Deutsche Bahn Launches Restructuring Programme

30 August 2015 Sunday, 20:46
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Dr Grube: “Deutsche Bahn is restructuring, DB 2020 strategy remains on course”
• Turnover up in first half-year
• Result suffers from impact of strikes and bad weather
• Savings of 700 million Euro planned at corporate level alone

Deutsche Bahn intends to make itself fit for purpose going forward thanks to a comprehensive overhaul of its corporate structure. “DB will become leaner, faster, and even more customer-focused. More rigorous management, slimmed-down structures and greater customer focus will put us in a position to successfully meet the fast-changing challenges in the world of mobility and logistics”, said DB Chairman and CEO Dr Rüdiger Grube as he outlined the company’s new direction at a press conference on the 2015 half-yearly results.

The DB AG Supervisory Board had already approved the six-point restructuring programme the previous day. Firstly, the programme sees membership of the company’s Board of Management reduced from eight to six. Secondly, DB Mobility Logistics AG, which was created years ago with a view to a possible stock-market flotation, is to be merged with the DB AG holding company. This will reduce structural duplication and time-consuming, costly coordination.

Thirdly, the Technology and Environment Division is being split up and reallocated amongst other divisions. Technology, DB Systemtechnik and Safety and Quality Management will all be placed under the Infrastructure, Services and Technology Division, while Procurement and IT (CIO) will be assigned to the Finance/Controlling Division and Environment to the Economic, Legal and Regulatory Affairs Division. The Chairman & CEO’s office will oversee Sustainability.

Fourthly, the restructuring will see a reallocation of tasks within the Board. A central point here is that the various businesses owned by DB Group will be more closely integrated than hitherto: In future, the Transport Division will bring together DB Fernverkehr (intercity passenger), DB Regio (regional passenger), DB Vertrieb (ticketing) and – the big change – DB Schenker Rail. Dr Grube: “That means even an greater focus on railways in our home country, which the German public rightly considers a priority.”

Fifthly, internal corporate service functions will in future be bundled together within a DB Global Service Centre whose watchwords will be transparency, costs and efficiency. Finally, the sixth point in the plan foresees an option to part-privatise DB Arriva and DB Schenker Logistics in order to boost strategic development and fund further growth.

The DB Chairman & CEO announced that: “Change begins as of 1 August. Deutsche Bahn is restructuring, the DB 2020 strategy remains on course.” The measures now agreed foresee additional savings, on top of those already planned, of over 100 million Euro at head office, leading to total savings of over 700 million Euro at head office and in corporate functions alone by 2020. These efficiency-boosting measures include further streamlining of decision-making bodies and reporting channels, a review of the property portfolio, and the decision to relinquish second offices for Board members.

The next step will be to address fields of action across the various business units and identify additional potential for cross-functional synergies. These measures will be defined during the second half of 2015 and submitted to the Supervisory Board, together with the medium-term planning for the period to 2020, at its meeting on 16 December 2015.

In presenting Deutsche Bahn’s results for the first half of 2015, Dr Grube highlighted that the month-long strike by (drivers’ union) GDL and several violent storms had had a severe impact. “The strikes were trying both for our customers and our staff, and cost the company vital revenue. The economic fallout will total around 500 million Euro in lost earnings for 2014 and 2015”, he said.

First-half turnover did grow by 1.3 per cent (266 million Euro) compared to 2014, rising to 20 billion Euro in 2015, but this was partly the result of favourable exchange-rate variations. The result before taxes and interest (adjusted EBIT) fell 18.2 per cent (198 million Euro) to 890 million Euro. “Had the strikes not cost us 252 million Euro, the EBIT would also be slightly up on last year. However, that should not blind us to the structural challenges facing us, to which the restructuring process set in train represents a concerted response”, Dr Grube added.

Finance Director Dr Richard Lutz said: “We cannot be happy with this year’s first-half results. However, we are confident that a strike-free second half of 2015 will see us generate an annual operating result before taxes and interest (EBIT) of two billion Euro. The measures already taken, coupled with those planned, will give us the flexibility to set the funding of planned investment, growth and our digital strategy on a sound footing.”

Strikes and storms also led to major disruption of passenger services. Passenger numbers at DB fell by 1.6 per cent (16 million) to 985 million in the first half of 2015. The drop was less marked in intercity traffic (down 1.2 per cent) than in regional traffic (down 2.8 per cent).

DB’s overseas subsidiary Arriva performed rather better. Turnover totalled just under 2.4 billion Euro in the first half of 2015, up 165 billion Euro (7.5 per cent) on the same period last year. Passenger-kilometres (pkm) increased by 2.5 per cent, to 4.3 billion. The adjusted EBIT fell slightly by 3 million (2.9 per cent), to 101 million Euro.

Strikes and bad weather also made life hard in the rail freight sector. Tonne kilometres (tkm) fell by 6 per cent in the first half of 2015, from 52.0 billion to 48.9 billion tkm. DB Schenker Rail AG CEO Dr Alexander Hedderich is to resign from his position as of 31 August 2015, and will leave DB Group.

First-half growth at DB Schenker came on the logistics side. The number of overland shipments grew by 3.8 per cent year-on-year, whilst air freight was up 1.1 per cent and contract logistics an impressive 16.6 per cent. Only maritime shipping recorded a 3.5 per cent drop in volumes in the first half of the year. Schenker AG’s new CEO will be Jochen Thewes, who to date has been CEO of DB Schenker APAC. He will thus also take over at the head of DB Schenker Logistics as of 1 September 2015.

(Source: Deutsche Bahn)

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