Labor Dispute

Rail Strikes Brake Industry Confidence

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German industry warns of yet another train strike halting the flow of goods and materials.

Numerous manufacturers in Germany are wondering whether they may be forced to halt production because of the latest train driver strike at Deutsche Bahn, the eighth in the ongoing dispute.

K+S, an agricultural chemical and salt producer listed on Germany’s blue-chip DAX index and the largest customer of Deutsche Bahn in some German states, is busy making alternative plans. If its salt and potassium warehouses are full but the company is unable to ship its raw materials, K+S will have no choice but to send employees home.

That point was never reached during the last seven strikes by Deutsche Bahn but is now a possibility, warn executives at K+S headquarters in the central German city of Kassel. “We normally dispatch 25 freight trains a day,” a spokesman said. “Switching to road transport would cause significant problems.”

“Things will start getting critical after three days.”

Gunnar Gburek,, Federal Association of Materials Management, Purchasing and Logistics

Germany’s GDL train drivers’ union, locked in a long and bitter battle with employer Deutsche Bahn, began a strike with freight trains on Monday and extended it to passenger trains on Tuesday. The employee action will continue until Sunday morning, unless a compromise is reached sooner.

The labor union is seeking a 5-percent wage increase and a reduction of weekly working hours from 39 to 37. The union also wishes to independently represent around 17,000 train workers in other positions.

K+S is one of many companies affected by the rail strike and some stand to be more affected than others.

“Smaller companies, which are not among the railroad’s preferred customers, will be especially hard-hit by the strike,” said Gunnar Gburek, a director with the Federal Association of Materials Management, Purchasing and Logistics, BME. “Retailers that are expecting five or six containers of promotional goods from the Far East may have to postpone their planned sales by a week.”

 

090 WTB Deutsche Bahn 2014

 

“Things will start getting critical for most customers after three days,” said BME expert Gburek, alluding to the resulting inevitable congestion. For instance, containers will be in the way because it is no longer possible to take them back once shipped. This in turn reduces the availability of containers for supplies.

The Association of German Chambers of Commerce and Industry, DIHK, estimates that each day of the rail strike will cost German industry €100 million, or $111 million.

“Rail is one of the main arteries of modern just-in-time logistics, and it is especially indispensable for German industry,” said Alexander Schuman, the association’s chief economist.

Germany’s coal and steel companies, some of Deutsche Bahn’s biggest customers, are especially nervous, because their buffer is usually enough to tide them over for only five to seven days.

Deutsche Bahn transports more than 600,000 tons of cargo every day in Germany, in addition to 5.5 million passengers. The company employs around 300,000 people, including 196,000 in Germany.

 

Freight Transport in Germany-01

 

The strike is especially challenging for freight forwarders. DHL Global Forwarding, the second-largest company in the industry next to DB Schenker, is concerned about angry customers. “We are now monitoring developments at Deutsche Bahn very carefully,” a spokeswoman said. “If necessary, we will shift our shipments from rail to road to ensure continuity in delivery times for our customers.”

Whether that backup plan is a possibility remains to be seen, experts warn. “There aren’t that many trucks available,” said BME logistics expert Gburek.

The severity of the situation was already evident later on Monday at the inland port of Duisburg, the second-most important German rail hub, with 22,000 rail trips a year. Trucks began backing up at the “Logport 1” section, because shippers were quickly collecting empty containers to use for truck transports.

The Duisport Group, which manages the Duisburg port, also operates rail companies, including one that provides a rail connection to the Rotterdam seaport. But CEO Erich Staake sees its main rail rival as a bottleneck. “The entire system is suffering because Deutsche Bahn handles many connecting trains,” he told Handelsblatt, calling the GDL strike “irresponsible” and a waste of taxpayer money.

 

Deutsche Bahn Freight and Rivals-01

 

The situation on the Elbe River isn’t any better. The Hamburg port and logistics company, HHLA, one of Germany’s biggest container reloading centers, operates two of its own rail companies with an annual rail volume of 1.6 million tons. They are not part of the strike, but their routes are narrowly defined.

One subsidiary, Polzug, supplies Polish cities, while the second company, Metrans, provides a rail connection from Hamburg to Bremen and Rotterdam. “The problems were manageable during the last strike,” a spokesman said. “We don’t know if we’ll get off as lightly this time.”

Another concern of private rail operators is that Deutsche Bahn train drivers who are GDL members could park their freight trains along routes, clogging up the rails. Although GDL chief Claus Weselsky assured customers that blockades would be avoided, the industry lost its faith in the union leader long ago.

Deutsche Bahn train drivers could park their freight trains along routes, clogging up the rails.

Still, some logistics experts remain optimistic. “Past strikes have shown how well companies can adjust to the new situation,” said a spokesman for the Association of German Freight Forwarders and Logistics Operators, DSLV, in Berlin.

Many still hope that some rail traffic will continue running, since the roughly 20,000 train drivers include more than 4,000 civil servants, who are not permitted to participate in the strike. Also, another 5,000 are organized in the competing railway and transport union, EVG.

“We are currently negotiating with Deutsche Bahn’s competitors to see if they can take on a portion of freight transport,” a spokesman for fertilizer giant K+S told Handelsblatt.

If quick alternatives aren’t found, costs could rise for some companies. Because it will be impossible to load ships in time, goods could end up sitting in ports for longer periods. Each additional day that goods wait to be moved in ports will cost about €15,000 in Hamburg alone, for example.

Many automotive suppliers could be even worse off. They can expect substantial compensation claims from carmakers forced to shut down  their assembly lines as a result of logistics problems. Contractual penalties of €200,000 per hour are not uncommon in the auto industry.

“Our confidence in railroad freight transportation has been shattered,” a spokesman from the freight association said.

 

Rail Freight in Germany-01

 

Christoph Schlautmann covers the logistics and transport markets for Handelsblatt. John Blau with Handelsblatt Global Edition contributed to this story. To contact the author: schlautmann@handelsblatt.com, blau@handelsblatt.com

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