Australia's defense minister apologized on Wednesday after saying he would not trust the government-owned submarine firm "to build a canoe," comments that fueled expectations that most work in a program costing 40 billion Australian dollars ($34 billion) will go offshore.
Reuters reported in September that Australia was leaning toward buying as many as 12 stealth submarines from Japan.
Prime Minister Tony Abbott had previously pledged the submarines would be built in South Australia, where unemployment exceeds the national average, but his government began backpedaling in July, signaling cost and schedule were paramount.