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"Neglects the common good" - Court of Auditors reprimands Wissing's railway course

This is bad testimony for Volker Wissing: The Federal Ministry of Transport, headed by the FDP politician, has “not taken sufficient steps to solve the worsening permanent crisis” with regard to Deutsche Bahn AG (DB), the Federal Audit Office stated in a statement published on Wednesday special report.

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"Neglects the common good" - Court of Auditors reprimands Wissing's railway course

This is bad testimony for Volker Wissing: The Federal Ministry of Transport, headed by the FDP politician, has “not taken sufficient steps to solve the worsening permanent crisis” with regard to Deutsche Bahn AG (DB), the Federal Audit Office stated in a statement published on Wednesday special report. The federal government, as the sole owner of DB, said ACA President Kay Scheller at a press conference, "is too passive and neglects the common good".

Unlike his predecessors from the CSU, Wissing openly addressed the DB crisis. But he doesn't draw any conclusions. Rather, the federal government fulfills the constitutional mandate to guarantee an efficient rail network for the benefit of the general public "increasingly poorly," says the text. "The federal railway policy goals are still not clearly defined in terms of content."

The ministry still lacked "a convincing ownership strategy and coordinated milestones" "to successively align the business activities of DB AG with the interests of the federal government". Wissing's reform instruments have also been ineffective so far: "The new steering group in the ministry announced in June 2022 does not strengthen the options under company law to influence DB AG as required." So far, the steering group has not even been able to work.

The DB “permanent crisis” – which the report attributes to the exploding corporate debt, the miserable punctuality figures and the failure to shift traffic to rail – is therefore “not only due to decisions by DB AG”. But “also on failures of the federal government”.

But the report is harsh on the DB board members. Criticism is, for example, that the group is getting bogged down in countless activities around the world – as well as the delays in the separation from the loss-making foreign subsidiary Arriva and the almost rail-free logistics subsidiary DB Schenker. In addition, "DB AG's commitment as a venture capitalist involves financial risks, for example in the development of satellite networks and drone landing pads".

With DB investments in various new forms of mobility, "risks have already materialized in the millions". In view of this action by the DB board members under CEO Richard Lutz, the auditors in the press conference called it "totally nonsensical that remuneration increases and bonuses are paid in some cases in the event of permanent performance losses".

For this reason, too, the federal government's options for influencing DB AG must be expanded. For this purpose, the Court of Auditors calls for a fundamental questioning of the structure of DB as a public limited company. It became an AG because of the planned IPO. But that failed. Nevertheless, she remained AG. According to the Court of Auditors, this has serious disadvantages.

With this group structure, the federal government has “only a limited influence”, although it owns everything. The influence on the subsidiaries is even smaller. At the same time, since DB is not listed on the stock exchange, there is also no "control of the capital market" which, in the case of normal AGs, could have an "additional regulatory effect on the board of directors".

The Court of Auditors therefore calls for a fundamental and open-ended review of the DB Group structure. And at the very least that the DB component that is most important for the common good, the infrastructure with the rail network, can actually be controlled by the federal government as the owner.

The traffic light government is planning to combine the DB Netz, energy (traction power) and stations (train stations) divisions in a new infrastructure division that is to be strictly oriented towards the common good. But the Court of Auditors not only criticizes the fact that this conversion process is taking place very slowly, but also does not seem particularly impressed by the traffic light plans to leave the new infrastructure division in the group. Instead of separating them entirely.

"As long as the infrastructure division is part of the DB AG Group, the federal government will continue to have only an indirect influence," the report says. "It is therefore not certain that the federal government will improve its control options." But the ministry has not yet opened up to such concerns. The Court of Auditors concludes from this that the federal government "has no mature plans for the future group structure of DB AG and the infrastructure division".

Canceled trains, full trains and delays – this should be less the case in the future. To this end, Deutsche Bahn wants to expand parts of the network into a high-performance network from 2024. But this means a lot for train travelers.

Source: WELT/ Viktoria Schulte

The report goes one step further, at least in a somewhat convoluted form: "The Federal Court of Auditors recommends examining what options exist to also give up railway companies to DB AG in the future." When asked by WELT, the press conference said that this could certainly be understood as that they support the examination of a possible sale of the freight transport division DB Cargo and the local transport division DB Regio.

Both divisions are active in fields in which private companies play a large and sometimes growing role. And that is why, according to the special report, the federal government no longer has to be active as market participants on the rails with its own companies in order to fulfill its public-interest-oriented guarantee mandate.

It is politically extremely unlikely that DB Cargo or DB Regio will ever be sold. But the group has hardly any financial advantages from them. DB Cargo is even a heavy loss maker and one of the reasons why DB needs more and more money from the federal government. According to the Court of Auditors, on average between 2019 and 2021, state subsidies exceeded the group's own income by around three billion euros. From the point of view of the auditors, that is reason enough to ask for a fundamental railway reform. For the President of the Court of Auditors, Scheller, "DB AG is becoming more and more of a bottomless pit".

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