Will Europe’s largest rail carrier be divided?
The European Commission may lead to the unbundling of DB Cargo because of the possibility of granting prohibited public aid to the company due to the large losses of this railway carrier. Brussels has already opened an investigation into the matter. This concerns probable state aid through the parent company Deutsche Bahn, which distorted fair competition in the rail freight market.
As reported by Reuters, Fret SNCF, the freight unit of the French state-owned railway company SNCF, suffered a similar fate. An investigation launched by the Commission last July showed that Fret SNCF had obtained a total debt write-off of 5.3 billion euros and a recapitalisation of 170 million euros by the parent company SNCF. Until July of the current year, Fret SNCF is to be divided into two entities: New Fret and New Maintenance (data from L’Usine Nouvelle newspaper).
In the background, there is also the sale of the “jewel in the crown” of the DB group, DB Schenker, to cover the debt of the entire DB group. Judging by the information that approximately 20 potential buyers have contacted us, the sale of DB Schenker is entering a decisive stage. It is worth recalling that DB and the German government have been considering the possibility of selling this company for 5-6 years.
Losses
Last year, DB Cargo’s losses increased for another year and amounted to almost 500 million euros, Reuters reported, emphasising that this data is not final. They were also twice as high as expected. This is one of the reasons why the European Commission initiated an investigation, fearing excessive financial assistance. DB Cargo has quickly lost its share in the domestic freight transport market in recent years, and it does not currently exceed 50 per cent. According to the agency, DB authorities did not want to comment on either the size of DB Cargo’s losses or the EU’s actions. Meanwhile, Germany’s Ministry of Transport announced that it “had a constructive exchange of information with the European Commission”.
DB Cargo’s losses are not due to lack of demand. For instance, it carries out “very lucrative” transportation of military equipment to Ukraine on behalf of the United States and the German army. Chronic losses, however, are incurred by dispersed transport, i.e. transport services using only a few wagons at most. The government estimates it at approximately 300 million euros annually.
Restructuring
DB Cargo is trying to improve its financial results by restructuring its operations. Their effect is to be the outsourcing of services, e.g. in the segment of single wagon and full-train transport, which will be provided by separate companies or external companies. DB Cargo is to focus on remaining operations.
The outsourcing of operations assumes, according to the DVZ newspaper, that combined transport to/from maritime terminals will be transferred to Mitteldeutsche Eisenbahn (MEG), a joint company of DB Cargo and VTG Rail Logistics. Meanwhile, Transfacht will take over part of the domestic operations, RBH Logistics – a subsidiary of DB – will take over cross-border combined transport operations, and Kombiverkehr will handle sales.
Employment reduction?
Representatives of trade unions such as EVG and DVZ fear that the implementation of these plans will mean employment reduction. According to them, this may any day lead to losing their jobs for over 1,500 employees. Representatives of DB and the government deny this. We are talking about a possible “correction of administrative staff in the process of this transformation of DB Cargo”. At the same time, the government clarified that there were “no plans to terminate the contracts” because the DB Group as a whole needs to increase the number of employees and, therefore, the employees will be rehired internally and will not lose their jobs.