TRAIN TROUBLE

Labor Strife Ahead for Deutsche Bahn

Streik der Lokführer
A Deutsche Bahn worker surveys an empty train platform during a strike last year. Photo: DPA
  • Why it matters

    Why it matters

    Unions are gearing for another tough set of wage negotiations with Deutsche Bahn, which could lead to strikes, widespread service outtages and perhaps political fallout for the government and the railway’s embattled CEO, Rüdiger Grube.

  • Facts

    Facts

    • Deutsche Bahn is Europe’s largest railway operator and is owned by the German government.
    • After years of profitability, the railway lost €1.3 billion in 2015.
    • In 2014 and 2015, a wave of strikes by the locomotive engineers cost the company almost half a billion euros.
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    Audio

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An off-the-cuff remark last month by the German transport minister has increased the likelihood of labor trouble for Deutsche Bahn, the country’s state-owned rail company.

On a publicity trip aboard one of the company’s flagship InterCityExpress trains, Alexander Dobrindt observed that “Deutsche Bahn’s primary aim is not maximizing profits.” He then listed a number of “social goals” that the company would do well to consider, alongside its balance sheet. These included “mobility for all,” and better internet access on trains.

He may not have intended it, but Mr. Dobrindt’s words probably gave ammunition to union leaders preparing for their latest showdown with Rüdiger Grube, Deutsche Bahn’s chief executive. A wage agreement hammered out last year after widespread unrest is up for renegotiation at the end of September. Claus Weselsky, leader of the train drivers’ GDL union, will likely cause trouble. Even the more moderate Alexander Kirchner, whose EVG union represents other train personnel, has predicted the talks will be “hard.”

None of this is good news for Mr. Grube. Under his watch, healthy profits turned into a €1.3 billion ($1.46 billion) loss in 2015. Hopes of privatization have all but disappeared. The railway is plagued with a very un-German epidemic of delays and cancellations. And renewal of Mr. Grube’s own contract, which expires at the end of 2017, is by no means a certainty.

“Deutsche Bahn’s primary aim is not maximizing profits.”

Alexander Dobrindt, transport minister

Mr. Weselsky has already hinted at his union’s initial gambit: a 4 percent pay increase. Not too bad in itself, but executives will worry more about the small print. The GDL is likely to demand that shift plans and other operational matters are included in the deal.

This could severely limit managers’ capacity to tackle inefficiencies. Some of these are striking: drivers at loss-making freight subsidiary DB Cargo, for example, spend less than half their work time actually driving trains.

Questions of work organization, as well as pay demands, have been at the heart of industrial strife in recent years. On these issues, the EDV’s Mr. Kirchner often seemed closer to management than his radical GDL colleague. In the past, Mr. Weselsky has poured scorn on the rival labor union, denouncing EDV as a “company union.”

Rivalry between the unions was a key factor in GDL’s strike wave in 2014 and early 2015, which paralyzed rail transport across Germany and cost Deutsche Bahn some €480 million. GDL wanted to represent other personnel as well as train drivers, and insisted on separate deals for its members. Deutsche Bahn resisted strongly, but a brokered compromise meant they had to accept just that: two separate pay deals for the same categories of workers.

What happens over the coming months is hard to predict, not least because of continued tense relations between the two unions. But Mr. Dobrindt’s words will have encouraged them to take a harder line: if even the government doesn’t think profitability is Deutsche Bahn’s main goal, why shouldn’t staff bid for a bigger piece of the pie?

 

29 p15 Deutsche Bahn and the Unions-01

 

This does not make Mr. Grube’s job any easier. The board will make a decision on his own future in the coming months. Strike action and network disruptions will not help his case. This is not simply because they will hit profits. As Mr. Dobrindt made all too clear, Mr. Grube answers to politicians, and his job includes keeping the peace in his part of the public sector, especially with federal elections looming.

In any case, Mr. Grube may be running out of excuses for Deutsche Bahn’s poor performance. By now it is clear that the company is suffering from serious internal problems. Its division into long-distance trains, freight business, regional trains, network management, and numerous other subsidiaries has led to widespread inefficiencies and helped to worsen growing punctuality problems.

Last year, after more than 30 percent of all long-distance trains arrived late, the government added an 80 percent punctuality target to Mr. Grube’s responsibilities. In the first six months of the year, DB managed 75.2 percent.

It is clear that Deutsche Bahn is suffering from serious internal problems.

In terms of profit, things have improved somewhat after 2015. Revenues may have stagnated in the first half-year of 2016, but operating profits jumped 13 percent to €1 billion. Still, a closer look reveals that the increase came almost exclusively from the network and logistics subsidiaries. Core businesses – including long-distance and regional passenger traffic, and freight operations – all showed weak performance.

The government also stands to lose from any labor militancy in the coming months. Under an agreement two years ago, when Deutsche Bahn was much healthier, the railway must pay substantial dividends to the government, no matter how big its losses. Last year, it paid €850 million into the public coffer. By 2020, that will rise to €1 billion, profit or no profit.

That hefty sum has not gone unnoticed by union leaders. In welcoming Mr. Dobrindt’s comments, Mr. Kirchner of the EVG union also called on the government to renounce its dividend. He wants to see that money used instead to accelerate new hires and cut back on overtime, which last year reached a record 7.5 million hours across the company.

A 4 percent pay demand may be the least of Mr. Grube’s worries.

 

Dieter Fockenbrock is Handelsblatt’s chief correspondent for the companies and markets desk, focusing on corporate governance, opinion and rail transport. To contact the author: fockenbrock@handelsblatt.com.

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