Strikes, storms, lead to restructuring at Schenker

DB Schenker HQAfter a rough first half of the year, state-owned Deutsche Bahn of Germany is moving forward on a major restructuring effort, which may involve a partial privatization of its DB Schenker Logistics sector. Strikes by the train driver’s union and multiple storms led to an 18.2 percent drop in first-half earnings (EBIT) to €890 million.

“Had it not been for the strikes, which cost us €252 million, our EBIT would have been slightly above that of the previous year,” said Rudiger Grube, Deutsche Bahn CEO. “But that cannot hide the fact that we are also facing structural challenges, which are determined to tackle with the transformation we have set in motion.”

That transformation, announced at a board meeting July 27, will take place beginning Aug. 1, and will be part of  a six-point restructuring plan that the company estimates will save about €700 million through 2020. The six points of the plan include:

  • DB Mobility Logistics AG, created in anticipation of an IPO, will be merged with DB AG, the group’s holding company, eliminating duplicate structures and two levels of management.
  • The management board members will be reduced from eight to six, and a female board member will be sought.
  • The responsibilities in the technology and environment division will be reassigned.
  • The rail companies will be brought together in one division, including freight transport. The rail companies also will be kept structurally separate from infrastructure and all other components of the integrated rail system.
  • All of the service functions and some of the internal services will be placed under the same management, in the form of DB Global Service Center.

There is the option that DB Arriva and DB Schenker Logistics will be partially privatized to boost development and finance future growth. The possibility of bringing in a third party for privatization of DB Arriva and DB Schenker is scheduled to be discussed at a Dec. 16 board meeting. In remarks that were made after the first-half results were announced, Grube said that “nothing has been decided” regarding privatization, adding that and he wished to make it “perfectly clear” that DB is not considering selling off Arriva and Schenker. DB, he said, is merely “keeping open the option of a partial privatization in order to utilize growth potential on the international markets as effectively as possible”.

Airfreight volume did rise by 1.1 percent and contract logistics rose 16.6 percent, year-over-year,  during the first half of 2015, the company said, however ocean freight dropped 3.5 percent, y-o-y, in the same period.

 

 

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