[A-List] EU & the imperialist chain: Germany

["Keaney Michael" <Michael.Keaney@xxxxxx>]

More evidence of the nonsense involved in replicating the conditions of
US monopoly capitalism: making a state-owned train operator "profitable"
in order that it be privatised -- in this case, by "diversifying" out of
trains.


Down a broader path
Germany's biggest train operator wants to diversify. But it will have to
cope with greater competition, say Peter Marsh, Haig Simonian and
Juliette Jowit
Financial Times: April 26 2002

Hartmut Mehdorn has a plan for Deutsche Bahn, Europe's biggest train
operator. The chairman of Germany's state-owned railway company wants to
concentrate less on trains and more on transport.

That could include cutting routes but broadening operations - at home
and abroad - into bus and taxi services, managing more shops at railway
stations and even offering pay-per-view films on its coaches.

Such thoughts may appal railway traditionalists. But for Mr Mehdorn, a
pugnacious 59-year-old former engineer brought in three years ago to
inject private-sector thinking into Deutsche Bahn, they would make
eminent sense if they helped the company boost profits and accelerate
the way to a possible part-privatisation sometime after 2004.

His progress will be watched by railways around the world, which are
under similar pressure to find ways to improve performance and attract
private sector investment to relieve the pressure on stretched public
finances.

Deutsche Bahn is not the first railway to tackle competition and
privatisation but it is the biggest public transport company in Europe
and its ICE high-speed trains have given it a high-profile international
image.

If Mr Mehdorn proves successful, it would mark an astonishing turnround
for the company. "What we had [before German unification, when the whole
of what is now Deutsche Bahn was two organisations] was two civil
service-run, state-owned rail authorities with a poor record in
efficiency and service. Germany could not afford to keep paying out so
much money every year for its train service without seeing improvements
in efficiency."

He says he was surprised at how Deutsche Bahn was then run. Over the
course of a year, trains were in service for only 80 per cent of the
time - a percentage he is keen to increase.

Mr Mehdorn introduced a new strategy of running three "clusters" of rail
operations: urban services in and around big cities; regional trains
operating in and around other towns and cities and beyond; and
long-distance inter-city routes. The goal was to improve efficiency, for
instance, by reducing through-services covering long distances and
replacing them with substituting shorter links that can connect with
each other at key rail stations serving as hubs.

Boosting investment has been another of Mr Mehdorn's achievements. In
the mid-1990s, he says, the average age of rolling stock and other
equipment was 28 years. "Our goal in the next few years is to reduce
this by half." Already, annual investment has been stepped up to about
E8bn ($7bn), compared with E7bn in the mid-90s.

Spending an extra E4bn on new, better designed rolling stock over the
past three years has allowed Deutsche Bahn to cut maintenance. That has
led to lower costs, by cutting 10,000 jobs from Deutsche Bahn's
workshops. The fleet is also being rationalised to cut capital costs and
simplify maintenance schedules. Four types of service will replace the
previous 24, to reduce confusion for passengers. And investment is
pouring into electronic control systems, with a plan to replace 8,400
manual signalling control stations by 240 less labour-intensive, and
therefore cheaper, electronic stations.

Much of this thinking reflects experience Mr Mehdorn gained running
Heidelberger Druckmaschinen, the world's biggest printing equipment
maker, which he transformed, via flotation, from a sleepy, privately
owned dinosaur into one of Germany's most highly capitalised companies.
But while happy to talk about the changes he has already implemented, Mr
Mehdorn - perhaps wary of political and trade union critics of his
no-nonsense approach - is reluctant to say too much about how he sees
Deutsche Bahn's future. "People with big visions should go to hospital,"
he says.

Most controversially, he wants to expand operations. "Deutsche Bahn will
be less a provider of train services and more a company involved with
mobility," he says. "We should be thinking of ourselves as an integrated
transport provider, involved in the whole chain of transport logistics,
whether delivering cargo or enabling people to visit their grandmothers.
Wherever people are starting to think about travelling, we should be
trying to help them, from providing information about buses and taxis to
shopping opportunities at their destinations."

To some extent, the more commercial approach entails no more than using
opportunities already available. Germany's railway stations received
4.7bn visits last year and of those passengers only about a third used
train services, with the rest passing through. "We should be more
interested in finding ways to enable train stations to make money out of
these visitors," Mr Mehdorn says.

Deutsche Bahn could jettison its name to reflect its change of focus
from railways. While Mr Mehdorn refuses to discuss this, a new name
could hint at a pan-European perspective. That would reflect his
ambition to expand Deutsche Bahn outside Germany, by increasing
international freight services and looking at joint venture passenger
operations in other countries such as the UK, Denmark and Sweden.

The government is watching carefully as Mr Mehdorn's ideas unfold. So
far, he has retained the crucial political support of Chancellor Gerhard
Schroder. It was Mr Schroder who summarily dismissed Johannes Ludewig,
Mr Mehdorn's predecessor at Deutsche Bahn, after rising popular concern
with service quality.

The centre-left Social Democratic-led coalition government has broadly
supported Mr Mehdorn's reforms, even if there has been occasional
friction: plans to prune jobs or regional services, for example, have
triggered protests from trade unions and the country's influential
federal states.

The government feels Deutsche Bahn can only be made profitable through
the tough reforms Mr Mehdorn has pushed through. But a fundamental
conflict in the government's approach to the railways could still prove
unsettling. While Mr Schroder and the politicians agree on the need for
Deutsche Bahn to make money, ministers have also emphasised their wish
for greater competition in rail services.

Mr Mehdorn claims he fully backs such policies. "I have always welcomed
competition. It gives us a clear benchmark against which to measure
ourselves against other companies."

With only about 5 per cent of German rail operations provided by private
operators, such as Connex, competition has not really been an issue. The
real test for Mr Mehdorn may lie less in recasting Deutsche Bahn into
the broad transport services provider he envisages than in doing so in
the context of much greater competition.

Full article at:
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3TBCRVG0D&live=true

Michael Keaney
Mercuria Business School
Martinlaaksontie 36
01620 Vantaa
Finland

michael.keaney@xxxxxx