Deutsche Bahn's chances of including its railways system in an IPO dropped Wednesday after experts said there would be a considerable risk to taxpayers and competition if the company and tracks to go public together.
Politicians are still discussing which path the Bahn's IPO should take
While speaking at a meeting of the Bundestag's transportation committee, a group of 10 experts agreed on Wednesday that German rail operator Deutsche Bahn should be separated from its physical railway system from the business operations before going public.
The German rail company has only been able to survive because of the taxpayer funds it receives, said Martin Hellwig of the Max-Planck Institute for Research on Collective Goods.
"It would be unbearable for taxpayers" if Bahn head Hartmut Mehdorn's plan to privatize the state-owned rail company gets the go ahead from politicians, he said.
Mehdorn wants the Bahn to go public by the end of 2006
Mehdorn has repeatedly said he wants the all of the Bahn's operations and track system to be made public as one to make the most of in-company synergies of about 1 billion euros ($1.27 billion). The Bahn is currently responsible for about 90 percent of rail transportation with other competitors claiming the remaining 10 percent.
Privatization cannot be undone
The chairman of the Monopoly Commission, Jürgen Basedow, pointed out to politicians that selling part of the railway network would be a nearly irreversible step that could only be undone by incurring high costs.
Splitting the company is politicians' only real option, Basedow concluded, adding that it would be risky for the government to allow the track network to be traded publicly, since only time will tell if the chosen privatization model is in line with European requirements.
Calling into question statistics provided by the Bahn, Berlin Finance Senator and former Deutsche Bahn head Thilo Sarrazin said according to his calculations the company's long-distance passenger transportation deficit would increase to 1.7 billion euros by 2010, which would force some 60,000 jobs to be cut.
"If it cannot lower costs, then the Bahn is not ready to be put on the market," said Sarrazin, a Social Democrat.
Second hearing scheduled for June
Politicians are expected to choose a privatization model by September
Splitting the track network from the company's operations would also have serious consequences, according to Bahn representative Otto Wiesheu. The Deutsche Bahn is among the top international rail companies and separating it from the track system could cost up to 80,000 jobs.
The head of the Transnet transportation union, Norbert Hansen, called the hearing "extremely one-sided and made a intentionally false" impression of the Bahn's privatisation plans.
But Hans Peter Friedrich, deputy chairman of the conservative Christian Union, said he did not think the government had decided on which privatization model it would support, adding he would wait until Deutsche Bahn officials receive a chance to respond to the experts' testimony during a second hearing at the beginning of June.
Politicians hope to reach agreement by September on a plan for how and how much of the Bahn will be privatized.