The EU Commission is increasing the financial pressure on Deutsche Bahn’s struggling freight transport subsidiary, DB Cargo. The federally owned parent company will no longer be allowed to compensate for the horrendous losses.
The freight transport subsidiary of Deutsche Bahn makes losses of hundreds of millions of euros every year, which are always offset by the parent company. It is becoming apparent that the EU Commission will put an end to this practice.
DB Cargo confirmed a report by the Reuters news agency that the Commission will prohibit Deutsche Bahn from compensating for losses, which is regulated by a so-called profit and loss transfer agreement, for competition reasons.
“A solution is emerging in the EU state aid proceedings against the Federal Republic of Germany in the case of DB Cargo,” a spokesperson said in response to a query. “The European Commission is expected to issue a decision on this matter with conditions in the course of this year.” Another key factor in this conclusion is “the timely termination of the profit transfer agreement.”
EU review has been ongoing since the beginning of 2022
The Commission initiated a review of this practice at the beginning of 2022. It is now nearing completion. DB Cargo will therefore have to stand on its own two feet financially in the future.
The competition authority is therefore giving the freight transport subsidiary around two years to get back into the black. However, as a wholly owned subsidiary, it can remain in the group of the state-owned railway company. Cargo does not have to repay any loss compensation payments it has already made.
“The Federal Government, the Board of Management of DB AG and DB Cargo AG agree that the economic crisis that DB Cargo AG has been experiencing for years must be ended urgently and that urgent measures are necessary to achieve this,” said a spokesman for the Federal Ministry of Transport (BMDV).
“For this reason, a comprehensive transformation program has been set up, which must now be consistently implemented with a view to the state aid procedure in order to ensure a legally secure future for DB Cargo AG,” it continued.
DB Cargo is in the midst of transformation
The company is already in the midst of a large-scale restructuring, which will involve job cuts, particularly in administration, and restructuring of business areas. Intensive negotiations are underway with the Railway and Transport Union (EVG) regarding the transformation.
A large proportion of the losses occur in so-called single wagon traffic. Loads are picked up directly from industrial customers and the wagons are assembled into long trains at marshalling yards. At the destination station, these are then dismantled again and the wagons are transported individually.
Many experts believe that this service cannot be operated economically. The federal government is therefore supporting single-wagon transport with funding.
Source: Stern
