DB Cargo container train, source: DB Cargo

DB Cargo could face massive job cuts

Deutsche Bahn (DB) is considering cutting off the DB Cargo freight division. A new saving round at the loss-making division could lead to the loss of 3000 jobs until 2030, reports Reuters news agency.

The management of the German state-owned company had the consultancy firms Oliver Wyman and SCI-Verkehr draw up two plans, in which a pruning scenario involves a rigorous reorganisation at DB Cargo, according to the news agency.

In addition, up to half of the staff could disappear within ten years. The leaked plans are mainly about hard interventions in the wagon transport division, which has suffered heavy losses in recent years and, as a semi-monopolist, lost nearly half its market share in Germany.

State aid

The savings would mean, among other things, that the slimmed-down DB Cargo withdraws entirely from rail freight transport in large parts of northern Germany and the former GDR.

In an alternative scenario, the wagon load division could still continue without reorganisation, but would be heavily dependent on substantial government subsidies to remain financially intact. According to the documents, this amounts to several billion euros in state aid.

Among other things, the VAT payment at DB Cargo could be reduced. In addition, the freight division could receive money from the profitable ticket sales for passenger transport, as suggested as another option. This form of cross-subsidy has actually been applied in recent years by the DB management to keep the freight division alive.

No decisions made

In a response, DB Cargo stated that no definitive decisions had been taken to drastically reorganise the freight division and that the leaked plans only concerned investigation reports that should serve as discussion pieces for the parties involved, including the political parties and the German government.

Within German politics, there seems to be little enthusiasm for the two scenarios that DB has had worked out. At DB Cargo, for example, the slimming down means that rail freight transport cannot play the intended major role in getting more trucks off the road. The alternative, whereby DB Cargo receives state aid for many years, is not popular. More billions to the bottomless pit of the rail freight transporter can no longer be sold politically.

Losses

DB Cargo has delivered a total loss of 1.18 billion euros to the parent company in the last five years, according to an analysis of the books of the railway company at the end of last month. In 2014, the freight division, which is also the largest provider of freight trains in the Dutch market, suffered a loss of 128 million euros. That loss rose last year to a record of 341 million euros, almost 100 million euros more than the year before.

Despite frantic attempts by the central management of the Deutsche Bahn to get the leak out at the rail freight daughter, this has not been successful in recent years. Only in 2016 (-229 million euros) did the loss decrease slightly, compared to the 2015 financial year (-242 million euros).

The long series of red figures also raises more and more questions in private competition, as the losses have consistently been absorbed by the parent company through cross-subsidies. In the end, DB’s travelers and the German taxpayers paid for the negative results. For example, it appears that DB Cargo received 73 million euros from the German government infrastructure pot last year.

Author: John Verleijen

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