Australian companies increasingly look to US following AUKUS pact – MASHAHER

The nuclear submarine collaboration between Australia, the U.K. and the U.S., better known as AUKUS, is opening new doors for Australian defense companies to set up shop in the U.S, executives say.

In at least one case, an Australian company has even opened up a location inside the gates of a U.S. Army arsenal.

Indeed, Australian defense executives say the AUKUS agreement not only offers the opportunity to expand into the world’s largest defense market, but also a chance to transfer those benefits back to a growing Australian defense industry ready to help if a large-scale conflict breaks out in the Indo-Pacific region.

“All of a sudden America and Australia’s industrial bases naturally just need to be linked,” Rob Nioa, chief executive of Australian munitions company Nioa Group, told Defense News. “Where we ultimately want to be is a company operating in the U.S. munitions base with forward-deployed, production-ready capabilities in the Indo-Pacific region.”

The AUKUS collaboration, unveiled in September 2021, is organized into two pillars of effort. The first focuses on nuclear-powered submarines; the second covers critical technologies like artificial intelligence, quantum computing, hypersonics and autonomy.

Already, Australia has received $1.6 billion in U.S. defense contracts within the context of AUKUS, and Australia is “significantly investing in the United States to support the delivery of these contracts,” Paul Myler, deputy head of mission at the Australian Embassy in the U.S., said during an April 5 Center for Strategic and International Studies event.

The AUKUS pact “is not about making it easier for Australia to buy U.S. kit,” he added. “If we only look at it through a purchase-sale transaction lens, we have failed. This is a radical reimagination.”

But barriers to working together remain, Cynthia Cook, CSIS’ Defense-Industrial Initiatives Group director, told Defense News.

“Some of these relate to challenges that all companies have when marketing to the government, which is getting insight into government requirements and matching their products to a government demand,” she said. “Companies in partner nations can have challenges seeing tenders. And there is the simple challenge of the ‘tyranny of distance’ and the different time zones.”

Building a U.S. footprint

Nioa’s father founded Nioa Group in 1973 out of the back of a gas station in Queensland as a regional sporting firearms shop.

Over the years, the company expanded its customers to law enforcement and defense and its focus to munitions production. The company today provides all of the Australian Army’s artillery ammunition.

Nioa Group also has a business in New Zealand and a joint venture with Germany’s Rheinmetall called Rheinmetall Nioa Munitions, which recently established a munitions shell forging factory in Australia to supply the German military.

Roughly a year ago, the company established the Australian Missile Corp. under a contract with the Australian government to develop a domestic guided weapons enterprise.

Nioa Group has partnerships with some U.S. companies like Northrop Grumman and, in 2023, it purchased Murfreesboro, Tennessee-based Barrett Firearms, which produces the only shoulder-fired 50-caliber gun, the primary anti-personnel sniper rifle used by the U.S. Army and Special Operations Command.

Now, Nioa Group has signed a long-term lease at Picatinny Arsenal, New Jersey, home to the U.S. military’s guns and ammunition development, making it the first foreign company with a footprint on Picatinny’s property. The company took up its tenancy in late November 2023 to collaborate on a variety of armaments supply needs.

“We have existing work that would see us wanting to be inside the wire working with them,” Nioa said.

And Nioa will have the chance to work more with other U.S. companies based there, including Northrop, General Dynamics, Winchester and BAE Systems. Nioa recently named Dan Olson, formerly Northrop Grumman’s weapons systems division vice president, a Nioa advisory board member focused on developing its U.S. strategy.

“Aspirationally, we want to grow in the U.S. market,” Nioa said. “What we now need to do is develop an ammunition footprint in the U.S., and that path is not 100% clear to us, but it will likely come out of us understanding the supply chain constraints in the U.S. and where the U.S. government needs more production for the allied effort.”

Nioa Group is interested in acquiring companies already in the supply chain, he added, and will seek to work with or acquire components that would be needed in Australia as well, Nioa said, which could lead to easier co-production.

While AUKUS is making it easier to establish direct relationships with the U.S. government and partner more deeply with U.S. industry, he said, it’s still too early to see technology being transferred.

“People are a little nervous that actually when it comes time for transferring missile technology or something that despite it being agreed to at a policy level, actually the documents and authorities which will allow the physical transfer, they think is still going to be entrenched,” he said. “There’s a lot of inertia around existing systems.”

Another Australian company is taking a similar approach in the U.S., seeking to expand the technology development work it is doing in Australia in the U.S. and with U.S. partners.

EOS Defence Systems opted to establish a production footprint in Huntsville, Alabama, in 2018 “in response to an ever-increasing U.S. military requirement for [remote weapon station] systems,” according to a company announcement at the time.

The company is perhaps best known for its common remote weapons stations and previously supplied some to the U.S. military in the 1980s. It lost the latest contract to Norwegian company Kongsberg, according to EOS chief executive Andreas Schwer, but the company has three other business sectors it hopes to grow in the U.S.

EOS has been working on lower kilowatt directed energy solutions that could be considered for integration on smaller systems like armored vehicles. He said the company is close to signing two contracts for lasers with international customers and then plans to migrate that technology to the U.S.

EOS also has developed over the last 20 years a ground-based laser that can blind satellites. The company is now developing capability to also disable satellites’ sensors and ultimately the satellite itself. “We see huge export potential,” he said.

AUKUS is allowing conversations and collaboration that would have been very difficult beforehand and giving the company the ability to participate in classified programs, Schwer said.

“AUKUS will make our life easier in terms of exchange of product data or product information, software codes, but also even the hardware to push back and forth, demonstrators, prototypes and stuff like that,” Schwer said. “We have more commercial reason to do more in the U.S.”

Like Nioa Group, EOS already has some partnerships with U.S. companies like Northrop Grumman, but the company is also looking for acquisition opportunities and partnerships, Schwer said.

“We are ready to bring laser technology to the U.S. or our satellite terminals, maybe even under another brand name,” he suggested. “We are currently checking all opportunities before we undertake a formal decision.”

Small business breakthrough

Smaller and newer Australian companies are also evaluating opportunities in the U.S.

3ME Technologies, an Australian company specializing in electrification, is now making a more global push, but hopes to focus on the AUKUS countries, according to chief executive Justin Bain.

The company has converted the Australian Defence Force’s Bushmaster vehicle into a hybrid-electric variant and has worked on projects delivering the battery system and power solutions for counter-drone and directed energy systems. The company particularly specializes in battery safety, critical both in the mining industry and the defense industry, Bain said.

3ME has now begun preliminary discussions with a number of U.S. prime contractors, which could help it grow in the U.S. The firm plans to make its U.S. trade show debut at Sea Air Space this month.

Enabling 3ME’s conversations with U.S. primes is an Australian government program called Going Global, which assists companies that want to link up with U.S. defense prime contractors.

Bain said he sees a strong role for the company potentially establishing a robust high-end battery and electrification supply chain in the Indo-Pacific as the U.S. considers logistics operations in a contested environment in the priority theater.

“The key theme we’re getting out of the U.S. is we need to shore up supply chain in INDOPACOM. We need more support in INDOPACOM. It’s the fact that we exist, we’re here in Australia with the experience and that’s why we want to focus in this area,” Bain said.

Ellen Lord, who served as the Pentagon’s acquisition chief during the Trump administration, said during the CSIS event in April, that working with small Australian companies “is where the real challenge is.”

“What we’re missing is the engagement strategy to bring all these small companies together to understand the art of the possible, to have the contracting officers know what to do with it, because we don’t always do a great job in the Department of Defense in terms of motivating and incentivizing individuals to lean forward and do something differently,” she said.

Hugh Jeffrey, the Australian Department of Defence’s deputy secretary of strategy, policy, and industry, said during a March 5 CSIS event in Canberra, Australia there’s a long history of trying to link the Australian and U.S. defense-industrial bases.

There has been “only limited success,” Jeffrey said, but said he’s optimistic this time will be different.

Already, he noted, the U.S. Congress made significant export control reforms in the fiscal 2024 National Defense Authorization Act, which will enable faster sharing of defense industrial resources with Australia and the U.K. and “most crucially” establish a national exemption for AUKUS countries from some U.S. export control licensing requirements. The U.S. State Department still needs to grant the exemption, contingent on Australia and Britain enhancing their own export control laws.

“My view is that the consensus has emerged on both sides of the Pacific on this issue, that we do need to change things up and that’s why it’s so exciting to see the US and Australia commit to a generational shift in mindset around industrial base integration,” he said.