Deutsche Bahn Government Slams Breaks on Rail Sell-Off Plans

The German government is blocking a plan by state railway operator Deutsche Bahn to sell off part of two major subsidiaries, overseas transport company Arriva and logistics unit Schenker.
Deutsche Bahn's sell off plans have hit a wall.

Rüdiger Grube, the chief executive of German state-owned rail operator Deutsche Bahn, faces political opposition to his plan to raise much-needed capital through the flotation of two major subsidiaries — overseas transport firm Arriva and logistics group Schenker.

A special supervisory board meeting scheduled for early February to discuss the partial privatization has been canceled and no new date has been set, even though Mr. Grube is planning precisely what successive governments have been urging Deutsche Bahn to do for years: Focus on the core business of passenger and freight transport in Germany.

Rail experts say a partial sell-off makes sense. “A company like DB Schenker definitely makes business sense from Deutsche Bahn’s point of view, but providing international logistics isn’t a government responsibility,” said Justus Haucap, a leading economist who teaches at the University of Düsseldorf and used to be head of Germany’s Monopolies Commission. “That is why one should at least consider a partial privatization in the medium term.”

Freight transport has stagnated at 17 percent of group revenue, and worse, it’s not earning money. Mr. Grube has launched a restructuring to fix chronic inefficiencies at the group, one of Germany’s largest employers with nearly 200,000 employees. The initial impact of the revamp will be to plunge the railway into the red, and the 2015 net loss will amount to €1.3 billion, or $1.4 billion.

For a long time — too long — nothing has changed at Deutsche Bahn. Matthias Gastel, Rail spokesman, Greens

Mr. Grube is under pressure to raise capital to fund the restructuring but the government has put the brakes on his plan and isn’t defining any alternative goals of its own. This apparent lack of interest has been reflected over the years in constant reshuffles of government representatives on the group’s supervisory board.

The current official representing the finance ministry, Steffen Kampeter, isn’t even a member of the government anymore. The former deputy finance minister is about to become managing director of the BDA Confederation of German Employers’ Associations. Effectively, the finance ministry is no longer represented on the supervisory board.

Two other board members, Kirsten Lühmann and Brigitte Zypries, haven’t had much to do with trains in the past. Ms. Lühmann is transport spokeswoman for the center-left Social Democratic Party in the German parliament, while Ms. Zypries is deputy to economics minister Sigmar Gabriel.

Their appointment was intended to increase the proportion of women on the board in line with German rules that came into force on Jan. 1 requiring the supervisory boards of large companies to have at least 30 percent women. The only government official who has been on the board for a number of years is deputy transport minister Michael Odenwald.

“For a long time — too long — nothing has changed at Deutsche Bahn,” said Matthias Gastel, rail policy spokesman of the opposition Greens. The railway needed to increase the independence of the rail track subsidiary Netz from the passenger and freight operations, he said. But this would only be possible if the divisions were split from each other, he added.

But no one in the government wants to split up Deutsche Bahn. “We’re committed to the integrated company DB,” the conservatives and Social Democrats pledged in their 2013 coalition agreement.

They want the company to keep on running the track network and the stations. This is storing up problems because under current plans, the railway will be allowed to increase its charges for track usage by between 2.5 and 4 percent, outpacing federal subsidies for local train transport which are to rise just 1.5 percent per year. If that isn’t changed, the regional states will scale back local transport services.

 

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt's Berlin office. Dieter Fockenbrock is Handelsblatt's chief correspondent for the companies and markets desk, focusing on corporate governance, opinion and rail transport. To contact the authors: [email protected], [email protected]