NEE sees lack of reform willingness as core problem at Deutsche Bahn

Deutsche Bahn AG today presented its deeply red-colored annual report for 2020 with a loss of 5.7 billion euros. Political disinterest and the company’s lack of self-healing powers damage the role of railways in the overall transport transition. The pandemic is not a valid excuse.

(Berlin) The DB management has laid an economic cuckoo’s egg in the nest of the next federal government. A profit decline of more than six billion euros is not an unavoidable consequence of the Corona pandemic, but primarily a mix of concealed misinvestments and declining productivity. The DB board, with the approval of the federal government, has continued the internationalization and diversification strategy of Hartmut Mehdorn after the canceled IPO more than a decade ago – but without fortune. Economic time bombs like Stuttgart 21, the Arriva acquisition, and other loss-making investments will continue to burden the balance sheet in the future. Fundamentally negative effects are primarily due to revenues that have been rising more slowly for years compared to the significant personnel expenses.

Focus on preserving the status quo

NEE Managing Director Peter Westenberger: “Management and the in-house union EVG focus on preserving the status quo. Climate-friendliness is the central political reason to rely on railways. However, regardless of Corona, there is a lack of quality and efficiency. Currently, the government is buying political calm and time with tax money, a significant portion of which is not being invested.” We dare to predict that the growing and currently Corona-masked need of DB for public handouts will soon hit limits.

The association reaffirms its criticism of competitive distortions. The new record loss at DB Cargo of 728 million euros is the sixth negative result in a row for the division. The loss doubling cannot be explained solely by revenue losses from the Corona lockdowns. Clearly, there is a “bad bank” operating in the market with too low prices, which harms competition. Management seems to rely on claiming the contractually fixed loss compensation from the group, which in turn speculates on the equity injection from the federal government. That at the same time – and this in the pandemic year – DB Netz AG can generate a surplus of 402 million euros almost exclusively from track fees is also a case for Brussels. Because a good part of the excessively high track fees for all freight railways drives the red numbers at DB Cargo. Westenberger: “This is how you slowly dry out the competitors.”

This year could be even worse

Even if it is assumed that DB has particularly dramatized the 2020 balance sheet through provisions, the association of freight railways estimates that 2021 will be structurally even worse for DB than 2020, even if the pandemic were over by late summer. Westenberger: “We assess the causes, situation, and perspectives very similarly to what the ‘Alternative Report’ presented yesterday has done. Unlike ‘Rail for All’, we cannot recognize a too low influence of the state at DB, no matter how hard we try.” The example of the joint-stock company Deutsche Bahn shows that a company that is exclusively focused on profit generation according to its legal form and statutes can be weakened further and further – if the owner allows it. The “commitment” of the boards to fulfill economic goals, announced at the instigation of the SPD in the coalition agreement of 2018, has either not taken place or has not borne fruit.

Independent analysis demanded

For politics, “Corona” is now a welcome excuse. The state can hardly send more executives to the management boards: three of the seven board members have spent many years in public service before their current roles. In the supervisory board of the company, the federal owner, alongside the chairman, former state secretary Michael Odenwald, is represented by three state secretaries, three members of the Bundestag, one board member of the state-owned kfW, and two management consultants. In the general meeting, the Federal Minister of Transport sits alone.

Westenberger concludes: “The report shows that it is high time for an independent analysis of the railway reform of 1994, which has hit the buffers. Suitable different framework conditions for the public infrastructure tasks of the state and for transport companies are a priority. The federal government’s unwillingness to reform in railway policy, as well as in creating suitable competitive conditions for roads, has fatal effects on climate protection goals.”

Photo: © NEE / Caption: NEE Managing Director Peter Westenberger