The BAE Systems-EXPAL relationship in jointly pursuing the
Domestic Munitions Manufacturing Arrangements (DMMA) project is a good example
of the whole being greater than the sum of its parts, although in this instance
little is known about one of those parts.
Yet EXPAL, a wholly-owned subsidiary of the Spanish civil
explosives manufacturer and industrial services group MAXAM, offers niche
technologies, facilities and experience which executives say dovetail neatly
with BAE Systems’ vision of the future for the Commonwealth’s Benalla munitions and Mulwala
propellant and high explosives plants.
EXPAL had originally intended tendering independently for
the DMMA contract but, Chairman Francisco Torrente told ADM, both companies
agreed on a teaming arrangement when it became clear that together they could
not only satisfy nearly all the Commonwealth’s requirements but also add unique
demilitarisation technologies together with access via MAXAM to the domestic
and international civil explosives markets.
Founded in 1872 by Alfred Nobel, the inventor of dynamite,
parent company MAXAM is Europe’s largest and the world’s second-largest
provider of explosives and initiators for civil use. It has facilities in 45 countries, 6,500 employees, and annually
markets more than a million tonnes of civil explosives as well as manufacturing
500 million cartridges a year for sports shooters.
The company has operated in Australia since 1988, and sees
the access to raw materials flowing from a BAES-EXPAL DMMA win as a means of
increasing its current share of blasting materials used by the domestic
resources industry.
Founded in 1946, EXPAL currently employs more than 1,000
staff in 11 production centres – six in Spain, one in Bulgaria, one in Denmark,
one in Italy and two in the US. Some 90 per cent of its munitions and energetic
materials are sold to customers in 40 countries, including Malaysia, Singapore,
Thailand, NZ and Australia.
This is a dramatic change from only six years ago when 80
per cent of sales came from Europe, a shift reflecting both cuts in European
defence budgets and parallel investment in developing new markets in the US,
South America, the Middle East and Asia-Pacific.
Sales to the ADF have been sporadic and relatively small –
naval clearance charges, 81mm mortar fuses, and components for 500lb general
purpose bombs. NZ has purchased 81mm mortar projectiles and 105mm artillery rounds.
These are just a small part of a portfolio described by
sales director Alvaro Alonso as one of the broadest in the industry despite the company’s relatively small size. Products
include a wide range of small arms and medium calibre cannon ammunition up to
35mm; fuzes; 76mm and 127mm naval rounds; 105mm and 155mm artillery shells;
warheads for 2.75 inch air to ground rockets; general purpose, penetrating and
delayed-action bombs; and 60mm, 81mm and 120mm mortar projectiles.
In addition, EXPAL produces a variety of energetic products
for military use that are grouped into initiation systems, demolition stores,
explosive ordnance disposal systems, insensitive munitions warheads,
propellants, and pyrotechnics.
“We and BAE Systems together can supply more than 90 per cent of the Defence Materiel Organisation’s shopping list both current
and future, including insensitive munitions,” Alvaro said. “Currently we don’t
manufacture grenades and 120mm tank ammunition, but we’d buy those in from
other manufacturers and warrant them ourselves.”
Demilitarisation focus
Demilitarisation remains a core and unique capability for
EXPAL, which describes itself as the world leader in undertaking the
neutralisation and recycling of munitions, explosives and pyrotechnics – skills
it says that are applicable to every disposal category listed by the ADF, and
are of undoubted interest elsewhere in the Asia-Pacific region.
Over more than 30 years the company has demilitarised more
than 1,000 types of different munitions; most recently Belarus landmines,
Spanish and Danish cluster bombs, a variety of Dutch, French and Belgium
ammunition stocks , and quantities of US munitions located on European bases.
In collaboration with the state-owned company EMGEPRON,
EXPAL is currently establishing a demilitarisation line in Brazil that will
dispose of obsolete and life-expired Brazilian navy ammunition.
Implementing techniques linked to its so-called R3 (Recover
Reuse and Recycling) philosophy enables significant amounts of
explosives to be extracted from munitions and recycled for civilian use, a
benefit which in Australia would be channelled through MAXAM for domestic and
international use and sales.
At EXPAL’s El Gordo demilitarisation and fuze-manufacturing
facility 150 km west of Madrid, company-developed machinery processes up to
4,000 rounds an hour of ammunition ranging from 5.56mm to 20mm, with the primer
the only component not eventually recycled.
Recycling the constituent elements of larger calibre
munitions and bombs – TNT, Comp B, plastic bonded explosives, propellants and
white phosphorus – involves more labour-intensive processes, with EXPAL
utilising containerised mobile demilitarisation plants wherever possible to
save transportation costs and reduce risks to safety.
The lack of an appropriate facility in the Asia-Pacific
region several years ago saw 1,200 tonnes of ammunition from Taiwan shipped to
an EXPAL demilitarisation plant in Bulgaria. EXPAL executives acknowledge the
opportunities an Australian facility could present, but are also well aware of
the regulatory issues that would be involved.
EXPAL also provides explosive ordnance disposal services including soil remediation,
together with specialist demining teams, equipment and training.
Assessing the company’s strengths in an industry dominated
by much larger competitors, planning and business development manager Pedro
Sallent notes its efficiency and flexibility in handling and customising
relatively small but profitable orders.
“There’s no reason why delivery shouldn’t be made within
five months or less,” he said. “If the customer wants plastic packing, we do
it. If the customer wants a special airdrop pallet, we’ll design it, test it
and deliver it within the contractual period. We’re also unusual in covering
the lifetime of our products – designing, developing, testing, manufacturing,
and sometimes neutralising what we produce.”
Danish work
At DENEX, an EXPAL facility close to the Danish ferry and
naval port of Frederikshavn, executives point to quality bolstered by a rigorous test regime.
Included in the plant’s varied capabilities is annual
production of 50 million rounds of 5.56mm ammunition, all orders for which are
manufactured to Danish army requirements specifying reliability at 72 degrees
Centigrade rather than to the less demanding NATO requirement of 52 degrees.
At the higher temperature, clearance between the projectile
case and the weapon’s chamber is just 0.02mm
The plant itself is cited by EXPAL as an example of its
ability to turn a faltering state-owned company into a globally-competitive
operation. Purchased from the Danish government in 2008, the product line has
been enlarged, exports have risen from zero to nearly 33 per cent of turnover,
and the plant is operating profitably.
Similarly with Murcia, a sprawling propellant-manufacturing
facility about 350km southeast of Madrid whose future was in doubt prior to its
acquisition by EXPAL from General Dynamics in 2009.
Murcia too has been turned around, with investment in a
centralised control room, a fully automatic and easily reconfigurable solvents
plant, a research and development centre, and the establishment of new lines
ranging from fillings for mortar augmentation charges to propellants for rocket
motors.
This in general reflects the input EXPAL executives anticipate providing in their DMMA
partnership with BAE Systems – transitioning expertise, technology transfers, new
products, existing relationships with Asia-Pacific customers, and direct access
via MAXAM into the civil explosives market.
Kevin Kitto, BAE Systems’ business development manager, says that a range of commercial models
for working together were considered for DMMA. A joint venture would have
unnecessarily complicated the DMMA bid, so an arrangement with BAE Systems as
the prime and EXPAL as its principal partner sub-contractor and partner had
been pursued.
“Everything outside meeting the Commonwealth’s requirements
will be handled by a supply agreement with EXPAL for agreed services – our two
companies have been cooperating for about 20 years and we understand each other
very well.
“We’ll have a contract with the Commonwealth for facilities,
assets and supply. BAE Systems will be the employer, with a subcontract with
EXPAL for demilitarisation, the supply of agreed munitions and some technical
and operating personnel.
“EXPAL will be responsible for export sales of their
products and/or designs that BAE Systems will manufacture under licence. EXPAL
will also be responsible for sales into the civilian market.”
A successful DMMA bid would see operations at Benalla and
Mulwala fully integrated into a global supply chain that already involves 15
sites and 9,000 employees, all purchasing the same raw materials, Kitto
says.
Both BAES and EXPAL have a demonstrable record of investment
and optimising underperforming businesses, and both companies see DMMA as a
means of obtaining a strategic advantage over European and US-based competitors in the Asia-Pacific
market, he notes.
Disclaimer: Julian Kerr travelled to Spain and Denmark as a
guest of EXPAL.