The Australian Submarine Corporation, builder of the Collins class submarines, is likely to be offered the $2 billion contract for new destroyers and other big naval contracts under a government plan to consolidate naval shipbuilding. The move is part of a plan by Defence Minister Peter Reith to reduce the number of naval shipyards. Mr Reith aims to leave decisions on the shape of the industry to industry players, but has signalled bidders for the submarine corporation should aim to reduce the number of shipbuilders.

It is believed the Australian Government plans to offer first option on major naval shipbuilding projects to the new owner. This would bolster the value of the corporation and help promote industry rationalisation. The final tender for the submarine corporation is likely next year. Before then the Government will choose between a US and a British defence company to provide the technological backbone for the corporation. The winner is also likely to be offered a stake in the company. The two contenders are General Dynamic Electric Boat and British Aerospace Systems, with the US firm the strong favourite.

The plan to reshape naval shipbuilding will probably ensure the survival of the corporation's shipyard at Osborne, in Adelaide, when the last Collins submarine is completed this year. It would leave to private industry a decision on whether to close the Williamstown shipyard in Melbourne, owned by Tenix. Some analysts argue there is only enough work for one major shipyard, but political considerations may persuade the new owner to find work for both.