The partial sale of the state-owned German rail system will eventually go ahead, but for now government officials have delayed the process for an undisclosed period of time. Some senior officials have said the stock flotation could be put off until after general elections in September.

The sale of just under 25 percent of Deutsche Bahn Mobility Logistics, a unit operating passenger and freight trains, had initially been set for last week, but it was called off because of the global financial crisis.

Complicated timetable

Deutsche Bahn's profits are on the up despite strikes earlier this year

Thomas de Maiziere, Chancellor Anglea Merkel's chief of staff, insisted that a sale before the next German general election on Sept. 27, 2009 remained possible if stock markets recovered. He said it was postponed, not abandoned.

But the finance ministry isn't expecting any privatization receipts next year, according to ministry spokesman Torsten Albig, who implicitly suggested the flotation is on ice for the time being.

"The government definitely does not intend to sell assets below their worth," Merkel's spokesman Ulrich Wilhelm said, adding that the government would wait until "a reasonable return can be expected."

Despite struggling with industrial actions and cancellations due to train maintenance this year, Deutsche Bahn's profits are on the rise. The firm has been helped by rising fuel prices, as ever more German commuters turn to public transportation for their daily journeys.

Contentious bonuses

Hartmut Mehdorn, Chief Executive of Deutsche Bahn smiles (or perhaps grimaces?) during wage talks with trade unions earlier this year during the annual balance press conference in Berlin, Monday, March 31, 2008.

(AP Photo/Franka Bruns) Railway boss Mehdorn could profit most from a deal

Public criticism of large bonuses promised to Bahn head Hartmut Mehdorn and other executives has turned the proposed stock launch into even more of a contentious issue than it was just months ago.

The German government now seems to be distancing itself from this bonus payment plan.

"If there is a flotation, there won't be any bonus provision," Finance Minister Peer Steinbrueck said.

See also:

German minister under fire over rail bonus row

Reuters: Oct 31, 2008
By Dave Graham

BERLIN - The German government on Friday defended Transport Minister Wolfgang Tiefensee against calls he resign because of his role in a row over bonus payments linked to the planned listing of national rail operator Deutsche Bahn.

Excessive executive pay has become a sensitive subject during the global financial crisis and many European leaders, including Chancellor Angela Merkel, have called for restraint.

Tiefensee has come under pressure since newspapers reported a week ago that the board of Deutsche Bahn was set to receive hefty bonuses for the hotly disputed partial privatisation of the firm, which was postponed this month due to market turmoil.

Merkel's chief spokesman, Ulrich Wilhelm, backed Tiefensee, who opposition politicians said should resign for his handling of the bonus affair.

"The Transport Minister still has the confidence of the Chancellor," Wilhelm said at a news conference dominated by 45 minutes of questions on Tiefensee, a member of the Social Democrats (SPD) who share power with Merkel's conservatives.

The Sueddeutsche Zeitung reported that Deutsche Bahn chief executive Hartmut Mehdorn stood to gain up to 1.4 million euros ($1.8 million) for the market listing, and that other board members could also reap millions, depending on its success.

Tiefensee on Wednesday fired junior transport minister Matthias von Randow, saying he had approved the payments without his permission, and urged Mehdorn to waive the perquisites.

Fritz Kuhn, parliamentary floor leader of the Greens in parliament, said Tiefensee had either known about the bonus scheme longer than he had admitted, or had failed to take proper charge of the listing that had been planned for Oct. 27.

"Tiefensee must resign," Kuhn said in a statement.

Tiefensee's spokesman Rainer Lingenthal told reporters at a regular government news conference the minister had known about the payments since mid-September.

Asked why it had taken Tiefensee so long to dismiss Randow, Lingenthal said the minister had not wanted to spark another public debate ahead of the listing, which was only given the green light after months of political wrangling.

The listing of Europe's biggest rail firm, which market analysts initially thought might raise up to 8 billion euros, was put on hold earlier this month due to market volatility.

Earlier on Friday, the company reported that revenues and profits rose by around 10 percent over the first nine months. Deutsche Bahn also said by the end of September, it had cut its debt by 1 billion euros to 15.5 billion euros.

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Deutsche Bahn Managers May Get Pay Increases, Newspaper Says

Bloomberg: Oct. 31
By Nadja Brandt

Deutsche Bahn AG's management board and other executives may receive pay increases next year, some as high as 20 percent, if an initial public offering of the company's train-operating unit is successful, Sueddeutsche Zeitung said.

Chief Executive Officer Hartmut Mehdorn's salary would rise to 900,000 euros ($1.16 million) from the current 750,000 euros, and his bonus of 2.99 million euros this year could climb to 3.51 million euros in 2009, according to the newspaper, which cited the company's IPO prospectus.

Personnel director Margret Suckale, who will take on additional tasks, would see her basic pay increase to 550,000 euros from 400,000 euros, the newspaper said.

See also:

German Minister Appeals to Bahn's Sense of Fairness

Deutsche Welle: 01.11.2008

German Transport Minister Wolfgang Tiefensee is under growing pressure to give up his post

Amid calls for his resignation, German Transport Minister Wolfgang Tiefensee asked Deutsche Bahn executives to refuse millions in bonus payments planned to be paid upon the rail company's IPO.

"I call on the directors of the Bahn to decline the bonus," he told the mass-market daily Bild on Saturday, Nov. 1. "Understanding is always the best answer."

The minister also added that German equity law prevents him from dictating how the company chooses to compensate its executives.

Tiefensee has come under increasing criticism this week when it was made public that Deutsche Bahn managers would receive hundreds of thousands of euros in bonus payments even if the company's much-disputed stock launch didn't earn as much as expected. The IPO has been postponed due to market turmoil.

Touchy subject

Debate has arisen in Germany over how much managers should earn

Public outcry over the issue led Tiefensee's deputy, Matthias von Randow, to lose his job this week. Von Randow knew how much the Bahn planned to spend in bonus payments but didn't inform Tiefensee.

Deutsche Bahn CEO Hartmut Mehdorn stood to gain up to 1.4 million euros ($1.8 million) for the market listing, and other board members could also reap millions, depending on its success, according to a report in the daily Sueddeutsche Zeitung.

Excessive executive pay has become a sensitive subject during the global financial crisis and many European leaders, including Chancellor Angela Merkel, have called for restraint.

Merkel's chief spokesman, Ulrich Wilhelm, backed Tiefensee saying he enjoyed the chancellor's full confidence. Opposition politicians, meanwhile, called for Tiefensee's resignation.

"Tiefensee must resign," Fritz Kuhn, the Greens party parliamentary leader, said in a statement. He added that the minister had either known about the bonus plan longer than he had admitted, or had failed to take proper charge of the listing that had been planned for Oct. 27.

Minister: Would have fought bonuses

Some opposition parties want a stop put to the Bahn's IPO

Tiefensee said he didn't know about the bonus payments until mid-September, long after he could do anything to change the scheme von Randow had approved.

"The personnel committee decided in June, and if I had found out about it earlier I would have opposed the bonuses," he told the Bild.

The listing of Europe's biggest rail firm, which market analysts initially thought might raise up to 8 billion euros, was put on hold earlier this month due to market volatility. Experts recently estimated that a stock launch under current conditions would bring the Bahn between 3 billion euros and 5 billion euros.

Earlier on Friday, the company reported that revenues and profits rose by around 10 percent over the first nine months. Deutsche Bahn also said by the end of September, it had cut its debt by 1 billion euros to 15.5 billion euros.

See also:

Deutsche Bahn Criticizes Transport Minister, Sueddeutsche Says

Bloomberg: Nov. 4
By Andreas Cremer

Deutsche Bahn AG, Germany's state- owned railway, criticized Transport Minister Wolfgang Tiefensee for comments he made publicly urging the company's managers to waive bonuses, the Sueddeutsche Zeitung newspaper reported.

Deutsche Bahn said bonuses are a confidential matter, adding that the company is ``disappointed and puzzled'' about Tiefensee's move to call on directors to dispense with the planned special payments, the newspaper said, citing no one.

Tiefensee last week dismissed one of his deputies, Matthias von Randow, amid allegations that he failed to inform the minister about a decision to pay bonuses to railway executives in the event of a successful initial public offering. Tiefensee, a Social Democrat, is now faced with resignation calls from opposition parties over his handling of the matter.

See also:

Delay for D Bahn unit stake sale

Financial Times: November 6 2008
By Chris Bryant and Gerrit Wiesmann

Germany's biggest privatisation in eight years appears heading to be for the buffers after the government warned it would probably not sell a stake in the train operating unit of Deutsche Bahn until after the general election in September.

The finance ministry said the new timing for the sale of Deutsche Bahn Mobility & Logistics reflected the "current economic environment", although an earlier sale remained possible in theory.

See also:

D.Bahn posts rise in 9-month turnover, earnings

Reuters: November 6 2008

BERLIN - German rail operator Deutsche Bahn AG posted a rise in turnover and operating earnings for the first nine months of the year, helped by an increase in passenger numbers.

The German government last month postponed plans for an initial public offering (IPO) of Deutsche Bahn due to turmoil on financial markets but has said it plans to go ahead once conditions have improved.

Deutsche Bahn said its nine-month turnover rose 9 percent from the same period last year to 25.2 billion euros ($32.5 billion) and EBIT before one-offs was up 3.7 percent at 2.06 billion.

In a statement in Thursday, the company said it had also seen a 3.8 percent rise in the number of passengers using its trains in the first nine months of 2008 to 1.42 billion.

Deutsche Bahn chief Hartmut Mehdorn said despite the difficult economic situation, the company's strategy would safeguard jobs.

"Deutsche Bahn is steering a successful course despite the financial crisis. This is being rewarded in our current talks with potential investors," Mehdorn said in the statement.

The partial privatisation of Deutsche Bahn would have been Germany's biggest stock market listing since 2000 and it took years of political wrangling to get agreement on the details.

It is unclear whether the government, which was forced to scale back its expectations of how much it would cash in from the sale from original estimates of up to 8 billion euros, will have another go at the listing before September's election.

Under the IPO plans, 24.9 percent of Deutsche Bahn's passenger transport, logistics and services businesses, DB Mobility Logistics AG, would be sold.

That unit posted a 12.3 percent rise in EBIT before one-offs to 1.67 billion euros in the first nine months of the year.