GERMAN RAILWAY has not given up its ambition for a stock market listing in 2007 or later, but turning in the necessary robust financial performance looks certain to mean a sustained policy of strict cost control for the next few years, with ambitious investment plans kept on hold.
DB management reached agreement with staff representatives in mid-December that personnel costs will be cut by 5·5% by 2010, that there will be no compulsory redundancies, and that there will be a possibility of bonuses related to DB’s financial performance. Despite this, DB is strategically committed to further cuts in the payroll, essentially through natural wastage.
While DB expects to announce a €200m ’profit’ for 2004, the forecast for 2005 is for a return to red figures as government funding for infrastructure work is ramped down (RG 11.04 p788). A major cause for concern is the performance of Railion, which in 2004 suffered badly as its road haulage and barge competitors kept up pressure on rates.
Last year’s ’qualified spending ban’ (RG 9.04 p554) has been eased, but DB Chairman Hartmut Mehdorn has ordered a detailed review of costs across the business, with the possibility of restructuring to streamline the organisation. DB is reluctant to confirm its plans officially, but reports in the German media indicate the start of a programme to rationalise what many other railways regard as lavish infrastructure provision. One report said that up to 5200 km of track may be taken out of use by 2010, while the Association of German Transport Undertakings (VDV) confirms that 4500 km has been closed since 2000; another 1700 km is already being considered for closure.
VDV is very concerned that further cuts will damage the prospects for growth in the regional rail business. President Dipl-Kfm Günter Elste said on January 18 that the government’s policy of reducing infrastructure spending ran directly counter to the strategic objective it had announced in October 2002 to provide ’long-term, secure support for public transport’. VDV is also calling for the government to hand financial responsibility for rail infrastructure in the regions to the Länder ’as they are close to the customers and the operators’.
