BREAKING: Deutsche Bahn Faces Major Changes as DB Cargo Loses Financial Support

Deutsche Bahn is on the brink of a significant reorganization as its loss-making freight transport subsidiary, DB Cargo, prepares to operate without financial support from the parent company starting in 2025.

This move comes as the European Union (EU) Commission is expected to rule that the financial aid provided by DB to DB Cargo constitutes unauthorized state aid, giving the division an unfair edge over private competitors.

"The financial umbilical cord is being cut," reports Süddeutsche Zeitung, indicating that DB Cargo will now have to stand on its own financially. The decision follows an investigation launched by the EU Commission in early 2022 after complaints were made about DB Cargo's reliance on state aid.

For Deutsche Bahn, this development raises questions about the company's future. With DB Cargo facing financial uncertainty, Deutsche Bahn’s influence over its freight operations is expected to shrink. At the same time, the company is preparing to sell its profitable logistics arm, Schenker, in a deal that could bring in much-needed funds.

This restructuring comes as Deutsche Bahn's core services are also under pressure. The rail network and stations, now managed by a new subsidiary called Infrago, are no longer profit centers but are intended to serve the public good. This leaves Deutsche Bahn focusing more on its regional and long-distance passenger services, both of which are facing challenges. Regional transport is seeing more competition from private companies, and long-distance services, like those using ICE trains, are struggling with financial losses.

DB Cargo is in a tough spot. In the first half of 2024 alone, it reported a loss of EUR 261 million. Over the past few years, the division’s losses have totaled billions. Although there are plans for DB Cargo to turn a profit by the end of 2024, achieving this goal seems uncertain. The company has lost key contracts to private competitors, and a sluggish economy has led to decreased demand for freight services.

In addition to external pressures, DB Cargo is dealing with internal inefficiencies. Last year, internal documents showed the need to streamline management structures and cut unnecessary administrative processes. Despite these efforts, the future of DB Cargo remains uncertain as it faces financial challenges without the support it once relied on from Deutsche Bahn.

Source: Süddeutsche Zeitung; Deutsche Bahn