DB Cargo

DB Cargo (previously known as Railion and DB Schenker Rail) is an international transport and logistics company with a registered office in Mainz and a further administrative office in Frankfurt am Main.[1][2] It was founded as part of the second stage of the reform of the German railway system (Bahnreform) in the 1990s. DB Cargo is now responsible for all of the rail freight transport activities of the German railway company Deutsche Bahn (the DB Group) in Germany and on a global level.[3] Sigrid Evelyn Nikutta took on the role of CEO of DB Cargo in 2020.[4][5]

DB Cargo AG
DB Cargo
TypePrivate
IndustryLogistics
Founded2009 (2009)
HeadquartersMainz, Rhineland-Palatinate, Germany
Key people
Sigrid Nikutta, CEO
ProductsRail Transport
Maintenance
Revenue€4.5 billion
Number of employees
29,525 (2019)
ParentDeutsche Bahn
Subsidiaries20 worldwide, including freight and contract logistics
Websitewww.dbcargo.com

The services provided by DB Cargo include both block train and single wagonload transport services, the latter of which have been abandoned by many of the company's rivals.[6] Based on the number of kilometres travelled, DB Cargo is the market leader in both Germany and Europe, although its transport services have been in decline for several years.[7][8] Within the context of the battle against climate change, however, DB Cargo is becoming increasingly important[9][10] because it offers transport options that are entirely carbon neutral.[11]

History

German rail reform

At the end of the 1990s, the operational business of Deutsche Bahn was reorganised into five legally independent joint-stock companies.[12] This measure formed part of the second stage of the German rail reform.[13][14] Within the scope of the reform, a precursor company was initially established in 1997[15] to facilitate a transformation of the rail freight transport division structured under public law into a private enterprise company[16] before the company DB Cargo AG was ultimately founded on 1 January 1999.[17] The headquarters of DB Cargo AG were established in Mainz.[18]

European expansion

At first, DB Cargo solely focused on activities in Germany. The Deutsche Bahn Group planned to invest billions in its subsidiary in order to improve its position in the transport and logistics market.[19] When the competitive environment with other European providers became increasingly tough,[20] Deutsche Bahn (DB) and the Dutch state-owned rail company Nederlanse Spoorwegen (NS) announced plans to merge their rail freight transport activities in 1998.[21]

Together, DB Cargo and NS Cargo reached revenues of around 6.9 billion Deutsche Mark (3.5 billion euros) and had 50,000 employees.[22] Their amalgamation was the first ever cross-border rail merger, in which Deutsche Bahn retained its majority share of 94%.[23] A financial holding company was created for this new company[24] and began operations under the name Railion in the year 2000.[25]

Internationalisation

Railion laid the foundation[26] for the establishment of a leading European transport and logistics company[27] that was open to further partners right from the start.[28] While the European Commission and European Parliament aimed to promote competition among providers, the providers themselves instead opted to foster cooperation.[29] In 2001, the Danish state-owned rail company Danske Statsbaner (DSB) merged its rail freight transport activities into the joint venture as its third partner and received shares totalling 2% in Railion in return, thus causing the stake of Deutsche Bahn to decrease to 92%.[30]

The cooperation between DB, NS and DSB played an essential role in Deutsche Bahn's long-term strategy for expansion in other European countries.[31] This strategy covered not only state-owned rail companies but also the acquisition of private rivals, for example in Italy (2004),[32] Switzerland (2007)[33] and Poland (2009).[34] These were joined by a multitude of smaller acquisitions such as the transport and logistics divisions of RAG AG.[35] In Sweden, where Deutsche Bahn was unable to acquire its chosen target,[36] the company instead focused on collaborations.[37] At the end of the 2000s, Railion was therefore able to not only offer connections from north to south[38] but also reliably serve rail lines running from west to east.[39]

Despite this progress, the tough competition had a negative impact on the company's economic development.[40] Deutsche Bahn responded to this by introducing strict cost-saving measures,[41] which significantly improved the situation at Railion.[42] In 2010, the rail freight transport crisis was initially deemed to have been largely resolved.[43]

Linking rail and road

In 2003, Deutsche Bahn transferred its share in Railion to the Stinnes AG (which later became DB Mobility Logistics). After the successful acquisition of the then-listed logistics company Stinnes, including its freight forwarding subsidiary Schenker AG, a restructuring of responsibilities took place within Deutsche Bahn.[44] DB Cargo, NS Cargo and other Railion companies subsequently solely focused on freight forwarding while Stinnes and Schenker took on central tasks in the fields of rail freight transport and sales.[45] By consolidating all of its transport and logistics activities, Deutsche Bahn also aimed to achieve growth in the freight transport domain.[46] The company adjusted its image to reflect this aim and as a result, DB Cargo was renamed Railion Deutschland.[47]

At this point, the general objective pursued by Deutsche Bahn was to better cover the entire transport chain with all transportation means and routes.[48] Over the years that followed, however, this approach mainly resulted in a shift of its freight transport activities from the rail to the road.[49] The company realised that it needed to improve the links between its rail and road transport in particular, and securing acquisitions was one way to do so.[50] In 2009, Deutsche Bahn abandoned the Railion brand and instead chose to consolidate all of its rail freight transport activities under the name DB Schenker Rail. Its organisational structure initially remained unchanged.[51] Media reports, however, already began to speculate about a stock market launch of the newly formed DB Schenker division.[52]

Company restructuring

The business operations of DB Schenker Rail experienced a significant decline in the 2010s.[53] One of the main factors behind this decline was the economic slump following the global economic and financial crisis. The company initially responded to this negative development by introducing a more flexible price structure.[54] It aimed to use a combination of block trains for large clients and bookings of single wagons to establish a fixed timetable that would in turn increase the capacity utilisation of its trains.[55] Other measures considered included closing freight railway stations in order to reduce fixed costs[56] and making job cuts.[57]

These measures were met with sharp criticism by the trade unions,[58] which demanded that the tough cost-cutting approach be stopped immediately.[59] They even accused the company of mismanagement.[60] After negotiations lasting several months, Deutsche Bahn Group and its works council finally agreed on a restructuring programme for DB Cargo[61] that avoided across-the-board job cuts in 2017.[62] The new approach instead aimed to gradually cut back on jobs over a period of several years.[63] On the whole, however, the company wanted its freight transport activities to grow.[62]

To reflect the company's focus on its core business activities in the domain of rail freight transport, it was again renamed and designated as DB Cargo AG in 2016. The name was also readopted for its most important German and international subsidiaries and continues to apply in the present day.[64] DB Cargo and DB Schenker are now equal sister companies within the integrated rail system of the DB Group.[2]

Recent developments

According to media reports, DB Cargo reduced its fleet size by nearly a half in the 2000s and 2010s.[65] The remaining locomotives were increasingly replaced by multi-system models that can also be used in the international rail network.[66] The company additionally equipped its inventory of wagons with whisper brakes[67] in order to halve the rolling sounds of its freight trains.[68] On top of all this, it decided to focus on state-of-the-art sensors and telematics,[69] which also improved its competitiveness.[70] To progress its developments in this area, DB Cargo played a leading role in the "Innovative Freight Wagons" research project conducted on behalf of the German Federal Ministry of Transport and Digital Infrastructure (BWVI) between 2016 and 2019.[71] Although the wagons used by DB Cargo have generally become older in recent years, they have also increased in size so that they can transport larger quantities of goods.[72]

Given that the majority of freight is still transported by road,[73] DB Cargo has recently attracted more attraction based on the fact that rail freight transport plays an essential role in achieving climate targets.[74] Within this context and based on expert opinions, the German Federal Government announced plans to transfer millions of lorry trips from road to rail[75] after similar attempts made little progress in previous years.[76] One of the main measures planned to achieve this aim is to gradually optimise the productivity of train drivers.[77] The current changes being implemented at DB Cargo form part of the strategy to strengthen Deutsche Bahn in its entirety that was launched in 2019.[78]

During the global outbreak of the novel respiratory disease COVID-19, which hindered cross-border logistics due to limitations in the area of passenger and goods transport, the company was able to secure its transport operations successfully. DB Cargo provided additional capacities for transporting supplies for the population, especially food and hygiene products.[79] Large special transports such as the "Pasta Express" from Italy most notably attracted headlines.[80]

Organisational structure

DB Cargo AG, a public limited company under German law, acts as a holding company for the operational entities. Its corporate purpose covers rail and road services for the transportation of all kinds of goods and the procurement and operation of stationary and mobile means of transport such as locomotives, railcars, wagons and other containers. Its articles of association also cover related services. The holding company is entitled to carry out all activities deemed to serve the specified business purpose either directly or indirectly. This includes the establishment and management of companies and the acquisition of other companies.[81]

Owners

DB Cargo AG has a share capital of 256,007,000,000 euros, which is divided into 51,201,400 no-par value bearer shares. When it transferred the assets and liabilities of its former freight transport division as part of the spin-off for the establishment of a new company, Deutsche Bahn AG acquired all of the company's shares and is therefore the sole shareholder of DB Cargo AG. A control and profit-and-loss-transfer agreement is in place between the parent company and subsidiary. DB Cargo AG is included in the consolidated financial statement of Deutsche Bahn. The company Deutsche Bahn AG is in turn wholly owned by the Federal Republic of Germany.[82]

Management board

The Board of Management of DB Cargo AG is composed of at least two people, one of whom is responsible for staff-related and social matters in connection with employees. Otherwise, the Supervisory Board determines the number and identities of the members of the Board of Management The current Members of the DB Cargo AG Board of Management are Sigrid Evelyn Nikutta (Chairwoman), Ursula Biernert (Human Resources), Thorsten Dieter (Service), Ralf Günter Kloß (Production), Martina Niemann (Finance/Controlling) and Pierre Timmermans (Sales).[83][84] The percentage of women on the board exceeds the average value of other German companies.[85][86]

Supervisory board

The Supervisory Board of DB Cargo AG has 20 members. It is composed of shareholder and employee representatives in equal measure, who are elected according to the regulations of the German Stock Corporation Act and German Codetermination Act. The Supervisory Board currently has 6 female and 14 male members. Its Chairman is Richard Lutz (manager), who has been the CEO of Deutsche Bahn since 2017.[87] The Vice-Chairman is Martin Burkert, a Member of the Board of the German Railway and Transport Union (EVG). Claus Weselsky, Chairman of the German Train Drivers' Union (GDL), is another member of the Supervisory Board, which therefore contains representatives from the two leading trade unions for the rail industry in Germany.

Companies

The business operations of DB Cargo are divided into three regions: Germany, Central Europe and Western & Eastern Europe. The German company DB Cargo AG is responsible for both operational services in the field of rail freight transport in Germany and central functions such as production, sales, finance and human resources for the entire DB Cargo Group.[88]

In 2010, Deutsche Bahn joined other rail companies in becoming a partner of the European Xrail Alliance, represented by its subsidiary DB Schenker Rail (now DB Cargo).[89] Ever since it was first founded, the alliance has focused on the objective of making single wagonload transport, namely freight trains with wagons used by different clients, a more competitive alternative to lorry transport.[90] Xrail also aims to achieve more customer-friendly service, efficiency and punctuality in cross-border transport,[91] for example with its universal booking system, Xrail Capacity Booking (XCB).[92]

Rail freight transport

Within the Deutsche Bahn Group, DB Cargo is mainly responsible for the following subsidiary and sister companies, all of which are directly involved in the domain of rail freight transport:

Service companies

These are joined by further companies that have special responsibilities in areas such as sales, transporting dangerous goods and combining traffic flows:

  • DB Cargo BTT
  • DB Cargo Logistics
  • DB Intermodal Services
  • TFG Transfracht
  • Transa Spedition

Services

Service catalogue

The service catalogue of DB Cargo consists of a wide variety of basic, additional and special services.[107] The company's core products particularly include block train and single wagonload transport services,[108] the combination of rail and road, and carbon-neutral transport, for example for Audi.[109] The latter is becoming increasingly important given that rail transport currently has the lowest carbon emissions of all carriers and also achieved the largest savings in recent years (1995–2015).[110]

The company additionally offers a wide range of industry solutions, for example for the chemicals industry and the timber and building materials trades.[111][112][113] DB Cargo is also active on an international level. Its global operations particularly focus on transport between Europe and Asia,[114] where the company has an extensive network.[115] Its service portfolio also includes related services such as the sale and rental of locomotives and wagons.[116]

Key figures

In the 2018 business year, DB Cargo transported more than 255 million tonnes of goods in 2,686 traction units and 82,895 freight wagons. Leased or hired materials are factored into these totals. The company provided its services on around 4,200 sidings belonging to clients in Germany, Denmark, Italy, the Netherlands and Switzerland.[117] It transported goods along a route network covering a total of 33,000 kilometres in Germany and, according to calculations by the German Federal Office for Goods Transport (BAG), achieved an average punctuality rate of 72.9% when providing these services.[118]

Criticism

The company is currently generating a loss.[119] Critics accuse Deutsche Bahn of having neglected the necessary maintenance work on and modernisation of the DB Cargo infrastructure and claim that the comparably high average age of its locomotives and wagons is a prime example of this problem.[120] In 2019, the German Federal Ministry of Transport and Digital Infrastructure (BMVI) responded to criticism by the German Federal Court of Auditors regarding the company's lack of investments by arguing that DB Cargo and other segments had yet to exhaust their full potential.[121]

Single wagonload transport plays a special role in the observation of the economic development of DB Cargo. Experts are currently demanding that the company subsidise its activities or shrink its business in this area in order to remain a strong competitive alternative to lorry transport.[122]

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See also
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