Der Spiegel: August 06, 2007
INTERVIEW WITH DEUTSCHE BAHN CEO HARTMUT MEHDORN:
Hartmut Mehdorn, the man in charge of Germany's restive train service, talks to SPIEGEL about privatising the nation's rail network -- and a potentially crippling strike by locomotive engineers looming this Wednesday.
Hartmut Mehdorn, the CEO of Germany's soon-to-be privatized railway service Deutsche Bahn, says the strike is the work of "a small group of trade union functionaries."
SPIEGEL: Mr Mehdorn, you have just celebrated your 65th birthday. At your age, other managers retire or opt for a laid-back post on the board of directors. Are you the sort of boss who can't let go?
Mehdorn: (laughs) Not at all, I'm good at letting go. But I also like to follow things through. And since my board of directors took the view that the privatization of Deutsche Bahn, which has been underway since 1994, is progressing well but not yet fully accomplished, I keep going. Besides: You're only as old as you feel. And I don't feel at all like I'm 65.
SPIEGEL: The Union of Locomotive Drivers (known by its German initials, GDL) is preparing a strike under GDL leader Manfred Schell. They are threatening to bring the entire country to a halt. How great could the damage be?
Mehdorn: Our customers are already unsettled by the impending labor showdown. We're already losing revenue in the millions every day. A small group of trade union functionaries has seduced its members with illusory demands and is trying to create a split within Deutsche Bahn's workforce. The things that are happening here have crossed the limits of what is tolerable.
SPIEGEL: The locomotive drivers are demanding 31 percent more money and their own union wage contract. You have rejected both demands. Can the strikes be prevented?
Mehdorn: The demands are ludicrous. That will not happen. The locomotive drivers' union wants to compel us to agree to 31 percent even as it reaches agreements of two or three percent with our competitors. That's arbitrary. We will not put everything at risk just because of a few functionaries.
SPIEGEL: Does that mean you are no longer prepared to conduct talks?
Mehdorn: I am. We presented the trade union with a new and improved offer as recently as Friday and suggested to the head of GDL that he negotiate with us. Instead of calmly evaluating our offer, the GDL promptly rejected it. Such stubbornness is absolutely irresponsible.
SPIEGEL: Will you sue the trade union for damages in the event of a strike?
Mehdorn: We will demand damages for all strikes that violate the law. If Deutsche Bahn suffers losses in the millions due to illegal actions, then we will want compensation. In the end, though, the courts will decide.
SPIEGEL: Should striking locomotive drivers expect disciplinary measures?
Mehdorn: A strike does not mean that industrial safety can be violated. Stopping a train between stations in the middle of an open stretch of track -- which some locomotive drivers did during the recent warning strikes -- endangers everyone. If another train comes up from behind, serious accidents can result. We will hold locomotive drivers who act irresponsibly to account, and suspend them from work immediately. This has been done in one case already. The safety of train travel is sacred, and takes priority over strikes.
SPIEGEL: Even a small group of striking locomotive drivers can largely bring rail traffic to a halt. What can you do to prevent that?
Mehdorn: Well, not all locomotive drivers are organized in the trade union that's planning the current labor showdown. (Some count as civil servants, and) civil servants are not allowed to strike. This is why I expect only a third of all locomotive drivers to even be available for the strike. We must prepare for that, unfortunately. But we refuse to be blackmailed.
SPIEGEL: What is your plan?
Mehdorn: We will try to arrange our service schedules around the locomotive drivers who are prepared to strike. If they're not on the job, they can't strike. We will also start a special training program for people within the company and outside it, which will provide us with additional train personnel as quickly as possible. If the union strikes despite our new offer, and despite our efforts to reach an agreement, we will have to look around for alternatives.
SPIEGEL: You plan to fire the striking locomotive drivers?
Mehdorn: All our employees, including the locomotive drivers, enjoy layoff protection until 2010. So, no -- we want to negotiate. We've made offers. But what can we do against a union functionary who has promised this effort will be the "last shot" (of his career)?
SPIEGEL: Honestly, though: You would be on strike yourself if you were a locomotive driver earning €2,000 ($2,765) per month while bearing responsibility for 400 passengers per shift, chauffeuring them across Germany at speeds of up to 300 kilometers per hour (186 mph). Wouldn't you?
Mehdorn: On average, we pay €33,000 ($45,620) a year before taxes. Locomotive drivers working for our competitors earn as much as 25 percent less. And the responsibility borne by those in our control center or in maintenance is no less heavy than the locomotive drivers'. Remember, we compete with highway traffic and other train services, which means we can't afford astronomical wage settlements.
SPIEGEL: But in a crisis, the man in the driver's cab has to make the decisions.
Mehdorn: All employees of Deutsche Bahn have their place within a single chain of responsibility. Everyone depends on the others to do his or her job. No one is better or worse. We won't let anyone touch the principle of a unified system of wage settlements -- not even the head of GDL, who thinks he has to initiate a completely unnecessary showdown just before his retirement -- during summer-holiday season -- and make all our customers nervous.
Part 2: The End of Regional Rail?
SPIEGEL: Until now, the "social partnership," or partnership between employers and workers, has been a cherished asset at Deutsche Bahn. It even featured in the story of your going public. Does the spat with GDL not deter potential investors?
Mehdorn -- and all of Germany -- faces a strike by locomotive engineers as of Wednesday, August 8.
Mehdorn: Of course an investor -- but also our current shareholder -- looks very carefully at how the management of Deutsche Bahn deals with trade unions, and what the work climate is like. No one invests in a company where a small group of functionaries is free to do whatever they want. French national railway company SNCF has about a dozen different trade unions, which means it is hard to control. I put a lot of stock in the fact that, during the past years, we have reorganized the company with a high degree of social compatibility -- cultivating a good dialogue with the trade unions. This is being put on the line needlessly. And because this issue has always been close to my heart, I refuse to accept a division between first- and second-class employees.
SPIEGEL: Apropos going public: You want to make Deutsche Bahn a world market leader in the logistics (transportation and shipping) sector. But how will the average German train traveler in the Swabian mountains or in Mecklenburg benefit from this?
Mehdorn: We are Europe's largest transportation company and have to be able to move on the capital market like our competitors from France and Great Britain. Polls repeatedly show that more than half of German citizens are allegedly opposed to the privatization of Deutsche Bahn. That is partly due, for example, to Hesse's State Transportation Minister Alois Riehl saying that the rail network would deteriorate and a large number of routes would fall out of service. These are untruths, which have been spread for populist reasons. The fact is that regional rail traffic is planned and commissioned by the German states. We are only coachmen for hire when it comes to that. Should the German states cease to commission certain routes because they have no money, then we will no longer service those routes.
SPIEGEL: So it's all just scaremongering?
Mehdorn: I'm tired of hearing the fairy tale about "locust" investment companies allegedly buying our shares and taking some route to Smallville out of service. Anyone who says such things is deliberately spreading untruths. No Mercedes shareholder decides how many red, white or yellow cars the company will produce next year. Neither we nor a future shareholder can just take routes out of service. We are not even capable of doing so legally. A future investor in Deutsche Bahn remains a minority shareholder by German constitutional law. As the owner of 51 percent of the shares, the German federal government remains the majority shareholder of Deutsche Bahn. So where is this terrible spectre of locust investors?
SPIEGEL: Last week the German states demanded more money and a greater say when it comes to investments in local transportation. They may manage to block the privatization law -- which has already been agreed on at the cabinet level -- in the Bundesrat. Could you live with their demands?
Mehdorn: Those are indeed issues one can -- and must -- talk about. We are in no way opposed, for example, to the states viewing the report on track conditions, which we've already presented twice to the federal government. Let me clear up another myth, by the way: The German rail system is not decrepit. It is one of the best in all of Europe, if not the whole world. If the German road system received as much attention as its rail system, there would certainly be fewer construction sites, potholes and traffic jams.
SPIEGEL: The states are also demanding that your track prices be regularly checked by the regulatory authority responsible for the railways, the Federal Network Agency.
Mehdorn: They are free to do so. We have no problem with that. But that is the federal government's affair, not that of Deutsche Bahn. We put 100 percent of what we receive as track prices back into the railway network. We don't steal any money, as some would have people believe, and we don't sneak it past the federal government and slip it into the pockets of "locust" investment companies.
SPIEGEL: But you could keep competitors off your back by drastically raising track prices.
Mehdorn: I am familiar with that argument. Another myth. Believe me, the Federal Network Agency is responsible for ensuring a level playing field for competitors in this market and they will watch what we do very carefully. Sleight of hand is not an option. Besides, if the prices are too high, we lose our customers to road transport -- where, by the way, no one checks if foreign companies are driving down truck drivers' salaries through wage dumping.
SPIEGEL: Are you not afraid that the demands by the German states will interfere with the time schedule for Deutsche Bahn going public -- and that Deutsche Bahn will become a campaign issue during the regional elections next year? That would be the end of your dream of going public.
Mehdorn: The danger exists -- and someone or other is certainly speculating on it. Some politicians may also think it will be a great victory to stop a railway reform that has been underway since 1994. There is just one aspect I will never understand: how even a Christian Democrat like (Hesse Transportation Minister) Alois Riehl can want to nationalize the rail network. The argument he uses is that competition is in danger. I wouldn't have expected something like that from a CDU economic expert. I continue to believe there is no alternative to a partial privatization in which Deutsche Bahn operates the railway network. We've seen the state fail to do otherwise before (in Germany), in the case of the Bundesbahn and the Reichsbahn.
SPIEGEL: Perhaps the politicians critical of Deutsche Bahn's plans of going public only want to prevent those plans from being realized on the backs of the taxpayers. The German Finance Minister would receive about €5 billion ($6.9 billion) for 49 percent of Deutsche Bahn's shares, but the federal government would have to continue paying Deutsche Bahn about €37 billion ($51 million) for the maintenance of the railway network during the next 15 years. Not a good deal.
Mehdorn: But that's wrong -- and Deutsche Bahn is certainly worth much more. And: If the federal government does not want to pay the annual €2.5 billion ($3.5 billion), which are exclusively for replacement investments, it could raise the track fees and thereby let the market pay for the necessary investments in the network. But that would not work, as cargo transportation by rail would then no longer be cost-effective, for example, and even more trucks would congest the roads -- not to mention being a disaster for our climate.
SPIEGEL: That does not yet answer the question of why the citizens should pay for an investor's improved return.
Mehdorn: Hold on, we're not talking about just any investor here. The federal government is always in the boat as the majority shareholder with 51 percent of the shares. If it does not want to pay the €2.5 billion ($3.5 billion), then there will just be less rail traffic. The question is: Do we want that? In any case we simply cannot maintain the quality of our 34,000 kilometer (21,127 mile) rail network in every corner of our country without this money.
SPIEGEL: You're just picking out certain details. On top of everything, the taxpayer will compensate the investor in the billions after 15 years, if the rail network happens to be returned to the federal government because Deutsche Bahn has ruined it economically.
Mehdorn: But that would only happen if Deutsche Bahn perfoms badly, which is not something we plan to do. No one is ruining the network economically. We operate more than 35,000 trains every day and have the greatest possible interest in the network, more than any state administration. Moreover, Deutsche Bahn invests its own money in the network -- more than a billion euros ($1.4 billion) annually over the past several years. That a potential shareholder should want a kind of compensation for his own investments in case he loses the network is something I find understandable.
SPIEGEL: What do you want to do with the revenue gained from going public?
Mehdorn: We need to increase our own capital to begin with. We're considering about €2 billion ($2.8 billion). But in the end, that is the shareholder's affair. The rest of the sum stays with the federal government. And if the politicians mean well, they will invest a little of it in new routes for us.
SPIEGEL: So you won't go on a shopping spree in the logistics sector?
Mehdorn: Enough of such fairy tales! Ninety percent of our investments go into the railway in Germany. We will continue to finance new acquisitions with profits from our day-to-day business, which is what we've done up till now.
SPIEGEL: What if the privatization project fails at the last minute? Will you hang up your hat?
Mehdorn: The privatization project will not fail. It's the right thing to do. There is no alternative -- so don't worry. Besides, I don't have a hat.
SPIEGEL: Mr Mehdorn, thank you for this interview.
'Fighting Cocks' Pushing Germany Into Railway Chaos
Der Spiegel: August 07, 2007
THE WORLD FROM BERLIN
Hartmut Mehdorn, who heads Germany's national railway, evidently can't stand the chairman of the train drivers' union, Manfred Schell. The feeling, apparently, is mutual. That's partly why Germany faces a railway strike this Thursday. Media commentators say it's high time for the men to kiss and make up to avert transport chaos in Europe's biggest economy.
Smiling for the cameras: Deutsche Bahn AG Chief Executive Hartmut Mehdorn (r) and train drivers' union chairman Manfred Schell after fruitless talks last month.
Germany is bracing for transport chaos at the height of the holiday season after train drivers' union GDL voted overwhelmingly (more...) in favor of a strike in defense of a 31 percent pay claim and a demand for a new wage contract that separates drivers from the other railway employees.
When the strike begins on Thursday, freight trains will be the first to be targeted, but the work stoppage is expected to spread to passenger trains as well in the following days. German media commentators say the wage dispute has come this far partly because of the personal emnity between the two stubborn adversaries, GDL chairman Manfred Schell and Hartmut Mehdorn, the energetic and outspoken chief executive of rail operator Deutsche Bahn.
Mehdorn has accused the train drivers of trying to "terrorize" the country and tried to halt warning strikes in recent months with a flurry of court injunctions. Schell for his part has called Mehdorn "Rumpelstiltskin" (the fairy tale dwarf character).
German media commentators say public sympathy with the train drivers, who do indeed seem to be badly paid compared to drivers in other European countries, is going to wane rapidly once the strike leaves thousands stranded.
Center-left Süddeutsche Zeitung writes:
"However this wage dispute ends, one thing is certain: The train engine drivers unfortunately won't get the wage hike they have failed to clinch in previous wage negotiations. Thirty-one percent more pay, or 20 or even 15 -- that won't happen. The stated goal of this strike is to get a separate wage contract for the drivers, but that always means more money. Now is the time for a more realistic demand. Or the engine drivers will very soon not just have the railway against them, but the whole public."
Conservative Frankfurter Allgemeine Zeitung writes:
"This conflict has a personal dimension: Railway chief Mehdorn and train drivers' chief Schell are facing each other like fighting cocks. This could lead to a major strike. The country could come to a standstill on Thursday."
"The railway shouldn't bow to the pressure. Mehdorn has time. The more holidaymakers are stranded on platforms, the angrier they will become. Passengers will become increasingly unsympathetic towards the engine drivers, partly also because they know that they will have to pay for the exaggerated loan demands in form of higher ticket prices further down the line."
Left-wing Berliner Zeitung writes:
"The GDL with its 30,000 members is one of Germany's smallest trade unions but has more power to disrupt the country than even garbage collectors or pilots."
"Millions of railway users should brace themselves for the worst in Germany in the coming days and even weeks."
"One has to ask whether this dispute is about the interests of rail employees or about massaging egos. Schell is 64 years old and will retire next year. He himself has said he has 'just this one shot left' regarding the wage demand."
"The €2,500 ($3,440) gross salary an experienced train driver earns at most per month isn't generous. But demanding 31 percent more money -- including shorter weekly working hours -- is impudent."
"It's totally unreasonable that Schell isn't prepared to make any compromises. It's the duty of the GDL and the railway employers to sit down and negotiate a deal acceptable to all sides."
Business daily Financial Times Deutschland writes:
"The strike isn't dramatic for the German economy -- it won't leave big traces in the 2007 national accounts. Forecasts that the dispute could cause €500 million in damage each day are absurd."
"The gross domestic product figures don't register discomfort and chaos. The economy won't grind to a halt. Taxis and car hire firms, budget airlines and private railways will keep up passenger transport; private freight rail operators and hauliers will profit in the cargo sector."