How the Crisis Saved the German Railroads

The rolling stock of the German railroads, due to be peddled off to the highest stock market bidders on October 27th, has been saved, at least temporarily, and is still nationally owned.  That seems to be the one possible bit of good news in the present economic crisis.  All the rest is bad.

The railroad system has been run in recent years by a kind of transportation czar, Helmut Mehdorn, 66, perhaps the least popular figure in German politics.  On the one hand he has been constantly raising fares, twice this year alone.  On the other hand, while modernizing the main lines for quick, comfortable transportation between Germany’s major cities, he has been mercilessly cutting secondary rail networks between smaller cities and towns, dooming endless kilometers of track to rust and weeds, selling off or abandoning numerous stations and cutting service to all but the diminishing number of “quality” customers.

Then, too, he has been decimating the ranks of railroad employees, laying off 90,000, almost one-third — sometimes, it is charged, at the expense of safety.  Last year, he fought an arrogantly stubborn battle for eleven months against the small but militant locomotive engineers union.   The larger railroad union, which kept out of the fight for the most part, was betrayed by its president, who finally showed his true colors by quitting his job and getting a well-paid leadership position in the railroad company, whose privatization he had also supported.

Mehdorn also gained unpleasant prominence last year when an exhibition train with documents on the deportation of Jewish children during World War Two with the help of the railroad system was at first refused permission to stop at main railroad stations around Germany.  When this position was revealed, Mehdorn was forced to change it, but insisted on charging full rental to the anti-Nazi group which organized the exhibition.

Mehdorn’s proclaimed aim for many years now, which he hoped would crown his own career, was to privatize the railroads, in the same way that the post office system, the telephone system and other public utilities have been turned over to private concerns.

A small but determined movement called “Railroads for Everyone” opposed privatization.  They pointed out the catastrophic results of this step in Britain and other countries and how postal and telephone employees and the public had suffered from privatization.  Because of their protests and growing popular doubts, the Social Democratic Party felt compelled first to reverse its support for the move.  But then it compromised, supporting the sale of shares “only of the rolling stock,” and only 24.9 percent of them, while maintaining national ownership of the system of tracks, stations, and other stationary property.

But with one private foot into the door, it was admitted (if not too loudly), more would almost certainly follow.  Mehdorn was busy searching for the highest bidders for that first big sector, and it seemed certain that he and his cronies — and most party leaders in the Bundestag, who supported the step — would succeed in the sellout.  The October date approached and Mehdorn was salivating like Pavlov’s dog.

And then came the financial and economic crisis.  Instead of 10 billion Euros — and possibly later an additional 8 billion, which the sale proponents had claimed, at least unofficially — the bids of the main potential purchasers began to diminish or vanish and sounded more like 4.5 billion.  Morgan Stanley in the USA was having other worries, the same was true of Goldman Sachs and the Swiss financial concern UBS.   Even the Russian railroad system, a prospective purchaser, was facing similar problems at home and backed out of the deal.

“Railroads for Everyone,” the group actively opposing the sale, with a moving documentary film and small but spectacular actions at main railroad stations, said the rolling stock was actually worth about 14 billion Euros.  It would be a criminal act to sell it way under value, losing billions urgently needed in so many sectors of the economy.

The Finance Minister, a Social Democrat, now expressed doubts that the sale would be possible on October 27th.  Then the Transportation Minister (likewise a Social Democrat), said, “There will be no sale of stocks if the result is under its value.”  Both had actively pushed the sale, but had evidently become worried at what a miserable flop might cost their weakened party in next year’s national elections.  While the Christian Democratic chairman of the Transportation Committee in the Bundestag criticized their pessimistic statements, it finally became clear on October 9th: the planned sale was abandoned, the millionaire Mehdorn had been stymied, and national ownership of the railroad system had been saved, at least for the present.

Victor Grossman, American journalist and author, is a resident of East Berlin for many years. He is the author of Crossing the River: A Memoir of the American Left, the Cold War, and Life in East Germany (University of Massachusetts Press, 2003).

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