Deutsche Bahn CEO resigns

Uncertainty hangs over the future of Deutsche Bahn with the abrupt resignation of its CEO, Ruediger Grube, yesterday (January 30, 2017). It appears that the disagreement was over the length of Grube’s contract, with the board offering only two years, whilst Grube demanded three. Such was his determination to serve until 2020 it is reported that he offered to forgo a pay rise.

It is unclear why the length of contract should be so important and it is tempting to think that there is a link with differing opinions over the strategic direction of the company.

Deutsche Bahn announced in early 2016 that it was in the early stages of planning a part-privatisation of the Schenker logistics business. This was driven by the need for Deutsche Bahn to invest heavily in new infrastructure in its core German rail operations. These are both fundamental to the prospects of what is after-all the German State railway, as well as being vulnerable to political criticism in Germany if the public perceives that they are not getting a good enough service. In addition, there has been the beginning of an opening-up of competition to other operators on the rail network. This remains on a small scale at present, however the threat of a full privatisation cannot be ignored, although the present German government has not pursued this so far.

There is also another issue. Schenker itself may also need more capital as well as the ability to evolve strategically through large-scale acquisitions, for example. A partially floated company would be better placed to do this. The global logistics market is changing fast and the danger is that, being buried inside Deutsche Bahn, Schenker will not be able to adapt.

The departure of Ruediger Grube is the second time that the head of Deustche Bahn has been lost in unplanned circumstances, with the previous CEO, Hartmut Mehdorn leaving the post in 2013 over a scandal concerning spying at the organisation.

Deutsche Bahn and DB Schenker need strategic direction and the appointment of Grube’s successor will be of unusual importance to the future of both companies.

Source: Transport Intelligence, January 31, 2017

Author: Thomas Cullen