FT.com / Columnists / European View - Tragicomic tale of three German men in a boat

FT.com / Columnists / European View - Tragicomic tale of three German men in a boat

Tragicomic tale of three German men in a boat
By Paul Betts

Published: January 17 2008 00:17 | Last updated: January 17 2008 00:17

Jerome K. Jerome’s classic story Three Men in a Boat recounts the comic misadventures of three chums who set off on an eccentric rowing escapade up the Thames. It is quintessentially English.

But three of Germany’s top bosses may be feeling they are paddling in an equally unpredictable if somewhat more serious journey in the same boat.

The trio are: Hartmut Mehdorn, head of Deutsche Bahn, the German railways; Klaus Zumwinkel, Deutsche Post chief;, and René Obermann, chief executive of Deutsche Telekom. They all differ in management style and performance but share the task of turning former federal bureaucracies into competitive, profitable companies.

They also share a problem. The government remains their biggest shareholder and calls the shots, even though two have been privatised and the Bahn still hopes to be.

Mr Mehdorn has done a great job restructuring the railways and making them profitable. For the past decade he has been working towards the Bahn’s privatisation. He hopes to achieve this in the next 12 months but his ambitions could be derailed as a result of his temperamental character.

The Bahn has just agreed to give railway engine drivers an 11 per cent pay rise. It successfully negotiated a far more moderate 4.5 per cent increase with the rest of its workforce last year.

But the engine drivers, rather like airline pilots, put a gun to Mr Mehdorn’s head by holding out for 30 per cent. Mr Mehdorn is furious, all the more so because the Bahn’s other unions are clamouring for a similar increase.

Rather than quietly licking his wounds, Mr Mehdorn could not resist an outburst, warning that the Bahn would be forced to make massive job cuts to compensate for the wage rises. The transport minister immediately rapped him on the knuckles and said the Bahn had no need to cut jobs.

Sure, the latest wage concessions are hardly going to make the Bahn a more attractive privatisation prospect. But by provoking a public controversy with an impetuous slip of the tongue, Mr Mehdorn could delay privatisation for another decade.

Mr Zumwinkel may not have performed as impressively as Mr Mehdorn at the postal group but he has shown more political skill.

His main preoccupation has been to preserve Deutsche Post’s letter monopoly, which is threatened by the European Union’s decision to open up all national postal markets by 2011.

Mr Zumwinkel’s wheeze was to propose a high minimum wage for all postal workers to undermine his private sector competitors. Left-wing politicians in the grand coalition and unions were delighted and have since adopted the minimum wage idea as their own.

The wages move drove up his company’s share price. The trouble is that Mr Zumwinkel chose this moment to sell some of his options, picking up a sizeable windfall in the process. This provoked an inevitable public outcry, and the politicians were not amused. Mr Zumwinkel had to apologise publicly. He no longer looks so secure at the helm of the post office in spite of his clever ploy.

Mr Obermann, in contrast, has sought to keep himself out of the headlines, except for his liaison with a television chat show hostess. Although he has managed more successfully than his predecessors to keep the government at bay, he still needs its approval for the unpleasant medicine he must continue to administer in Deutsche Telekom’s domestic operations.

Among these is to persuade persuade Berlin to take back all those high-cost civil servants employed at DT, much as France Telecom has managed to do with Paris – and agree another 25,000-30,000 job cuts in the next four years as the company embraces an internet-based network.

With elections next year, let alone the gloomy economic outlook, life can only get more complicated for these three. So much so that they may be tempted to recall a remark by one of Jerome’s characters: “I don’t understand German myself.

“I learnt it at school, but forgot every word of it two years after I had left, and have felt much better ever since.”

Fasten your seat belts

It is that time of year when the world’s two big civil aircraft manufacturers, Boeing and Airbus, seek to upstage each other with statistics of how many new aircraft orders they have booked and how many airliners they have delivered the previous year.

Since they both command roughly 50 per cent of the market, the numbers competition is pretty meaningless. Boeing last year booked more net orders than Airbus, 1,413 versus 1,341, but Airbus booked more gross orders, 1,458 versus 1,423. As for deliveries, Airbus did better than the US group with 453 deliveries last year compared with 441.

What these numbers say is that airlines have continued to order a surprisingly high level of new aircraft. The question is: have they once again ordered more aircraft than they can chew? If so, fasten your seat belts. The cycle will turn and the bubble will soon burst in the sector.

european.view@ft.com
Copyright The Financial Times Limited 2008