Deutsch Bahn is now unable to provide funds to its logistics affiliate.
The German Rail's freight division, DB Cargo, is undergoing a significant overhaul due to financial losses amounting to hundreds of millions annually, which have traditionally been covered by its parent company. This change is being driven by the EU, which views the ongoing compensation to DB Cargo as a competition distortion and has initiated an infringement procedure. The outcome is expected in October.
DB Cargo, a subsidiary of the German Rail, has been relying on its parent company to cover its annual losses for years. This practice has been perceived as undermining fair competition among other freight railways by the EU, leading to an infringement procedure initiation.
The first signs suggest that DB Cargo must swiftly shift towards profitability and significantly alter its operational strategy. The competition authority has reportedly granted the freight railway around two years to turn a profit, allowing it to continue as a 100% subsidiary within the bundeseigenen Bahn's corporate group. There's no requirement for DB Cargo to repay previous loss compensation payments.
"Extensive Transformation Plan Initiated"
According to representatives from the Federal Ministry of Transport (BMDV), an extensive transformation plan has been put in place to guarantee a legal and sustainable future for DB Cargo. The German government, DB AG's board, and DB Cargo AG agree on the urgent need to address DB Cargo AG's prolonged economic crisis and implement immediate measures.
Currently, DB Cargo is going through a massive restructuring phase, focusing on allocation of resources in administration and refining various business sectors. Negotiations involving the Railway and Transport Union (EVG) are ongoing, with an emphasis on transformation-related issues.
A substantial portion of the losses stem from single wagon traffic services. In this model, loads are directly picked up from industrial customers and assembled into long trains at marshalling yards, before being dismantled and transported individually at the destination station. Many experts argue that single wagon traffic is economically unsustainable. The federal government subsidizes single wagon traffic.
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The EU's concern over the ongoing compensation to DB Cargo is contributing to the economy's broader discussion on fair competition. The extensive transformation plan for DB Cargo aims to address its economic crisis and ensure a sustainable future.
