Australia's decision to scrap the Attack class submarines and the contract with Naval Group was 'driven by strategic circumstances', according to Tony Dalton, Deputy Secretary National Naval Shipbuilding, as the fallout in Australia's diplomatic relationship with France grows.
Prime Minister Scott Morrison announced last week that Australia will acquire nuclear powered, but not nuclear armed, submarines to replace its existing Collins class diesel submarines under the newly-created Australia-UK-US (AUKUS) agreement - effectively ending the contract with Naval Group and the French government.
In response, France has recalled its ambassadors to the US and Australia at the direct request of President Emmanuel Macron: the first time it has done so since the US declared independence from the UK in 1776.
Paris has also said it will help limit the financial impact to Naval Group and has not ruled out seeking further compensation from Australia.
Morrison said that 'at least eight' new nuclear powered submarines will be built in Adelaide with UK and US assistance.
Meanwhile, Dalton said the decision was 'not related' to industry performance on the Sea 1000 program.
"The decision to not proceed with the Attack Class Submarine Program was driven by a consideration of the strategic circumstances and the impact this has on Australia’s submarine capability requirements," Dalton said.
"It was not related to the performance of Naval Group or Lockheed Martin.
"Over the coming months, the Department will conduct negotiations with both Naval Group Australia and Lockheed Martin Australia to reach a fair and equitable agreement to wind up the Attack class submarine program."