March 27, 2008 / 10:05 AM / 9 years ago

UPDATE 2-Germany scraps Munich Transrapid as cost spirals

(Releads with confirmation, adds details)

By Gernot Heller

BERLIN, March 27 (Reuters) - Germany has ditched plans to build a flagship high-speed rail link between the Bavarian capital Munich and its airport because of ballooning costs, Transport Minister Wolfgang Tiefensee said on Thursday.

The Transrapid, one of the world's fastest trains, was developed by German engineers at Siemens AG (SIEGn.DE) and ThyssenKrupp AG (TKAG.DE) and so far the technology has only been used commercially in China.

Tiefensee told a news conference that industry estimated the cost of building the link would reach 3.2 billion to ($5.76 billion) 3.4 billion euros compared to the 1.85 billion euros orginally earmarked for it.

"The Munich magnetic levitation rail project has collapsed," Tiefensee told reporters.

The federal government had originally pledged to assume up to 925 million euros in costs and the state of Bavaria around 500 million.

Construction company Hochtief (HOTG.DE) had been leading the consortium. National rail operator Deutsche Bahn AG [DBN.UL], Munich airport and the European Union were also involved, as well as Munich-based Siemens and ThyssenKrupp.

The project was announced last year by then Bavarian premier Edmund Stoiber just days before he stood down as head of the southern state's conservative party.

Critics said it was a pet project of his which he wanted as a personal legacy despite fierce criticism from local residents and the Munich mayor. The costs had soared mainly due to the costs of the track, said industry sources.

Bavaria's plans for the Transrapid, which set a speed record of 450 kph in 1993, had offered hope for the technology which has enjoyed little commercial success.

Despite a string of proposals for its use across the world, the only train of its kind in commercial use is a shuttle from the centre of the Chinese city of Shanghai to its airport.

Travelling at three times the speed of normal steel-wheel trains, the "mag-lev" Transrapid floats on a magnetic cushion one centimetre above the track. It has no fuel source on board and its makers say it cannot derail.

Industry groups in Germany, Europe's biggest economy and the world's biggest exporter, bemoaned the decision.

"That is not a good signal for Germany as a location," said Heinrich Hoefer, technology expert at Germany's BDI industry group.

Another plan to build a Transrapid link between Hamburg and Berlin has already been scrapped.

A Transrapid train crashed on a test run in northern Germany in 2006, killing 23 people, an accident in which investigators said human error was to blame.

Siemens Chief Executive Peter Loescher said the company was in talks with several other possible global partners who might be interested in the Transrapid project.

At 1048 GMT, Siemens shares were up 1.38 percent roughly in line with the leading German DAX .GDAXI index and ThyssenKrupp shares were up 2.31 percent. (Reporting by Gernot Heller and Jens Hack; Writing by Dave Graham and Madeline Chambers; Editing by David Holmes/Elaine Hardcastle)

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