Train Drivers’ Strikes Disrupt Rail Freight Movement in Germany and Beyond

Train Drivers’ Strikes Disrupt Rail Freight Movement in Germany and Beyond

At 17:00 local time on September 1, the German Train Drivers’ Union (GDL) began the third round in a series of strikes that have intermittently been disrupting the movement of passengers and freight across Germany for more than three weeks. The latest strikes are currently scheduled to last until the morning of September 7, making them the longest round of strikes during the ongoing labor dispute so far.

While the previous two strike rounds lasted for four days each — from August 10 to 13 and from August 21 to 25 — and paralyzed hundreds of cargo and passenger trains across the country, the current strikes are expected to be even more disruptive. Although a range of sectors use the railway network, industries such as automotive, steel, and chemicals are expected to be particularly susceptible to further disruptions amid the ongoing strikes due to their reliance on rail freight transport. As official negotiations about the union’s demands concerning salaries, bonus payments, and overall working conditions remain stalemated, and each side’s position has become more entrenched over recent weeks, further delivery delays and knock-on disruptions at transport hubs and manufacturing sites should be expected in- and outside of Germany as the conflict shows no signs of abating.

Labor conflict disrupts operations at one of Europe’s key rail freight operators

DB Cargo AG is an international transport and logistics company responsible for handling the rail freight transport activities of Germany’s state-owned railway company Deutsche Bahn AG. Around 60 percent of all its freight train services serve pan-European routes that span from Lisbon in Portugal to Nizhny-Novgorod in Russia and Shenyang in China.

Using thousands of trains each day, DB Cargo AG moved around 213.1 million tons of freight across the continent in 2020, and currently connects the region’s inland manufacturing sites and transport networks with around 90 inland ports and 20 seaports throughout the region. A wide range of industries use its railway network to move their goods, including agriculture, automotive, coal, construction, consumer goods, chemicals, oil, and steel. Although DB Cargo continues to be one of the biggest rail freight operators in Europe, the company has been losing market share to competitors for years, and some fear that the prolonged labor dispute with GDL could lead some of its customers to permanently switch to other rail operators or change to more reliable transport modes in the long-term.

Collective bargaining dispute leads to three strikes with no clear solution in sight

At the beginning of August, the collective bargaining conflict between the German Train Driver’s Union and Deutsche Bahn intensified after negotiations about better working conditions, a wage increase of 3.2 percent, and a COVID-19 bonus of EUR 600 reached a deadlock in June. Consequently, around 95 percent of union members, which represent 80 percent of all train drivers at Deutsche Bahn, voted in favor of strike actions that commenced with little warning on August 10.

The first strike started at 19:00 local time at Deutsche Bahn’s subsidiary DB Cargo AG and was extended to passenger transport the following day. While DB Cargo assured the transport and delivery of critical supplies to power plants and large industrial parks, around 300 cargo trains were reportedly affected by the time the strike ended at 02:00 local time on August 13.  

Figure 1: Timeline of GDL strike actions as of September 6. Source: Everstream Analytics

Although Deutsche Bahn offered a new wage deal, a second strike was called from August 21 to 25, delaying more than 200 freight trains across the country, after the two sides were unable to resolve a dispute about the duration and implementation of the salary increase. While the first strikes were shorter and freight movements resumed quickly, the latest strike from 17:00 local time on September 1 to 02:00 local time on September 7 is expected to affect up to 70 per cent of all rail freight traffic and could further intensify existing supply chain issues in several industries.

Chemical and automotive industries expected to be hit hardest

Even before the conflict began, industries such as chemicals, automotive, and construction faced disruptions in their supply chains due to material shortages amid the COVID-19 pandemic. The third round of strikes could now result in further production disruptions, delivery delays, and additional transport costs in both industries using just-in-time supply chains as well as in those that use less time-critical cargo with higher buffer stock, but are nevertheless reliant on a steady stream of material to keep production going.

The chemicals industry, where around 20 percent of companies were already forced to reduce production due to material shortages and delays at their upstream suppliers, is expected to be particularly vulnerable to the latest disruptions. Although companies like BASF SE, Covestro AG, and Lanxess AG tried to reroute shipments via other transport modes as early as the second strike, safety measures that make rail transport mandatory for much of their cargo, especially hazardous goods, leave these companies with few alternatives to the rail network. A trade body warned that prolonged strikes in the rail sector could result in delivery delays of finished goods to customers.

Automotive companies also tried to switch parts of their cargo to road freight and other rail operators in anticipation of the strike, but logistics representatives warned that transport capacity was already strained and changing transport modes on such short notices would likely result in much higher costs, even if a change is at all possible. Manufacturers like BMW AG and Audi AG were reportedly also prepared to temporarily reduce the transportation of automotive components for the duration of the strike.

While industries that use rail for non-time critical bulk cargo, such as the steel sector, may also be able to fall back on ocean freight transport, logistics associations have warned that similar to road and private rail operators, ocean freight capacity was already limited, making it difficult and costly to adjust shipments on short notice via this mode of transport.

Although detailed impact assessments are not yet available at the time of writing, a prolonged conflict between Deutsche Bahn and GDL resulted in losses of approximately EUR 100 million per day during a series of strikes in 2014-2015. As such, significant economic impact should also be expected during the current conflict, if the dispute is not resolved in the foreseeable future.

Labor dispute likely to continue as negotiations remain deadlocked

By September 3, the labor court Frankfurt and the state labor court of Hesse had rejected two applications for an emergency injunction filed by Deutsche Bahn in an attempt to have the strike suspended on legal grounds. The decisions will allow the ongoing strikes to continue unabated until the morning of September 7 as negotiations between the union and Deutsche Bahn remain halted after GDL rejected the company’s latest offer just hours before the third strike round began.

Throughout the third strike, public pressure has mounted to reach an agreement, with members of several political parties as well as representatives of the German Trade Union Confederation (DGB), the Association of German Transport Companies (VDV), and Allianz pro Schiene e. V. all calling for a swift resolution. However, some have also suggested that the dispute it not just a disagreement about salaries and working conditions with Deutsche Bahn, but a show of strength in an internal dispute with the bigger labor union Eisenbahn- und Verkehrsgewerkschaft EVG, making a quick resolution even more unlikely as the smaller union tries to gain influence and members.

At the time of writing, Deutsche Bahn continues to insist that it is now the union’s responsibility to return to the negotiation table, while GDL claims it will only resume talks if Deutsche Bahn improves its last offer. Consequently, those using rail freight transport to move cargo through or within Germany should expect further disruptions to the country’s rail network in the weeks to come as the collective bargaining conflict remains unresolved.

Recommendations

Customers and organizations are advised to consider using inland shipping as an alternative to rail. For larger and less sensitive loads, which are most often transported by rail, barge shipping may be an option, and for a variety of other goods, trucking remains suitable. As ad hoc changes are likely to result in significant additional costs, and with transport capacity and truck availability being limited, advance preparedness is crucial. Investing in more warehousing capacity and material stocks could also offer a prudent strategy to better mitigate risks of such strikes in the future.

Customers and organizations are advised to map and visualize their supply chains to be able to react faster and more effectively by making ad-hoc decisions if needed, reroute freight, or switch to other modes of transportation. With Everstream Analytics’ Transportation Planning solutions, customers can proactively plan around disruptions.

Those whose supply chains rely on rail transportation to, from, or through Germany, are also advised to keep up to date with the latest developments regarding the train drivers’ strike. Using Everstream Analytics’ Intelligence Monitoring capabilities, supply chain managers can better understand the scope and impacts of such industrial actions. By using near real-time predictive risk monitoring capabilities, companies can adapt their contingency plans before disruptions cause significant impacts on their business.

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