Strikes spoil German rail chief's grand design
BERLIN (Reuters) - Hartmut Mehdorn spent eight years turning loss-making Deutsche Bahn into a profitable rail company and readying the state-owned colossus for the stock market.
But the chief executive's handling of a train drivers' strike has tarnished his reputation and a last-minute political hurdle dashed his dream of an initial public offering next year.
Mehdorn's blunt style helped Deutsche Bahn out of the red after he took over a company in 1999 struggling to cope with the merger of former West German and East German railways.
His drive into the profit zone -- Deutsche Bahn expects operating profits of 2.4 billion euros ($3.6 billion) in 2007 -- also earned the man with the high-pitched voice many enemies.
"I'm goal-oriented," Mehdorn once told Reuters. "Zig-zagging is not my style."
Mehdorn slashed staff levels to 230,000 from 310,000 with surprisingly little protest thanks to union cooperation -- no small feat in Germany. He also won praise for retooling the railways as a service-oriented enterprise with motivated staff.
Everything was rolling his way in July when Chancellor Angela Merkel's cabinet approved plans for a flotation of a 25 percent stake of Deutsche Bahn the government valued at 3 billion euros ($4.44 billion).
Mehdorn, who is married to a French woman and spends his holidays in France, was scheduled to retire by his 65th birthday in July before his contract was extended by three years to oversee the IPO, which he expected to complete in 2008.
"All the naysayers have now gone quiet," he said at the time, a claim that was rather premature.
CONQUERING GLADIATOR
Things quickly started to unravel after that.
The railway's three unions, which had for years fallen into line with what Mehdorn wanted, demanded big pay rises.
Mehdorn managed to limit the rise agreed with the two main unions Transnet and GDBA to 4.5 percent but the GDL train drivers union, until then a little-known grouping with 34,000 members, refused to accept that level.
Its members compared themselves to airplane pilots, and demanded 31 percent more pay and a separate labour contract.
Their periodic strikes of up to 62 hours have paralysed the country of 82 million yet the GDL union enjoys wide public backing, in part due to Mehdorn's abrasive style.
"I don't need a diplomatic pass," is one of his favourite lines.
Mehdorn wanted to crush the union ahead of the privatisation to impress investors, analysts said. That plan backfired.
"He thought the public would turn against the union over the strikes and then, as a conquering gladiator, he would be free take the railways on to the bourse," said Wolfgang Schroeder, political scientist at the University of Kassel.
"But the public has largely stuck with the strikers, something you rarely see in German disputes."
Adolf Rosenstock, economist at Gebser & Partner Asset Management, said the IPO was all but killed off after the Social Democrats, partners in Merkel's grand coalition, insisted it be open to small investors.
Mehdorn rejects that idea because he fears insufficient capital would be raised for his expansion plans.
"Mehdorn's privatisation is still twitching but it's only a question of time before it is pronounced dead," said Rosenstock. The SPD veto was not related to the strikes yet the messy dispute created unwanted turbulence.
"Its failure has damaged his reputation. Some might admire him for the hard line but his public comments really hurt his cause. He came across as brash and arrogant."
(Editing by Robert Woodward)
($1=.6752 Euro)
($1=.6752 Euro)
