\u201cThe federal government and DB have missed the core objectives of the railway reform initiated 25 years ago,\u201d says Mr Kay Scheller, president of the Federal Court of Auditors.\u00a0\u201cEspecially in relation to road, there is hardly any more traffic on the rails.\u00a0In freight transport, the proportion of rail traffic is even lower than in 1990.\u201d\r\n\r\nThe court says when DB was formed in 1990 following the merger of the two separate state-owned railways in East Germany and West Germany, it was debt free. Despite continuing government support, DB\u2019s long-term debt is now almost \u20ac20bn and rising, and DB is not earning enough to fund capital investment in the next few years.\r\n\r\nThe court says the federal government is partly to blame for the current situation as it has largely left DB to regulate itself. \u201cAs the sole owner, the federal government has made a significant contribution to putting rail transport and DB in a difficult situation through its own decisions and omissions,\u201d says the court.\u00a0\u201cThe framework conditions set by the various modes of transport make it difficult for the railways to compete.\u201d\r\n\r\n\u201cIt is incomprehensible that even 10 years after DB's cancelled IPO, the federal government has no concept of what kind of railway and how much railway it wants,\u201d Scheller says.\r\n\r\nThe court points out that the federal government has allowed DB to pursue an international expansion policy so that DB is now active in around 140 countries. \u201c73% of the subsidiaries of the DB Group are domiciled abroad - 513 out of 700 companies,\u201d says the court. \u201cOutside Germany, the DB Group generates more than 43% of its sales - \u20ac18.6bn out of \u20ac42.7bn.\r\n\r\n\u201cDB has not yet used internationally-generated profits to finance railways in Germany, but has reinvested them internationally.\u00a0At the same time, the economic risks of DB\u2019s global business may be detrimental to the railways in Germany or the federal government.\u201d\r\n\r\nThe court wants the government to sell unnecessary parts of the business including DB\u2019s two largest subsidiaries, Arriva and Schenker. The court says this would raise \u201cseveral billion euros\u201d which DB could use to fund investment. It also wants the government to study different organisation models for DB including separating train operation from infrastructure.\r\n\r\n\u201cThe current model of the integrated DB Group has to be questioned,\u201d the court says.\u00a0\u201cThis includes answering the business policy question as to which of the two goals, profit orientation or public service obligations, should primarily be pursued by the federal railways in the future.\u201d\r\n\r\nThe court also wants the government to define its objectives for DB, and to develop a national intermodal strategy.