EU could break up Germany's DB Cargo after heavy losses, sources say

By Markus Wacket

BERLIN (Reuters) - Losses at Germany's state rail freight operator leapt to almost 500 million euros ($535 million) last year, putting it at risk of being broken up if the EU deems the figures are distorting the market, three company sources familiar with the matter said.

The losses are twice as bad as expected at the DB Cargo company, which is part of Deutsche Bahn.

Brussels has already opened a probe into possible market distortion as the German government is plugging the freight operator's losses. A similar fate befell Fret SNCF, the freight unit of France's state-owned SNCF railway firm.

The EU Commission declined to comment on ongoing proceedings. Deutsche Bahn did not want to comment on the cargo unit's losses or the EU's actions. The German transport ministry said it was having a constructive exchange with the European Commission.

Employee representatives at DB Cargo said around 2,000 jobs were at risk due to consolidation plans that the company wants to implement to avoid being broken up.

DB Cargo has rapidly lost market share in recent years and now accounts for less than half of rail freight transport in Germany.

The losses are not due to a lack of demand. For example, military transport for Ukraine on behalf of the United States and the German military are lucrative, said the company sources who declined to be named.

However, so-called single-wagon traffic incurs chronic losses, with consignments of at most a few wagons each having to be transported together at great expense. The government is plugging the losses with around 300 million euros per year.

The government has targeted raising the railway freight market share to around 25% of all cargo transport by 2030 in line with its climate goals. But it is currently around 19% and has only increased slightly in recent years. ($1 = 0.9333 euros)

(Additional reporting by Foo Yun Chee; Writing by Matthias Williams; Editing by Keith Weir)