It is all change at Germany’s government-owned rail service.
The rail company is merging its two largest engineering divisions, according to an internal paper seen by Handelsblatt, in a bid to streamline operations as it battles to keep up with decaying train lines and threats from the government to cut its funding.
The restructuring will affect 5,900 people, mostly engineers, architects, planners and construction experts as Deutsche Bahn embarks on an uncertain experiment to bolster what is already one of the largest engineering firms in Europe.
One person hard hit is Christoph Bretschneider, who is losing his job as chief engineer.
The move will affect 5,900 people, mostly engineers, architects, planners and construction experts as Deutsche Bahn dissolves what was one of the largest engineering firms in Europe.
Mr. Bretschneider led the Eigenwerbung Projektbau department, which manages engineering for Deutsche Bahn itself. This will be merged with DB International, which handles international engineering contracts, in a move that the rail firm hopes will reduce “damaging internal competition.”
The new combined operation, called DB Engineering + Consulting, will start work in 2015. Niko Warbanoff, a 37 year-old industrial engineer who currently runs DB International, will run the new division. He is among the up-and-coming younger managers at Deutsche Bahn being supported by Rüdiger Grube, the rail group’s chief executive.
The departments are plenty busy. There are numerous construction sites across Deutsche Bahn’s 33,000-kilometer rail network. Bridges and tracks are gradually decaying and the rail firm faces a repair work backlog worth €30 billion, or $36.9 billion.
A spokesperson for Deutsche Bahn emphasized that no jobs will be lost during the restructuring.
There is plenty to do for the company’s thousands of construction experts, in what is Germany’s biggest engineering department. Each year they work on projects worth €5 billion to install tracks, repair train stations and supply energy.
But Deutsche Bahn is struggling to keep up. Its chief executive Mr. Grube is in the unfortunate position of complaining on the one hand that his network needs extensive and expensive repairs, and on the other, failing to make use of available funds.
The government provides money for repair work. But over the last three years, Deutsche Bahn has failed to spend the money on time. Subsidies of €250 million went unused in 2011 and 2012; in 2013 funds worth €100 million were left lying, and unfortunately these are not transferable to the following year.
“We could do better,” said a Deutsche Bahn spokesperson.
But provider Deutsche Bahn may receive less money and closer scrutiny in the future as the government renegotiates the funding contract.
The rail service is due to receive €4 billion every year for the next five years to renovate and improve the rail network. Deutsche Bahn provides money to the government in the form of investment and dividends; the money is then transferred back to the rail service for renovation and restructuring.
The rail service has to demonstrate that the money has been used effectively in order to keep receiving the funds.
The Federal Audit Office and politicians from two political parties recently criticized Deutsche Bahn, saying it was impossible to see whether the funds were being invested properly in the network.
But according to Norbert Brackmann, from the governing Christian Democrat party and a member of the budget committee, Deutsche Bahn has already addressed the criticisms. Better measurements of how the money is spent will be available next year.
The audit committee will determine Friday whether a new agreement can be made for after 2015 between the government and the rail company.
The outlook is tough for Deutsche Bahn. Politicians are keen to keep expenditure low. At the same time, the rail service faces growing competition following the liberalization of the market for long distance bus travel in 2012.
Travelers have seized the chance to save money and take long-distance buses, which offer considerably cheaper tickets than the train service and the trend looks set to continue. Research shows one in every two Germans would be willing to take the bus for a long distance journey or has done so already. This is three times higher than one year ago, according to the Allensbach Institute, which tests public opinion on issues.
As the train service struggles with wrangles and repairs, there may be slow times ahead for Germany’s rail travelers.
Dieter Fockenbrock has been Handelsblatt's chief companies and markets correspondent since 2005. Allison Williams contributed to this story. To contact the author: [email protected]