DB Cargo UK is preparing to appoint a Chief Restructuring Officer as the sale of the British freight operator enters a critical phase. The company’s chief executive, Andrea Rossi, told staff last week that the appointment would bring dedicated leadership to its future business priorities. The move comes as the bidding shortlist has reportedly narrowed to seven interested parties. However, concerns grow about the potential scale of restructuring under new ownership.
Drivers’ trade union ASLEF has warned that a major restructuring will be necessary irrespective of who buys the business. The identities of the seven shortlisted parties have not been disclosed, and their investment profiles remain unknown. ASLEF has raised concerns over ‘vulture capitalists’ and the prospect of hundreds of job losses. Meanwhile, the Government in London has said it understands that DB Cargo UK is being sold as a going concern, with services continuing normally. Nevertheless, the appointment of a restructuring chief suggests that significant changes may already be in preparation.
A new chief to oversee restructuring
In an internal communication to staff seen by RailFreight.com, Rossi confirmed that DB Cargo UK was planning to appoint a Chief Restructuring Officer as soon as possible. The announcement does not specify the scope or timetable for restructuring, but the appointment comes amid an active sale process and uncertainty over the company’s future.
“We understand the changes that are needed and are committed to taking responsibility for delivering them, rather than leaving the next phase of our development entirely to a future owner,” said Rossi. Despite sentiment to the contrary, the future of the company is very much up in the air.
Seven parties remain in contention
New information from ASLEF confirms that the bidding shortlist has been reduced to seven interested parties. Their identities have not been disclosed. It remains unknown whether they are private-equity firms, infrastructure investors or buyers with other intentions. Earlier reports indicated interest from more than 40 potential bidders and investors.
The shortlist does not establish who is most likely to succeed, or whether all seven parties want to acquire the business intact. The future of its locomotives, wagons, depots, terminals and rail-connected land could depend on the buyer’s strategy. Although concerns have been raised about a possible break-up, no decision to divide the company has been announced. Nevertheless, it has been noted that DB Cargo UK is in possession of a land portfolio, surplus to rail freight operations.
ASLEF warns of a painful adjustment
ASLEF warns that substantial restructuring will be necessary regardless of the successful bidder, potentially putting hundreds of jobs at risk. The union’s concerns extend beyond head-office functions (the company has specified driver managers as being in the front line) to train drivers and engineering staff. Neither the scale of any reductions nor a redundancy programme has been confirmed.
It is widely believed within the industry that DB Cargo UK has more resources than current trading levels can sustain. DB Cargo UK operates 228 locomotives, or about 18% of freight motive power currently in UK traffic, depending on whether stored and leased locomotives are included. A new owner may seek to reduce costs and improve asset utilisation. However, cuts affecting drivers and engineers could also have implications for locomotive availability, maintenance and service delivery.
Government watches the sale
Changes significant as the sale of DB Cargo UK has implications for the national economy. Salford MP Rebecca Long Bailey asked the Transport Secretary what steps the Government was taking to protect rail freight jobs and assets. Responding on 19 October, Keir Mather, a transport minister, remained positive. ”As we understand it, DB Cargo is being sold as a going concern and services continue to operate as normal,” he said. “We consider the company to be in a strong position to find a suitable buyer. We will continue to monitor the progress of the sale and any implications for the company or the rail freight sector as a whole.”
The response sets out no specific safeguards for jobs or assets. The planned restructuring appointment suggests changes could begin before a new owner takes control. Such appointments commonly signal a drive to reduce costs, sometimes with painful consequences for employees. Could it be that the company is facing the sort of ‘restructuring’ carried out by George Clooney’s corporate downsizing expert character in the movie in which he starred? Perhaps not, but like the movie title, the future for DB Cargo UK is very much “Up In The Air”.