Questions are being raised about Deutsche Bahn’s corporate strategy and in particular its ownership of Schenker. A number of German newspapers are reporting that the German Federal Court of Auditors (Bundesrechnungshof) published a report last week for German members of parliament and ministers that criticised the financial position of Deutsche Bahn and recommended the sale of both Arriva and Schenker.

The main problem that the report identifies is that Deutsche Bahn is financially over-stretched, without the resources to meet its promises to invest in the rail network and has possibly exceeded its legal debt ceiling by €1.5bn. There are even suggestions that the report questioned the liquidity of Deutsche Bahn. The German Transport Minister is quoted by a tabloid newspaper as saying that Deutsche Bahn needs to “restructure and streamline”.

The issue of Deutsche Bahn’s rail services has become politically sensitive in Germany, with a widespread perception that the rail network is inadequate and needs substantial investment. A large programme of investment has been outlined for the next ten years with Deutsche Bahn committed to spending €24bn whilst the German Federal Government will inject a further €62bn.

If the news about the auditor’s report is accurate it is not particularly surprising as the same organisation in January criticised both the German Federal Government and Deutsche Bahn for its problems, stating that the; “Federal Ministry of Transport … did not question DB AG’s far-reaching strategic decisions. For example, it has accepted the company’s extensive international business and has allowed DB AG to regularly invest funds for foreign and non-railway business instead of investing for the railways in Germany”.

Arriva is already in the process of being sold, possibly to US-based private equity businesses. The strong implication is that Schenker will be next. Finding a buyer for the road freight, forwarding and contract logistics provider is unlikely to be difficult, however its sale will represent a considerable reversal for Deutsche Bahn’s strategy in the freight market as well as having a considerable impact on the Group’s profits as Schenker has consistently been a contributor to Deutsche Bahn’s bottom line.

Source: Transport Intelligence, September 17, 2019

Author: Thomas Cullen

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