Deutsche Bundesbahn Business Information, Profile, and History

History of Deutsche Bundesbahn

The Deutsche Bundesbahn (DB) is the largest transport company in the Federal Republic of Germany. DB operates passenger and freight transport services, by rail and by road. The bulk of its business, however, is rail transport. In 1990 DB carried 1.072 billion passengers. Of those 1.043 billion were carried by rail, 18 million by bus, and 11 million by ship. Passenger traffic measured in passenger-kilometers amounted to 44.2 billion passenger kilometers, of which 43.6 billion were carried by rail. Freight traffic amounted to 66.8 billion ton-kilometers, of which 62.5 billion were carried by rail and 4.3 billion by road. The volume of freight carried amounted to 299.5 million tons in 1990.

In 1990 DB's revenue of DM30.00 billion included federal subsidies of DM4.1 billion. In addition the company's owner, the state, once again made financial subsidies of around DM9.6 billion. These figures reflect the particular political conditions under which DB operates and reveal its financial difficulties. For many years DB has seen declining demand for its transport services and decreasing profitability.

DB has experienced financial difficulties since its foundation. DB's predecessor was the Deutsche Reichsbahn, which was split up in 1945 when Germany was divided into four occupied zones, each with an independent railroad network. Beginning October 1, 1946, the Reichsbahn railroad lines in the American and British zones were placed under the control of a common central administration, based in Bielefeld. By September 7, 1949, the name "Deutsche Reichsbahn" was changed in the American and British occupied zones to "Deutsche Bundesbahn." On January 1, 1951, according to the company report for that year, the railroad in the French occupied zone was merged with the DB to form "a financial and economic community with a common economic, financial, and accounting management." The formal merger of the DB took place when the Federal Railroad Act came into effect on December 18, 1951. The integration of the railroads of the Saar began in 1957 and was concluded in 1959 with the ending of the Saarland's economic transitional period--the Saarland joined the Federal Republic of Germany at a later date than the other states. Because of war damage, DB began operating under extremely adverse conditions. Buildings, permanent ways--tracks, points, bridges, and signal boxes--and fleets had suffered badly during the war. DB had to carry out repairs and reconstruction predominantly by itself. In addition to the material damage of the war, DB had postwar costs which also hindered the company's development. DB had to bear the costs of paying maintenance and interim payments--grants to cover refugees' losses and help them to resettle--to railway workers expelled from central and eastern Germany and to their surviving dependants, as well as to those entitled to war maintenance. These and similar non-operating overheads were later transferred to the state budget. Furthermore, the alignment of the network, which before the war had run predominantly in an east-westerly direction, no longer corresponded to the traffic flows and now ran mainly in a north-southerly direction. The re-alignment of the network through building new stretches of track required much time and expenditure.

In the 1950s and 1960s DB's freight volume and freight train services, as measured in ton-kilometers, grew considerably. The volume of freight carried rose, albeit with fluctuations, from 203.2 million tons in 1950 to reach a historic peak of 351.8 million tons in 1974. Since then, the amount of freight transported has generally declined. In 1990 freight volume totaled 275.1 million tons. The growth in freight train services operated was similar. In 1950 they stood at 38.9 billion ton-kilometers, reached 70.5 billion ton-kilometers in 1970, an all-time high, and since then have generally been in decline. In 1990 train services operated totaled 61.5 billion ton-kilometers.

The picture is somewhat different for passenger transport. While the number of rail passengers, including those using the suburban lines, grew less dramatically and while there was a downward trend in the number of rail passengers from the 1960s, passenger train services operated, including suburban lines, rose from 30.2 billion passenger-kilometers in 1950 to 38.5 billion in 1970 and reached 42.7 billion in 1985. In 1990 ridership still amounted to 43.6 billion. The number of passengers rose from 1.28 billion in 1950 to a high of 1.47 billion in 1957 and since then has tended to decline. In 1990, 1.04 billion people traveled by rail. DB has developed increasingly into a long-distance carrier, while being less attractive for short distances. The situation is different for the so-called SBahn rapid transit suburban services. Here passenger volume has risen sharply; ridership has quintupled since the early 1970s.

DB also declined in relative importance in the transport markets. The company has seen its share of the markets decline continuously since 1950, largely owing to the increasing popularity of road transport. While in 1950 DB had a 64.8% share of the total volume of freight carried by the German domestic long-distance transport industry--that is, excluding short-distance road haulage and maritime shipping--by 1970 this share stood at around 40% and in 1989 was only 27.2%. DB's market share of freight transport declined from 61.6% in 1950 to 39.3% in 1970 and 24.7% in 1990. In passenger business, DB had 2.6% of the total ridership in 1989 as compared with 15.2% in 1950. The situation was similar for traffic results; DB's market share fell from 35.5% in 1950 to 6.0% in 1989. In passenger transport, the motor car dominates the market and has a market share of around 82% both in traffic volume and results.

DB has tried in many ways to make its services more attractive in order to withstand competition from road transport. One of the most significant investments to enhance the competitiveness of the railroads was the increased electrification of the network. In 1950 it was envisaged that the electrified lines taken over from the Deutsche Reichsbahn be extended by 4,500 kilometers to a total of 6,000 kilometers. By the mid-1980s, this target projection was exceeded. The electrified network comprised around 11,700 kilometers in 1990. More than 80% of DB's transport services operate on the electrified lines, which make up around 40% of the total network. Diesel trains run on the non-electrified lines, while steam locomotives ceased to operate in spring 1977.

In its competition with the motor car for ridership, DB concentrated from the beginning of the 1970s on speed and regularity of long-distance services. The Intercity (IC) system linked densely populated areas with high ridership volumes. IC trains began operation in winter 1971-1972 on four lines, with trains leaving at two-hour intervals. In 1979 the interval for IC services was reduced to one hour, and in 1985 a further line was added. In freight business too, DB reoriented its services to concentrate increasingly on the transporting of goods between industrial centers, where the high volume of traffic permitted the use of through trains. DB also reduced the number of part-load stations--terminals where freight trains carrying less than full wagonloads are handled--reorganized the marshalling--or shunting--system, and in 1984 established the InterCargo overnight service. Since then, the eleven most important industrial centers have been connected by overnight services. For regional freight distribution DB uses trucks, of which it has between 3,000 to 4,000 under contract.

DB's involvement in intermodal transport has also helped to improve local collection and delivery services. The first trials with piggyback transport--the transporting of articulated trucks or trailers on special railway wagons--began in 1954. The technology of piggyback transport and container transport, where only the transport vessel is changed, superseded the Culemeyer Strassenroller (wagon-carrying road trailer), the so-called private siding, a line leading off a main line to an industrial plant for collection and deliveries of freight. The container business is operated by DB's subsidiary Transfracht Deutsche Transportgesellschaft, founded in 1969. DB is also an associate shareholder in Kombiverkehr, dealing with piggyback transport and founded in 1968. Despite the considerable growth rate in the volumes carried by intermodal services, in 1989 piggyback and container traffic represented only around 8% of DB's total rail freight business.

In parallel with its decreasing economic importance and declining market shares, DB experienced increasingly poor financial results. In 1974 Hans-Otto Lenel wrote in volume 25 of the ORDO-Jahrbuch that "the Deutsche Bundesbahn has been one of the biggest headaches in transport policy for more than one and a half decades." This statement has lost none of its relevance. According to its financial statements, since its incorporation DB has only made a profit once, in 1951, when profits amounted to DM71.7 million. With the exception of 1955, the company's losses increased year by year. From 1958 these deficits could be attributed to changes brought about by the consumer boom that began in autumn 1959. In 1960 and 1961 the deficit stood at DM13.5 million and DM29.8 million respectively. By 1965, however, the deficit had exceeded DM1 billion deutschmarks. In addition, in the same year DB received equalization payments from the state of more than DM1 billion deutschmarks. DB's deficits and the state's subsidies to date add up to almost DM14 billion annually. It is not surprising, therefore, that DB came to be described as a drain on the budget.

Apart from a few smaller stretches of new line--the first new line built after the war went from Salzgitter-Drütte to Salzgitter-Lichtenberg, and was opened in November 1954--DB's major new line construction program began as late as August 1973 with the commencement of work on the new line between Hanover and Würzburg. This line and the link between Mannheim and Stuttgart were to replace the winding and heavily-used stretches through the mountain ranges of central western Germany. Work was delayed due to protracted planning and approval procedures and numerous legal proceedings. The two lines did not go into full service until timetable changes were made at the beginning of June 1991. The new Hanover-Würzburg line permits the operation of freight traffic at maximum speeds of up to 160 kilometers per hour and InterCargoExpress services are able to cover the Hamburg to Munich corridor on night runs.

The company's ability to compete on equal terms with other carriers and its adjustment to economic developments and changes in structure were considerably restricted by its relationship with the state. The 1951 Federal Railroad Act stipulated that DB be run in accordance with commercial principles and in the interests of Germany's national economy. Within the scope of this relationship, with its tensions resulting from DB's contradictory status as a public service undertaking and a commercial enterprise, DB's commitments toward public service duties have, until the present, been dominant, although the 1961 amendment to the transport laws formally reduced its public service obligations. The Federal Railroad Act specifically states that DB is to carry out its public service duties within the framework of a commercially run company.

In general, the duties of operation, transportation, and fares are included under the generic term of public services. DB is obliged to provide rail transport, even on unprofitable sections of its network. The closure of lines requires formal procedures in which various political bodies are involved.

The first closure of certain branch lines occurred at the end of the 1950s, but the network was not greatly reduced. In 1990, the total length of lines was 27,000 kilometers, only slightly less than the total length in 1950 of 30,500 kilometers. DB is also obliged to adjust its capacities to take account of transport demand at peak times. DB's fares were set by the minister for transport until the amendment of the transport laws--the so-called minor transport policy reform--in 1961, giving DB greater freedom to set prices. However, fare changes still required the approval of the minister for transport. Until this change in the law, DB's freight rates had to be in line with those for long-distance road haulage and inland shipping. DB's freight rates were governed by the Reichskraftwagentarif, from 1989 known as the long-distance road haulage tariff, which hindered DB's competitiveness in the road haulage market.

Apart from these political reasons, there were two further processes that were significant in the development of DB's transport business. Firstly, the motor car boom which had begun in the 1950s took away a great deal of DB's market share in passenger transport. Secondly, the evolution of freight structures had an adverse effect upon the railroads, as changes in Germany's industrial structure led to a dramatic increase in the proportion of goods better suited to road transport.

The deterioration in DB's financial situation could not be prevented even by various plans for reform and restructuring. As early as 1958 the DB board of directors presented its ideas for DB's financial recovery. It requested that DB be given more leeway to adapt to commercial market requirements. Prerequisites for this were equality in conditions at the outset after reform and restructuring in the transport field and the relaxation of the legal and financial relations between the state and the federal railroad. In 1960 the Brand Commission, established to examine the state of affairs at DB, presented its report.

The Brand Commission advocated a stronger commercial orientation in the field of transport. DB's businesses should be run according to independent commercial market principles. Furthermore, the Brand Commission also advocated the discontinuation of the policy whereby only civil servants could be board members, managers of the business divisions at the DB headquarters, or president of the regional headquarters, as well as clarifying the financial relations between the railroad and the state.

In 1967 the government put forward the Leber Plan, its transport program for 1968 to 1972 which gave special attention to road haulage, planned line closures, and reductions in staffing. In 1969 the advisory committee to the minister for transport proposed that financial responsibility for the public service sector be imposed on the regional administrations requiring the provision of DB services. In the 1970s the minister for transport set various objectives, the government commissioned projects, and the DB board put forward its conception for an optimum commercial network. These plans envisaged, amongst other things, the closure of lines leading to a halving of the network, DB's concentration on long-distance traffic, and staff reductions. In 1983 the government agreed to the guidelines presented by the minister for transport for DB's consolidation, according to which increases in productivity, investments, the closure of lines, and reductions in personnel were to lead to a 40% reduction in overall expenditure by 1990. In addition, a ceiling was set on government grants which were already authorized and running.

From the beginning of the 1980s DB's statement of accounts made a distinction between the commercial sector, the public sector, and the state-financed sector. The commercial sector included in particular long-distance passenger and freight services. The public sector, subsidized by the government, included those services operated by DB which are unprofitable to run but must be provided in the interest of the general public. This sector included short-distance passenger services. The state-financed sector included the provision of the infrastructure--that is, the track.

Of the various proposals for reform to bring about DB's financial recovery, three measures in particular have been put into practice already: the reduction in personnel, the discontinuation of insistence on civil service status for board members, and, although only to a limited extent, suitable definition of the financial relations between the government and DB.

DB has received financial resources from the federal government since the beginning of the 1950s. According to the federal minister for transport, grants allocated to the DB between 1952 and 1960 amounted to DM5.9 billion. This sum includes loans and support for banking, liquidity, and financing, as well as the waiving of transport tax. From the beginning of the 1960s financial aid from the federal government has been increasingly determined by both national and European Community (EC) legislation. This includes equalization payments for the public sector, in particular to cover losses due to the imposition of cheap fares for commuter and school traffic, equalization payments to offset losses due to the disadvantages suffered by DB in the competitive field--in particular, the enormous increases in social security payments, as DB runs its own superannuation scheme--as well as government ownership obligations such as interest payments and repayments for loans taken on by DB. Transferring these obligations from DB to the state could, in itself, hardly be conducive to DB's longterm redevelopment.

The reduction in the work force is intended to cut the company's costs: expenditure on personnel represents around 60% of DB's total outlay. The workforce reached a historic peak in 1948 at 602,000. Soon afterward, some major redundancy schemes reduced DB's average annual work force to 530,000 in 1950, after which the number of employees diminished further. Between 1960 and 1969, the number of employees fell from 498,000 to 398,000. The beginning of the 1980s brought an accelerated reduction in staff to 246,000 by the end of 1990. Since the beginning of the 1980s, managers from the private sector have been appointed to DB's board. This discontinuation of adherence to civil service status for the company's management was designed to lead to greater commercial orientation for DB. This objective has only been attained to a limited degree since government policy has still not allowed DB the necessary freedom of action. It therefore comes as no surprise that Heinz Dürr, chairman of DB's board since 1991, is pressing for a constitutional amendment to end the bureaucratic status of the railroad, thus permitting it to operate more fully as a commercial entity.

The obligation toward modification of the government's railroad policy and the economic redevelopment of DB arises not only from the company's difficult financial situation but also from the reunification of Germany, the accompanying takeover of the Deutsche Reichsbahn (DR) by the federal government, and the development of the EC transport policy. The unification treaty calls for the ultimate technical and organizational merging of the two railways.

Principal Subsidiaries: Deutsche Bundesbahn Holding GmbH; Nuclear Cargo + Service GmbH; Transfracht GmbH (79.5%); Schenker & Co. GmbH (77.5%); Rhenus AG (4.4%); Bahnbus-Holding GmbH; Deutsche Service Gesellschaft der Bahn mbH; Reisebüro Rominger (90%); Amtliches Bayerisches Reisebüro GmbH (55%); Vereinigte Bundesverkehrsbetriebe (52.9%); Bayern Express (51.7%); DER Deutsches Reisebüro (50.1%); Deutsche Touring (50.1%); BRG Bahnreinigungs-Realisierungsgesellschaft; RBRG Hannover (51%); RBRG Nürnberg (51%); RBRG Stuttgart (51%); RBRG Frankfurt/Main (51%); RBRG Hamburg (51%); RBRG München (51%); RBRG Köln (51%); Planungsgesellschaft Airport Express; Deutsche Eisenbahn Reklame (60%); PFA Partner für Fahrzeug-Ausstattung (51%); Planungsgesellschaft Schnellbahnbau Hannover-Berlin (51%); Marbeton; Kombiwaggonprojekt GmbH (50%); MVP Versuchs- und Planungsgesellschaft für Magnetbahnsysteme (33.3%); Deutsche Gesellschaft für Kombinierten Güterverkehr (20.5%); Münchner Verkehrsund Tarifverbund (50%); Frankfurter Verkehrs- und Tarifverbund (49%); Verkehrs- und Tarifverbund Stuttgart (50%); Eurofirma Europäische Gesellschaft für die Finanzierung von Eisenbahnmaterial (25%); START-Holding GmbH (30%); Deutsche Umschlaggesellschaft Schiene/Strasse (DUSS) (40%); Deutsche Eisenbahn-Consulting GmbH (49%); TLC Transport-, Informatik- und Logistik-Consulting (45%); Autotransportgesellschaft mbH (25%); BTT BahnTank-Transport GmbH (25%).