Deutsche Bahn must be transformed into a state-owned GmbH, so that the German government is able to sufficiently influence corporate governance. Only then will the transformation of the state-owned rail company be success. That says the Union of CDU and CSU, which together form the largest government fraction in the German coalition with the SPD.

“It is time for a new rail reform, “says Ulrich Lange, the Union’s vice-president in the Bundestag. “We are increasingly noticing that Deutsche Bahn is unable to master the new challenges.” The Union wants more direct influence on strategic decisions made by the DB management. The group has no solutions for the losses in freight transport.

Influence on governance

Deutsche Bahn was transformed in 1994 into an Aktiengesellschaft (AG), with all shares remaining in the hands of the state. What the Union is now advocating, a transformation into a Gesellschaft mit beschränkter Haftung (GmbH), seems a subtle and cosmetic change.

However, under German law, the AG (“NV”) and the GmbH (“BV”) differ in the influence of the sole shareholder on corporate governance. In the case of a GmbH, according to Lange, the state has a direct “right of designation”, to which the directors must adhere. “We don’t have that with DB board members at the moment.”

Heavy pressure

Federal traffic minister Andreas Scheuer already put heavy pressure on DB’s management at the end of last year to finally take decisive action on strategic issues and on the loss-making freight rail division.

This led to a number of staff changes in the management of the group, whereby the financial chief, who is also responsible for DB Cargo, had to leave the company. However, no real changes were carried out.

Separation

The party top of the Union now wants to be able to intervene more drastically, vice-chairman Ulrich Lange said in the Augsburg Allgemeine. The programme also includes a separation between the DB rail company and the management of the rail network, which has been placed with DB Netz, a division of the group.

According to Lange, a sale of shares in the current Bahn AG is no longer at stake. In German politics, and at DB itself, there has long been speculation about a partial privatisation of the rail group. An IPO was even prepared in the first decade of this century, but it was canceled when the financial crisis began in 2007.

A sale of parts of DB remains on the agenda. The company wants to say goodbye to traveler’s daughter Arriva, an international company with interests in more than ten European countries and headquarters in England. However, competitors have not yet picked up on the offer, because an amount of four billion euros is requested for Arriva and the candidate will also have to take over around one billion euros in debts.

DB Schenker

The German General Audit Office, the Bundesrechnungshof, urged several times last year to also sell the DB Schenker division. This part of the DB group is one of the largest freight forwarders and logistics service providers in the world. Union spokesperson Lange did not comment on how to proceed with DB Schenker, inside or outside Deutsche Bahn.

Lange’s proposals are remarkable, because the Bundestag’s scientific service prepared a report in 2016 with the tenor that a transformation of DB from an AG to any other legal form would make little difference to the state influence. This service also wondered whether a conversion from AG to GmbH would be permissible under European law.