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Business

Deutsche Bahn on Track for Partial Privatization

After years of wrangling, Germany's coalition leaders have agreed to sell up to 24.9 percent of the national train service Deutsche Bahn, making it the last major state enterprise to face privatization.

German ICE train in front of the Bundestag

The train operations are up for sale, but not the stations or tracks

Volker Kauder, parliamentary head of Chancellor Angela Merkel's Christian Democratic Union, said on Monday, April 28, that coalition leaders had signed off on plans to partially privatize Deutsche Bahn.

Passenger and freight operations will be privatized, but all the stations and its 34,000 kilometers (21,000 miles) of tracks will remain state property.

CDU Chairman Erwin Huber said the deal would ensure "high quality" at Europe's largest rail group, speaking to ongoing concerns that partial privatization would lead to route cuts and lay-offs.

Federal Transport Minister Wolfgang Tiefensee said Tuesday in an interview with radio broadcaster Deutschlandfunk that Deutsche Bahn had the government "as a guarantor in the background" and was "a secure stock that would bring long-term success."

Tiefensee said the government hoped the Bahn's initial public offering could take place before the end of 2008, but he added that "one could perhaps wait two or three months" if market conditions proved unfavorable.

Details of the plan are to be worked out next month, in time for parliamentary approval before the summer recess.

Deutsche Bahn head Hartmut Mehdorn has for years insisted that a public listing was the only way the company could generate the capital it needs to remain internationally competitive.

Constitutional duty

a local train in a station

Some fear unprofitable local routes will be cut when the Bahn leaves state hands

With its initial public offering, Deutsche Bahn is expected to raise about 6 billion euros ($9.5 billion), about two thirds of which will flow back into the train company's coffers, said Social Democratic Party head Kurt Beck.

Deutsche Bahn reported a 4.2-percent rise in sales for 2007 and has forecast a 5 percent increase for 2008.

Ahead of Monday's meeting, Deutsche Bahn had reached an agreement with trade unions that rules out lay-offs as a result of the privatization for the next 15 months.

While Merkel's conservative bloc had pushed for an original plan to sell off 49.9 percent of Deutsche Bahn's shares, senior party members indicated they viewed Monday's agreement as the first step toward a further reaching privatization.

Germany's constitution stipulates that the state retain a majority holding as part of its duty to provide Germany with rail services.

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