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Business

Tearing down the tracks

An old giant of east German heavy industry, the Ammendorf railway carriage works, has made a bold, brave bid to survive. Yet it struggles.

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For Ammendorf, there may be more switches ahead, in business strategy

If state intervention does not work, the great railway carriage works at Ammendorf, near Halle, may close down for good.

But if it does, the carriage works and its employees will not be just some more predictable victims of the slow-going economic transition in eastern Germany. Ammendorf is an unusual case.

So the fight to keep it on track is drawing support from the federal government, as Chancellor Gerhard Schröder’s cabinet has reportedly leaned on the German railways, Deutsche Bahn, to place new orders that will likely benefit Ammendorf.

The railways have announced plans to invest €10 billion ($8.8 billion) in their rolling stock through 2006.

Though the reports of federal pressure were denied by Deutsche Bahn, the timing of the plan is exceptional.

Ammendorf’s Canadian owner, Bombardier Transportation, was threatening to close down the carriage works before the news came in. But a survival strategy is now in the works, with the state government of Saxony-Anhalt pledging to support Bombardier in property purchases associated with the Ammendorf works.

Staying alive

Were the carriage works to shut down, it would be a spectacular failure, since efforts to boost Ammendorf’s competitiveness have been expensive and long-running.

In post-socialist Saxony-Anhalt, where unemployment hovers around 19 percent, the plant has been an unusual success story.

Much of the heavy industry that flourished under Communist rule failed after 1989, deemed too ungainly to reform by potential investors. Not Ammendorf.

The carriage works made all the major changes an aggressive business consultant could have dreamt up – technical modernisation to the tune of 100 million marks, plus gradual redundancies to shrink the workforce from 1989’s level of 5,000 employees to 850 now.

Then, to top it off, finally privatisation into the hands of Bombardier, a Canadian giant in the international rail manufacturing industry.

Trickiest of all, Ammendorf, once dependent on orders from the Soviet Union – to which it sold 30,000 carriages before the collapse of the Communist block’s COMECON trading community – diversified its export markets, finding new buyers from both western and eastern Europe.

Yet it has barely survived its latest dip in business. Bombardier officially announced that Ammendorf would close, until outside forces intervened, apparently giving it a new lease on life.

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