Deutsche Bahn Off the Rails

Without a clear strategy Deutsche Bahn, Germany’s struggling state-owned rail company, will never succeed, writes Handelsblatt's political and transport editor.
Chaos reigns at Deutsche Bahn.

What incredible chaos now reigns at Deutsche Bahn, Germany’s struggling state-owned rail company. Maybe the supervisory board thought to themselves, if the winter weather’s not making negative news, let’s cause a storm ourselves at company headquarters.

Its personnel committee unanimously negotiated a contract extension with CEO Rüdiger Grube. Then chairman of the supervisory board, Utz-Hellmuth Felcht, couldn’t get his fellow board members to agree to it, causing Mr. Grube to resign in disgust.

The shambles in the company’s glass tower headquarters in Berlin is enormous. The boss is gone, the head of the board massively damaged and the company’s massive problems keep growing without any prospect of improvement. The vision of a modern 21st century transport company seems like something from never-never-land.

Basically things have not run smoothly since 1994, when the federal government decided to put its railways on the market. That decision had less to do with strategy than being driven by the wish to get a grip on spiraling debts. The plan was to turn the rail, post and telecom sectors into agile markets with modern, economically managed enterprises. The railway, the postal system and telecoms were turned into stock corporations.

With 300,000 employees Deutsche Bahn has an annual turnover of €40.5 billion ($43.7 billion), Deutsche Post with half a million employees has €60 billion in sales and Deutsche Telekom with 225,000 employees almost €70 billion ($75.2 billion). Whereas the federal government owns only 21 percent of Post and only 32 percent of Telekom, it still owns the railways completely. As such the company is always a very special state-owned firm for any government.

Every Deutsche Bahn boss has to be not just a manager, but also a shrewd diplomat.

The really worrying thing is that the owner of the railways doesn’t know what it wants. It was clearly set out in 1994 that competition was to advance the enterprise. But that decision turned into a constant bone of contention. It’s the worst situation a chief executive can encounter – since then every Deutsche Bahn boss has had to be not just a manager, but also a shrewd diplomat.

The government could formulate more clearly what it wants – competition on the rails or to be a provider of livelihoods? National or international strategy? Diversified conglomerate or purely a railway enterprise? Profitable or not? More or less cargo? There are no clear answers that would indicate an understandable strategy. Instead slogans like punctuality, reliability and service are bandied about. When supervisory board chairman, Mr. Felcht, took office he described those as “core competencies” of the firm. But surely those are givens delivered by a stringently formulated strategy? Yet Deutsche Bahn doesn’t even meet these criteria satisfactorily.

And all the while digitalization races past the railways. Trucks and cars are being automated, networked mobility services are being created. A click on an app and a car stands ready to drive the caller from A to B, possibly along with three or four other people. This is how individual drivers in towns and regions are transforming into local transport providers.

By contrast, you drive to the station and wait for a train. Digitalization is making transport more versatile. That’s where rail loses market share, for example because it is still struggling to string containers together and having to argue with residents over whether trains run too loudly or too long on tracks through towns or regions like the Rhine Valley.

At the end of the day, how much room will remain for the railway, the once innovative mode of transport in the 19th century? Clearly, the rail system is still needed to solve 21st century mobility issues - to avert traffic gridlock in conurbations and to ensure that bulk cargoes reach even distant destinations without interruption. That should drive efforts to design concrete concepts and to implement them briskly. And it requires a strong chief executive and a skillful supervisory board chairman or woman, confident of the backing of fellow board members.

Deutsche Bahn now has neither. Transport minister, Alexander Dobrindt, has to clear up the mess, and Chancellor Merkel will also have to deal with the company, something she’d much rather leave alone. But peace and quiet is earned only by those who work their field diligently and constantly. In politics that means creating the framework that allows all forms of transport to exploit their advantages to the full.

To that end, the government should do for rail what it does for roads: provide the infrastructure as the base for economic success. That then allows the companies to provide transport and other services.

That should even be possible at Deutsche Bahn.

 

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