Sectorisation of DB Cargo Germany

[Fragezeichnen]

DB Cargo Germany is not in good health. They have been making massive losses for years and are on track to lose around €500 million this year. The German monopoly commission(which wants and will probably get a total seperation of DB into independent companies for infrastructure and train operation) and the EU Commission too, is on Deutsche Bahn's case about potentially illegal cross-subsidy of freight traffic from other parts of Deutsche Bahn.

So far the only ideas to save the business were to keep cutting out unprofitable flows.
The new plan announced yesterday in agreement with the labour unions is to sectorise the business, in an interesting parallel to British Rail. Sectors for Steel, Cars, Chemicals, Raw Goods and Consumable Goods will be established. Locomotives, wagons and staff will be assigned to specific sectors and the sectors should be given freedom to innovate.

 

[duesselmartin]

does not sound like a good idea. Synergies are lost that way.
What was the BR experience? Did sectorisation reduce losses or did it just make the system less flexible?

My personal opinion, sell DB Cargo to competitors. One is rid of a loss making division and might even get some cash to pay off debt.

 

[nwales58]

Quicker to dump wagonload freight and eliminate its losses? Few other countries can make it work nowadays. Bulk, intermodal and whole train consignments are what rail is good at, split into those sectors if necessary, and can cover costs +/- how your infrastructure operator allocates costs.

 

[ainsworth74]

What was the BR experience? Did sectorisation reduce losses or did it just make the system less flexible?

My understanding is that it wasn't quite as balkanised as this is sounding. You ended up with two main sectors Trainload and Railfreight Distribution. The former, as the name suggests, handled trainload operations so coal, steel, chemicals, etc. Railfreight Distribution handled non-trainload work (so the last vestiges of wagonload), intermodal and I think the Channel Tunnel was their remit as well.

I'm not sure if within the two silos there were further hard divisions but the impression I have is that there weren't though obviously crew and trains that were dedicated to the coal part of Trainload would spend their days doing coal. I believe that Trainload was also profitable (as you might expect considering unit trains are where the money is to be made for rail freight).

However, I wasn't around at the time so could have gotten the wrong end of the stick!!!

 

[eldomtom2]

My personal opinion, sell DB Cargo to competitors. One is rid of a loss making division and might even get some cash to pay off debt.

Why would competitors want to buy a loss-making division?

 

[littledude]

Quicker to dump wagonload freight and eliminate its losses? Few other countries can make it work nowadays. Bulk, intermodal and whole train consignments are what rail is good at, split into those sectors if necessary, and can cover costs +/- how your infrastructure operator allocates costs.

No, the whole purpose of protecting the (vast) wagonload network is that the environmental impacts of binning it would be huge. The vast majority of the ‘Einzelwagennetz’ customers could not operate without the flexibility of small, regular consignments. Longer trainloads just don’t work for many smaller customers and would force them to road haulage.

 

[TonyWigan]

Why would competitors want to buy a loss-making division?

I’m not sure that’s what’s happening. We heard a rumour yesterday that my company had taken some stone trains off them.

I doubt they’ll be loss making to us, or they wouldn’t take it on. It’ll just add more revenue to the pot

 

[158756]

No, the whole purpose of protecting the (vast) wagonload network is that the environmental impacts of binning it would be huge. The vast majority of the ‘Einzelwagennetz’ customers could not operate without the flexibility of small, regular consignments. Longer trainloads just don’t work for many smaller customers and would force them to road haulage.

That doesn't fit with the drive to eliminate DB Cargo's losses though. Other freight companies make money on intermodal and trainload freight, not wagonload. The EU is focused on increasing competition and fragmentation of the rail industry, and all these competing companies want to move traffic away from wagonload. Wagonload is a natural monopoly which only works with economies of scale, it is difficult to see where it fits in this competitive environment. The environment is not a priority.

 

[eldomtom2]

That doesn't fit with the drive to eliminate DB Cargo's losses though. Other freight companies make money on intermodal and trainload freight, not wagonload. The EU is focused on increasing competition and fragmentation of the rail industry, and all these competing companies want to move traffic away from wagonload. Wagonload is a natural monopoly which only works with economies of scale, it is difficult to see where it fits in this competitive environment. The environment is not a priority.

I wouldn't say it's implausible for the government to have contradictory objectives, though of course I don't know much about the specific situation.