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Negative business in freight transport: How politics could fill a gap in the billion-dollar euro in DB Cargo – the economy

It will be an important performance for Sigrid Nikutta. This week, the head of the federally owned company DB Cargo AG has to answer questions from its supervisory board. The largest rail freight operator in Europe, based in Mainz, is making record losses as the parent company of Deutsche Bahn in Berlin. The freight transport division, which has been neglected for a long time, is making a significant contribution to the minus 5.6 billion euros that the largest state-owned company expects this year due to crown losses.

The meeting of the 20 Cargo Supervisory Boards could be exciting, just because of a special staffing constellation. Nikutta has also been a member of the DB Group’s board of directors since the beginning of the year, and some already consider it a possible successor to DB CEO Richard Lutz, who heads the supervisory body of the freight subsidiary. Following the failure of the arbitration between DB and GDL due to an early collective agreement and the first warning strikes for drivers since March, there is further potential in the supervisory board for a conflict with competing unions EVG and GDL.

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At least a difficult renovation is progressing. Nikutta is accelerating and wants DB Cargo to become Europe’s most important railway logistics company. In the future, more complete supply chains will be organized throughout Europe and will be more involved in China and the DB Schenker truck transport company, so that transport is primarily by rail, instead of stronger for the environment. The new course is well received by employees who demonstrated in front of the DB Chancellery and Headquarters in Berlin years ago against further red pen plans from former DB chief Rüdiger Grube.

Growth is a new goal

In the meantime, the exchange rate has been readjusted and DB Cargo should grow instead of shrinking. The declared political goal of the European Union is also to bring much more freight to the railways in order to protect the environment and achieve climate goals. In many areas, the DB Group in particular benefits from this advantage, as the latest resolutions of the Federal Assembly on the 2021 budget show.

Corona’s planned € 5 billion financial aid to DB, which has not yet been approved by Brussels, may continue next year. Likewise, the annual capital injections of € 1 billion from the 2019 climate package, which have not yet been approved by the EU. Both projects are controversial because other railways fear unilateral assistance to the state market leader in terms of serious competitive disadvantages.

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This is especially true for freight transport, where Deutsche Bahn’s competitors have already conquered more than half of the rail market and DB Cargo would find it difficult to finance the necessary investments without subsidies and financial assistance due to high losses. Nikutta wants to acquire hundreds of new, greener locomotives for the growth course, support digitization using automatic clutches instead of manual work, and hire thousands of new employees every year.

Red numbers by 2025

At the same time, the manager is asking politicians for patience: the federal rail freight operator will hardly get out of the red by 2025. In particular, the operation of a single wagon, in which freight wagons and wagons are laboriously assembled at marshalling yards, causes high losses due to insufficient capacity utilization. However, a green network with 12,000 trains per week is considered indispensable, as a single transport will replace more than 50 lorries, thus significantly reducing road and climate congestion.

Additional cancellation plans are currently unavailable. Instead, the government will financially support the operation of one car with hundreds of millions of euros over the next five years. Given that the use of shifting and forming equipment is to be subsidized in a competitively neutral way, the European Commission has approved aid of up to € 600 million. Nikutta hopes that the total amount will be exhausted.

Scheuer wants to put more money on the train

There is also a large amount of funding for alternative drives in rail transport; The Bundestag has just increased its liabilities by almost 200 million euros. There are a total of half a billion euros this year and next year for the digitization of interlocks, as well as control and safety technology.

Overall, according to Transport Minister Andreas Scheuer (CSU), funding for railways will increase from € 7.6 billion to € 8.5 billion next year – and in 2022, for the first time, the ministry wants to invest more of its budget in rail transport than in road transport.

Despite the dark red numbers and the threat of further depreciation, DB Cargo’s long-term prospects are definitely positive. Of course, much needs to be done for freight to run by rail. There is still a lot of help for truck competition, high freight train costs, for example through electricity taxes, many barriers to rail infrastructure, too few combined terminals – and too many commercial areas on motorways without any rail link.

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