Deutsche Bahn aims to bolster its logistics business | Business| Economy and finance news from a German perspective | DW | 27.01.2011
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Deutsche Bahn aims to bolster its logistics business

Although the Deutsche Bahn's passenger service has been flagging at home, the company reportedly has ambitious plans for its international logistics branch.

DB Schenker logistics trucks

Deutsche Bahn is on rails and roads, in the air and on the sea

Although the Deutsche Bahn is regularly criticized for shortcomings in its domestic passenger service, the company reportedly has substantial ambitions for its logistics branch during the next five years.

Deutsche Bahn aims to increase the annual operating profit of its Schenker logistics unit from its current 298 million euros to 798 million euros by 2015, according to the business newspaper Financial Times Germany. The value of Schenker's rail freight busines is to grow from 33 million euros to 490 million euros during the same time frame, FTD reported, citing supervisory board documents.

A Deutsche Bahn spokesman said the company doesn't comment on internal documents.

However, the spokesman told Deutsche Welle that the transportation of goods via rail, air, road and water is "an essential part" of the company's business. "It's only possible for us to offer a network like this if we maintain a certain size," he said. "That's very important to us and a large component of Deutsche Bahn."

The company has made significant international expansions in recent years. Its investments include consolidated control over Spain's Transfesa, Poland's PTK Holding, and England's Welsh & Scottish Railway Holding Ltd.

Deutsche Bahn headquarters

Deutsche Bahn has been in a privitization process since 1993

But, according to FTD, the German national railway could struggle for years to make some of its European operations profitable, and is losing money in the United States.

Not impossible

Maria Leenen of SCI Verkehr, a Hamburg-based transportation sector consultancy, described Deutsche Bahn's reported plans as ambitious but possible.

The train company, she said, has made intelligent international investments, giving it a leading position in Europe.

"A company with plans of that magnitude can only grow where there are still markets, and that means looking to foreign markets," Leenen told Deutsche Welle. "One thing that is necessary is that they secure all their market share – which isn't necessarily a given – above all on the domestic market."

Complete logistics services

Both Leenen and Deutsche Bahn's spokesman highlighted the importance for the company to develop from a carrier to a complete logistics service that offers peripheral services to its clients.

A Deutsche Bahn train under the sun

Air conditioners failed during the summer...

"That's the main challenge for the Deutsche Bahn in both domestic and foreign markets," Leenen said.

According to Deutsche Bahn's spokesman, such logistics services could include shipping automobile steering wheels from one location, shipping airbags from another location, and then assembling the two at a cost advantage before delivering them to their destination.

"Contract logics are still a small part of our turnover, but certainly a very positively developing branch," he said.

Domestic criticism

But for all of its expansion on the international logistics market, Deutsche Bahn's passenger service has drawn plenty of negative publicity.

During the summer, air conditioning aboard many of its ICE high-speed trains failed, leading to interior temperatures as high as 50 degrees Celsius (122 degrees Fahrenheit). At the time, the company was accused of cutting corners at home in order to finance costly international purchases.

More recently, it faced criticism after widespread cancellations during snowstorms this winter, presumably due to infrastructure shortcomings.

Deutsche Bahn - formerly wholly government run - is also stuck in a privatization process, which began in 1993 and continues indefinitely.

A train in the snow

... and trains were cancelled in the winter

Michael Klein, a speaker for EVG Railway and Transport Union, said he welcomes news of further ambitious expansion by Deutsche Bahn.

"That should include hiring more personnel and, above all, should mean an end to layoffs," he told Deutsche Welle. "I believe that, overall, logistics is a sector that can create jobs in the future and also secure them."

Klein added, however, that he would like to see that investment take place within Germany.

"I believe this is a growth market, specifically for domestic rail, and I believe the Deutsche Bahn needs to invest here," he said.

Author: Gerhard Schneibel
Editor: John Blau

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