"Chancellor Angela Merkel has asked Transport Minister Wolfgang Tiefensee to brief the Cabinet tomorrow about Deutsche Bahn's concrete plans,'' Merkel's spokesman Ulrich Wilhelm told a regular government press briefing today in Berlin. Tiefensee will today hold talks with Deutsche Bahn Chief Executive Hartmut Mehdorn, Transport Ministry spokesman Dirk Inger said.

Deutsche Bahn said on Nov. 25 it plans to buy harbor operator Hamburger Hafen und Logistik AG and public-transport operator Hamburger Hochbahn AG from the city of Hamburg. At the same time, it said it is considering moving "central functions'' of the company to Hamburg as the northern port city is a "natural center'' for its "worldwide logistics'' operations.

The Hamburg city government will only allow Deutsche Bahn to buy the two companies if it moves its headquarters and 1,000 members of top management to the city, Hamburg finance department spokesman Sebastian Panknin said today in an interview. Deutsche Bahn is Berlin's biggest employer, with 19,000 staff, including 1,900 at its headquarters at Potsdamer Platz.

"The presence of the Deutsche Bahn as a job provider, educator and investor here in Berlin and also in the eastern German states will continue'' regardless of the final decision reached, Mehdorn said in a statement today.

Mayors' Statements

"If Mr. Mehdorn wants to pack his suitcases then we shouldn't stop him from doing so,'' the Berliner Zeitung newspaper today quoted Berlin Mayor Klaus Wowereit as saying. Still, Wowereit said, the headquarters staff should stay in the capital.

Mehdorn said on Nov. 25 that talks with Hamburg Mayor Ole von Beust on the sale of the two companies had been "constructive and promising, although no decision has been reached yet.'' He said cooperation with Hamburg harbor offers great opportunities to boost rail cargo traffic.

The railway would spend 500 million euros ($590 million) on the move and probably eliminate positions in the process, the Berlin-based newspaper Der Tagesspiegel reported today, citing unnamed officials close to the Bahn's supervisory board. The board is likely to vote on the matter Dec. 7, the newspaper said.

"The supervisory board is the panel that will make a decision on this matter, just like in all companies,'' and not the government, Deutsche Bahn spokesman Heiner von der Laden said, declining to comment on the costs of a move to Hamburg.

Sale Plans

The city of Hamburg owns 100 percent of both Hamburger Hafen und Logistik and Hamburger Hochbahn and wants to sell between 25 percent and 75 percent of each company, Panknin said.

Hamburger Hafen, which runs Hamburg's port, rents storage space and provides logistics services, posted a 32.4 million-euro ($38 million) net profit in 2004 after a loss of 8.5 million euros a year earlier, according to the company's Web site. The port increased earnings last year by 14 percent to 746 million euros and employed 3,334 people at the end of 2004.

The Hochbahn, which runs Hamburg's public-transportation system, providing service to 318 million riders annually, narrowed its loss last year to 63.1 million euros from 67.4 million euros, according its Web site. The company employed 4,246 people as of the end of last year.

The German government is planning to sell shares of Deutsche Bahn in an initial public offering to a strategic investor. A decision will depend on a report to be drawn up by experts, the new government of Merkel's Christian Democrats and the Social Democrats, which took office six days ago, said in their coalition agreement. Mehdorn originally planed to sell shares as early as 2006.

The dispute between Berlin and Hamburg pits the two parties in the new government against each other. Wowereit is a Social Democrat, while von Beust is a Christian Democrat.

To contact the reporter on this story:
Claudia Rach in Berlin at crach1@bloomberg.net;
Chad Thomas in Berlin at cthomas16@bloomberg.net.