AFTER a decade at the helm of Europe's largest railway, the manner of Mr Hartmut Mehdorn's ignominious departure from German Rail could not contrast more starkly with the remarkable transformation he presided over. 

Mehdorn, whose contract ran until 2011, tendered his resignation on March 30 in the face of allegations that DB had spied on 173,000 of its 220,000 staff between 2002 and 2003 as part of an inti-corruption campaign. News agency Reuters also says it obtained documents which suggest DB screened its entire workforce again in 2005 for corruption.

In the week before Mehdorn's resignation, DB's supervisory board said the company had also monitored the emails of 80,000 staff to check whether they had contacted journalists, in an effort to identify employees who had criticised the company's policies in the run up to DB's stock exchange flotation, which was later postponed. 

Announcing his resignation at a press conference in Berlin, Mehdorn attacked his critics for turning the company's attempts to tackle corruption into a data protection scandal. "Although I am a tough man, I have reached the limits of what is bearable," he said. "The whole thing has been so scandalised that we're no longer dealing with the facts. The investigators had not found any evidence of illegal conduct by DB's management. I have nothing to be ashamed of. Even if I have done nothing wrong, the most important thing is to put an end to this destructive debate about the railway."

Under Mehdorn, DB has pursued a rigorous policy of acquisitions that has transformed the struggling former national railway into a major international transport and logistics company. DB now has passenger and railfreight operations across Europe, and the acquisition of Schenker in 2003 has helped DB to become the world's fifth-largest logistics company and the biggest road freight forwarding company in Europe. Mehdorn's policy of creating a ‘one-stop solution' for logistics is now being emulated by other railways such as French National Railways (SNCF).

Plans to sell up to 49% of DB was supposed to have been the centrepiece of Mehdorn's legacy as CEO, but protracted political wrangling, which reduced the IPO to just 24.9% of the DB Mobility and Logistics operating division was followed by the economic downturn and last October the government decided to postpone the flotation. For the IPO's most vigorous proponent this was a bitter disappointment, but Mehdorn vowed to continue leading DB and guide it through the gathering recession, although the emergence of spying allegations in February signalled the beginning of the end of his tenure. 


On April 2, the German government announced it would be nominating Mr Rüdiger Grube, chairman of the European Aeronautic Defence & Space Company (Eads), and a member of the board of automotive giant Daimler, to succeed Mehdorn. Grube has since relinquished his position with Eads saying his new role "does not leave room for a second job".

Grube has the backing of a several senior government figures, including the German chancellor Mrs Angela Merkel, vice-chancellor Mr Frank-Walter Steinmeier, and transport minister Mr Wolfgang Tiefensee.

The supervisory board of DB was expected to vote on April 25 whether to confirm Grube as CEO. The Federal government has the right as major shareholder to three members on board, and these posts are filled by representatives of the ministries of finance, science and technology, and transport. All are expected to back Grube. Trade unions, which have 15% share of vote on supervisory board, have also publically approved Grube's appointment. Other members of the supervisory board include representatives of Deutsche Bank, and energy companies RWE and E.on.

Despite his departure, Mehdorn's dream of partially privatising DB looks likely to live on under his successor. At his first press conference after being nominated for the role of CEO by the government, Grube affirmed: "We must preserve the option of a partial share sale," although he warned economic conditions must improve before the IPO can be considered viable again. "I don't want us to be distracted from doing our core business at a time of crisis," he said. He added that the economic downturn will give him "much time" to ponder how DB will now approach the delayed sell-off.

With a general election imminent and uncertainty about when economic conditions will improve, Tiefensee recently told reporters an IPO may not occur before the end of the next legislative period in 2014. With DB effectively stranded in its transition between public and private sector, it is unclear whether Grube shares Tiefensee's view that the sale will be such a distant prospect. 

Continued growth in 2008

DB enjoyed a fourth successive year of growth last year, despite a sharp downturn in revenue in the fourth quarter. Group revenues rose by 6.8% to €33.5 billion, while net debts were reduced 3.5% to €15.9 billion. Earnings before interest and tax (Ebit) rose 4.8% to €2.5 billion. DB's operating division DB Mobility and Logistics posted revenues of €32.7 billion, up 5.6% over the previous year, with Ebit increasing 5.4% to €2 billion.

Passenger numbers rose by 4.8% to 1.9 billion, with a 3.8% increase in long-distance, 3% in regional and 8% in S-Bahn ridership. Railfreight arm DB Schenker Rail also witnessed a 21.1% increase in traffic to 378.7 million tonnes, with volumes climbing 15% to 14.8 billion tonne-km. However, much of the increase was caused by the inclusion for the first time of  DB's British railfreight operations, and growth in the domestic market did not reflect the increases witnessed in 2007.