fair enough.

And I've worked pretty closely with Norm on the forward plans - it's not like this is a sudden shock wave that disrupts our strategy: "It's not a matter of let's create a new plan, everything up to now is not right!"

We've got a forward plan, we've continued to make improvements according to that forward plan.

Right now I'm very happy with the team we've got and the benefits of our connection into Thales internationally.

We're finding export markets opening up for us as a result of Thales' connectivity into the international market place: the Netherlands contract for Bushmaster, and some pending contracts overseas which will become important over the next few weeks.

ADM: Is Thales Australia still a shipbuilder, or will the company now concentrate in the maritime area on upgrades, support and maintenance?

Jenkins: We absolutely will concentrate on our systems offering and particularly areas like underwater systems for the AWD.

We want to see our investment in underwater systems and naval communications capitalised on locally.

We'll certainly focus on our capabilities in Electronic Warfare and bring that to bear on the FFG program; we'll focus on the through-life support offerings that we're able to provide.

We've developed a good track record on in-service support on our naval platforms, so we'll want to consolidate that,

ADM: What's the current split of revenue between defence and commercial? Do you envisage this changing, and if so why?

Jenkins: It's roughly 75 per cent defence and 25 per cent civil.

We have two lines of civil work.

The air systems division does air traffic management systems: the company is one of the largest suppliers of air traffic management systems in the world.

Every time you fly you're probably flying in airspace that is controlled by a Thales system generated here in Australia - the software, the systems, the testing, the implementation, all of that done here in Australia.

Most of that is exported.

The other part of our civil business is what we call D3S - Security Solutions and Services.

This is a very rapidly growing business area for us.

We did the security systems for APEC, we're doing the onboard systems integration for the 5th generation trains for Downer EDI Rail, we're doing the motorway toll system for Queensland now, that's a recently awarded contract - these are very important, sizeable civil contracts for us.

Security Solutions and Services is a rapidly growing sector, and it's benefiting from the mining boom.

We can provide security solutions into the mining and energy sector; the money earned from the mining boom by governments is providing a significant investment in infrastructure - we're seeing that all around Australia: road, rail in all forms, and a lot of the services and systems solutions we provide are really going to bring benefit to that infrastructure investment that the state and federal governments are making.

So we see that as a very important growth area of the company over the next 5-10 years.

The medium term vision, within five years is that 25 per cent share growing fairly quickly to about 35 per cent, something of that ilk.

It hasn't been one of the well-advertised Thales offerings in Australia - everyone sees us as a defence company, but internationally the company does very well in the area of security related systems and technology and we benefit significantly from leveraging the dual-use of the technologies we develop.

When people think about dual use, they think about a defence product painted a different colour: it's more subtle than that - what we're seeing is that algorithms which secure IT networks or secure other information systems, for example electronic ticketing for public transportation, we have developed very substantial experience in our defence work and are now able to use these skills in creating those algorithms, setting them to work and putting them into practice.

That's dual-use capability, as opposed to a dual-use product, and that's really flowed across our security solutions and services division worldwide.

It's a very powerful offering and I think Australia will see some real benefit come from that over the next couple of years.

ADM: What will be the biggest differences between Thales Australia as it is today and as you'd like to see it in, say, 10 years time?

Jenkins: I think you'll see a much more even balance between products, systems and service.

I think you'll see the services side of our work in defence get larger; in say 10 years time I'd expect to see the civil business as a much larger percentage than it is today and again our service offering will be a much more substantial part of the total.

I think it's something that we're well placed to do.

In systems and electronics we'll probably see a lot more focus on the good work coming out of our R&D side.

I think that's a real strength of Thales, it's a capability which we can bring to all of our business divisions.

It's very strong in our underwater systems and air systems businesses, but because of all the internal changes, the acquisition and integration of ADI and so on, we've not ventured far enough into the R&D in some of the business areas that we should.

I think you'll see some real growth in the new technology coming forward.

ADM: What elements of AWD and LHD work will Thales Australia be tendering for?

Jenkins: AWD - we've tendered for the sonars. It's a capital ship: from my point of view it's not about protecting itself, it's about protecting the fleet, so it needs a very capable sonar and I think anything short of that would be a disservice to the AWD and to the vessels it's going to protect like the LHD.

Long range sonar detection is as important as long range aircraft and missile detection.

One submarine in the area and your whole fleet is denied access.

We are also tendering for the communications and the electronic warfare requirements.

We're also considering the through life support opportunities; we are a credible naval support service provider and we've demonstrated that with the work we do at Garden Island and less so, but still significant, on the West coast.

We see that being an important part of both those programs.

ADM: How does the change of government affect the FFG upgrade?

Jenkins: It's certainly increased the focus on the project, and I think it's not unexpected.

We're working very closely with the DMO and the Navy to demonstrate what stage the program is really at and the trials program that we want to see conducted over the coming months is extremely important in demonstrating that to the new government.

We believe that will be a positive and very important milestone for the program.

The new government is doing the right thing - they're getting lots of advice and guidance on different projects.

As they get more information and see how those programs develop over the next few months they'll gain maybe a different perspective.

When they see what incredible capabilities are at hand on the FFGs and the significant level of advance -it is a substantial warfighting capability - once that is demonstrated they'll be saying this is a great thing for the RAN and this is something we want to fully support.

ADM: How do you propose progressing future Bushmaster export opportunities given its failure so far to win any MRAP orders?

Jenkins: That's hugely disappointing!

We've been very disappointed by the lack of uptake in the United States and we're still scratching our heads as to why that is.

The vehicles are, from all tests that I've seen, the safest way to transport personnel on and around high risk areas.

The ones we've sold to the Netherlands and to Australia mean that people are wanting more.

We really don't understand the US reluctance.

It may be an industrial sector decision, it may be something related to readiness to produce over there, we're really scratching our heads.

But we're always open for business and if they ever look towards Bushmaster that would be a very good decision.

ADM: Are there other potential export markets you can talk about at present?

Jenkins: There are some very promising markets, and we're looking to Europe and to South-East Asia - we've had very good interest in both areas.

We've had very good support, I must add, from the DMO and the department in those markets.

I think their enthusiasm for the vehicle is truly demonstrated by how enthusiastically they're putting the message out, "Guys, this thing saves lives!"

ADM: Are there any plans to improve protection levels of the standard vehicle?

And what's happened to the proposed six-wheeled variant?

Jenkins: We've created a 6-wheeled stretch hull in the US with Oshkosh and it enabled a higher payload and up-armouring and so on.

It's there, the design's in being.

If that requirement comes up in the US, then it's sitting there, ready and waiting.

The dual axle gives you the extra capacity for payload and armour.

It's always a trade off between weight and protection, and you need to consider also manoeuvrability and how you're going to transport the vehicle too.

We see Bushmaster as an important strategic capability of the force protection that's available to the ADF right now.

We'd like to see that evolve as a platform in terms of the systems it's carrying - there are many ways of enhancing the capabilities of Bushmaster so we'll be extending that strategic capability.

Bushmaster's our specialty, we're proud of it and we know it's one of the vehicles that's of most importance to the ADF today.

ADM: How are your long-term contracts for ordnance/munitions travelling?

Jenkins: The SAMS contract runs to 2015.

It's an important part of what we do.

Propellants, explosives, bombs, bullets and rifles are all at the important end of the lethality argument.

The various programs down the track like Land 125/75, and so on, are very much about enhancing the soldier's ability to connect, his ability to understand his situation and threat scenarios, and how best to prosecute his mission.

We see the rifle as being the platform for the soldier, just as the ship is a platform for the sailor and aircraft for the airman.

There is a lot more that can be done with the rifle and what it fires and we're keen to enhance our offerings in that area - it's an important area for us.

The Explosive Ordnance Services (EOS) contract and SAMS go hand in hand.

If you look at the supply chain from production of the explosive ordnance to final delivery to the end user, which is what our EOS does, this has the potential to be a very efficient and complete supply chain and we need to find better ways of connecting it end to end.

ADM: You actually manufacture some but not all of the ammunition natures the ADF uses.

What's the limiting factor on how far you're able to build ammunition in-country?

Jenkins: We have a strategic capability with our ordnance offer with deep skills and experience in design, production and manufacturing processes.

An area we can improve in is being able to predict the demand requirement and tailor the production facilities according to that demand requirement.

We can build all of those things, it's just the ability to re-shape the production line quickly, from the propellant end of the supply chain right through to the final round coming off the line.

For example, if you're making small arms ammunition a very high volume is usually involved - setting up the line and getting it running with the propellants and components coming through takes planning, so the limiting factors for us are ultimately tailoring capacity to the requirement at any point in time.

Right now our guys are very quick at turning round our production line and getting things changed, but I think we can do it more efficiently and we are very happy to work with the DMO to find the best way of doing that.

ADM: Given the strategic nature of munitions and ammunition manufacturing, is this a price sensitive sector of the market?

Jenkins: Depends on the particular round.

We focus very much on the quality of the round.

Australian-built rounds are built to a very high specification, so I would say that you're paying for the absolute predictability, robustness and capability of the round - and that's more and more important these days, whether it's small calibre or large calibre.

If you go to all the trouble of deploying troops with systems that guide them to their objective and the armaments to help them do what they have to do - would you then compromise on the thing that will allow you to complete your mission successfully?

The key thing is that Australian-produced rounds are proof-tested in Australia and we can guarantee the quality of the stuff that's going into the hands of our soldiers, and that's critical.

ADM: Will the Australian market for small and medium calibre weapons be enough to justify ongoing investment in sites like Lithgow and Bendigo?

Jenkins: Lithgow is our point of focus for small arms - we see that as being the most important element of the future soldier.

The weapon is the platform: when the soldier's in an engagement, he's focused on what the weapon's showing him through his sights, and what he's going to do with it.

He doesn't want to have to rely on a bunch of separate systems when he's at the end game in an engagement.

The team up at Lithgow are able to design different rails to hang different bits of kit off the weapon, improving its usability.

Integrating the Austeyr and other small arms with the ability to build new systems is really important for us.

We see that as being an absolutely vital part of the future of soldiers and land warfare.

To that end, we've invested significantly in upgrading the capabilities at our Lithgow site, looking to leverage into the future for programs such as Land 125.

ADM: What is the status of the Tiger ARH mission system project, including helmets and displays?

Jenkins: We've got a couple of different programs with the Tiger.

We've got the harnesses and avionics which we've delivered; we've got the Top Owl helmets which we've delivered - and there's some interesting upgrading now for a variety of enhancements they want to do, which is terrific: people are saying, "Ah, now I see what it does, what else can I do with it?"

We have delivered the most sophisticated dual dome simulator in the world.

This exceptional piece of technology is a clear reflection of the strong local capabilities of Thales in Australia, and also the hard work and dedication that we commit to our partners and customers to deliver world-class technologies.

There was some delay with the simulator; it has been delivered and currently provides the basic level of functionality - which is not a minor thing, by the way.

By the end of this year all of its functions will be operational, so it will be capable of simulating all sensors and weapons, by day and night.

There is a complex sequence of coming to life of the helicopter itself, coming to life of the simulators in Europe, and then coming to life of what we do in Australia.

We're getting massive benefit out of the money being spent in Europe solving issues before this is impact in Australia.

It's one of the values that comes from companies like Thales - you've got that reach back into the work that's being done in Europe.

They're solving a lot of the problems before they get to Australia, so even though the delays are lamentable, the end result is performance that's substantially better.

Even better for Australia is when we can take our own capabilities, and offer them to the world markets.

Over the past 10 years, Thales has actually exported over $1 billion in Australian technology - and that's something to be really proud of.