Dutch, German rail cargo merger raises concerns

By Staff -- Logistics Management, 10/1/1998

Beneath the surface of Transfracht's acquisition of NDX Intermodal lies another layer of industry consolidation and anti-competitive concerns that are likely to further complicate a complex story.

In June, the Netherlands' national railway, Nederlandse Spoorwegen (NS), and Germany's national railway, Deutsche Bahn (DB), announced a plan to merge their cargo subsidiaries into a new company, tentatively named "Rail Cargo Europe." The new organization, which will integrate NS Cargo and DB Cargo, will be headquartered in Mainz, Germany. It is slated to begin operations in the second half of 1999.

Rail Cargo Europe will offer complete, customized logistics services for domestic and international shipments. Its management plans to take full advantage of the transport deregulation that the European Union will phase in over the next few years. Ultimately, the new company expects to win more cargo for the rails by cutting costs, improving efficiencies, and offering competitively priced products through cooperation with other transportation and logistics-service providers.

The deal has some regulatory hurdles to overcome. For one thing, the European Commission's Competition Directorate, headed by hard-nosed former EU Transport Minister Karel Van Miert, has been closely scrutinizing the transportation industry. Meanwhile, Annemarie Jorritsma, the Netherlands' Transport Minister, has stated that although her government supported the liberalization of rail freight in Europe, she would examine the merger for any potential anti-competitive effects it could have on shippers and the Port of Rotterdam. DB Cargo currently is appealing a judgment by the European Commission that its rate structure unfairly favors cargo routed through German ports at the expense of other European ports, including Rotterdam.

Transfracht International's takeover of NDX may affect the NS Cargo/DB Cargo merger proposal's chances of approval by the Dutch, German, and European governments. The problem is that both Transfracht and DB Cargo are subsidiaries of Deutsche Bahn. DB's acquisition of NDX and its plan to merge with NS Cargo have raised the specter of German control over Dutch strategic national interests. Not only will the process of getting approval for Rail Cargo Europe be long and difficult, but it also is likely to severely test member governments' commitments to a truly unified Europe.