Deutsche Bahn sells logistics unit to Danish group September 15, 2024

Deutsche Bahn hopes the sale of its logistics unit will help it pay off its debts Odd ANDERSEN

By AFP -Agence France Presse

Deutsche Bahn sells logistics unit to Danish group

By Sam Reeves, with Camille Bas-Wohlert in Copenhagen

Troubled German rail operator Deutsche Bahn announced on Friday the sale of its logistics unit Schenker to Danish group DSV for 14.3 billion euros ($15.8 billion), as it focuses on reforming Germany's rail infrastructure.

The German state-owned group, which has faced growing criticism due to frequent train breakdowns and poor punctuality, said the deal would provide new investment in Europe's largest economy and help pay off its monstrous debts.

DSV's chief executive, Jens Lund, praised the acquisition of his logistics group, saying it would “bring together two strong companies, creating a world-leading transportation and logistics powerhouse that will benefit our employees, customers, and shareholders”.

The new entity will aim to compete with other industry heavyweights such as DHL, UPS, and FedEx.

DSV, founded in 1976, said the deal was its biggest transaction.

The combined companies will have 147,000 employees in more than 90 countries and generate revenues of 39.3 billion euros. The transaction is expected to be completed in 2025.

Despite expectations of job cuts following the sale, DSV insisted that Germany will remain a “key market” for the company and will retain Schenker's offices in Essen, western Germany.

Deutsche Bahn launched the sale of Schenker, its most profitable subsidiary, at the end of 2023, seeking funds to pay off a 30 billion euro debt and make desperately needed investments in Germany's aging railroads.

Deutsche Bahn CEO Richard Lutz said the sale was the largest transaction in the operator's history and “provides our logistics subsidiary with clear growth prospects”.

Deutsche Bahn said the Danish group plans to invest one billion euros in Germany over the next three to five years.

The German group said the sale will allow it to focus on its top priority - improving rail infrastructure and operations, which are also seen as key to helping Germany meet its climate targets.

A Berlin transport ministry spokesman welcomed the move, saying Deutsche Bahn needed to “concentrate on its core business of rail transportation in Germany”. The sale of Schenker is an important step in that direction.”

Once a symbol of German efficiency, Deutsche Bahn has been beset by problems in recent years, with critics blaming chronic underinvestment.

Breakdowns and delayed arrivals are now commonplace on German railroads. Last year, 36% of long-distance trains arrived six minutes or more later than scheduled, well above the European average.

The network's problems became painfully apparent when Germany hosted the Euro 2024 soccer tournament in June and July, with fans frequently complaining about problems.

Its net losses increased 16-fold year-on-year in the first half of 2024, with the operator blaming extreme weather, strikes, and improvements to its network.

By reducing its vast debts, the sale of Schenker “will make a substantial contribution to the group's financial sustainability,” said Deutsche Bahn chief Lutz.

The sale of Schenker has left its employees in Germany fearing for their jobs, with staff protesting against the move outside the subsidiary's office this week.

DSV has promised to maintain, and even increase, staff numbers in Germany in the long term, but an initial phase of cuts seems likely.

The Danish group initially plans to cut around 1,600 to 1,900 jobs at Schenker, many of them in management, sources close to the matter told AFP.

However, even before the sale, Schenker was already planning to cut hundreds of jobs, the sources said.

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