DB Schenker Rail ECM Registration and Impact on Strategy

DB Schenker Rail ECM Registration and Impact on Strategy DB Schenker Rail Dr. Markus Hunkel Member of the Management Board VPI-Conference 15.06.2012

Agenda DB Schenker Rail at a glance ECM - Background, Targets, Registration ECM - Business Benefits 2

DB Schenker Rail is the No. 1 rail freight company in Europe transports over 400 million tons a year resulting in 112 billion ton kilometers being no. 1 Europe nearly three times larger than no. 2 operates 5,200 freight trains a day throughout Europe with a fleet of 3,400 locomotives and 105,000 freight cars and a workforce of over 32,000 employees in 14 countries and generates a turnover of nearly 5 bn Euro 3

DB Schenker Rail is a international company 14 countries, different cultural as well as linguistic identities Region West Deutschland / Region Central DB Schenker Rail UK Doncaster DB Schenker Rail Scandinavia Tåstrup Region East Most internationally diverse railway group in the world with 11 different languages in 14 countries RBH Logistics Gladbeck Paris ECR France Utrecht DB Schenker Rail Nederland Schkopau MEG Frankfurt (2013ff) DB Schenker Rail Mainz DB Schenker Rail Deutschland Zabrze DB Schenker Rail Polska From startup companies to companies with over 175 years of history Transfesa Madrid Milano NordCargo Timişoara DB Schenker Rail Romania Pirdop DB Schenker Rail Bulgaria Acquired companies vs. always DB group 4

DB Schenker Rail is on its way from today s patchwork to a truly European Network Past Present Future DSB NS PKP SNCF SBB ÖBB 5

European Production takes responsibility for certain tasks to contribute to the whole and energize the network Production Europe West Central East Contribution to the whole by European Service Design Transnational development and implementation of service & production concepts European Operations Management Cross-border Operations Management with end-to-end perspective on rail transport Resource Management Cross-entity Asset Management, Operational Benchmarking and Best Practice Transfer Technical Management European-wide type support loco & wagons, maintenance rules & quality guidelines, group technology strategy & safety coordination 6 Rail

EU has put in force a regulation about maintenance of freight wagons main target is to ensure safety and ease market access Legal basis ECM (Entity in Charge of Maintenance) Commission Regulation (EU) No 445/2011 on a system of certification of entities in charge of maintenance for freight wagons and Regulation (EC) No 653/2007 issued 10/05/2011 This Regulation (ECM-REG) is directly applicable in each member state The national laws of the member states [ ] where the wagon is registered, are mandatory and contain partial supplementary rules as well as interpretations of the implementation of the ECM-REG Target EU 1 Ensure that freight wagons are in a safe state of running by a process-oriented system Improvement of market access (particularly for the wagon keeper) Harmonization of the requirements and methods concerning the maintenance of freight wagons Harmonized certifications of ECM 1 Source: implementation guide for the entity in charge of maintenance (ECM); version 1.4 8

Today s keeper -function will change Core Responsibilities Keeper Keeper today and ECM SCHEMATIC Registration/ Administration Registration in national vehicle register Selection of ECM Reduced Role of Keeper New Role of ECM Maintenance/ Safety Definition of technical standards over the lifetime of wagons Ensure the requirements based on the safety management system (SMS) Responsibility for safe construction and operational standards of wagons 9

The ECM organization is built up modularly opportunity to subcontract sub-functions lead to more competition ECM organizational framework Management function Supervision and coordination of the three ECM sub-functions Responsible for safety conditions and risk evaluation of freight wagons Maintenance development Fleet management Maintenance delivery Mgmt. of Maintenance rules & guidelines Definition of target state Regime documentation Maintenance orders Removal and return from/to operations Auditing of workshops Observing of maintenance execution Deliver the required technical maintenance of a freight wagon Provision of infrastructure, equipment and tools 1 in any cases the management function has the general responsibility for ECM 10 10 can be subcontracted 1

The ECM certification focuses on the Management function and its interfaces with the sub-functions Scope of ECM certification Objects of certification Supervision and coordination of the three ECM sub-functions Responsible for safety conditions and risk evaluation of freight wagons Maintenance development Mgmt. of Maintenance rules & guidelines Definition of target state Regime documentation Management function Fleet management Maintenance orders Removal and return from/to operations Auditing of workshops Observing of maintenance execution Maintenance delivery Deliver the required technical maintenance of a freight wagon Provision of infrastructure, equipment and tools Two possible cases of certification process: First-hand-certification - Certification of Management function and processes/ procedures of ECM - No sub-contraction Sub-hand-certification - Sub-functions are outsourced - Management function ensures supervision of sub-contractions - Outsourced sub-functions can obtain a part-certificate of ECM = Object of certification = part-certificate if outsourced 11

ECM certification will only be manageable if it is based on procedures and processes of the security management system (SMS) ECM REG and SMS @ DB Schenker Rail High diversity concerning freight wagon constructions and technologies - fleet of 105.000 freight cars - approx. 110 different types of wagons across Europe Different maintenance strategies in different entities SMS for railway undertakings implemented Maintain the existing level of safety Position DB Schenker Rail Processes and procedures of the SMS should be congruent to ECM requirements Double Certification effort SMS and ECM must be avoided Two possible ECM procedures in place - Full ECM certification - Fast and lean ECM certification process based on SMS 12

The certification of ECM or ECM-functions within DB SR D will be started in 06/2012 together with EBA Signing of the MoU ECM 1 ECM-REG coming into force Beginning of certification of ECM Deadline for certification of ECM Potentially expansion of ECM to all vehicles 05/2009 05/2011 05/2012 05/2013! to 2018 2 Exception Railway undertakings which have certified their SMS by no later than 05/2012 do not need to apply for an ECM certificate as long as the SMS certification is valid This Exception ends 31/05/2015 2 Source: In accordance to article 14a (5) of directive 2008/110/EG; amending directive 2004/49/EG 13

The implementation of ECM basically supports the DB SR strategy "European production network Example maintenance framework for Central-East wagon flows Keeper Workshops International flexibility due to ECM Exemplary Framework: = ECM Wagon Keeper Netherlands Registered ECMs regional entities Germany, Poland, Romania and Bulgaria Maintenance delivery/ Workshops in Germany, Netherlands, Austria, Poland, Romania and Bulgaria The ease to install and adjust this framework will dramatically increase through ECM Regime 15

Potential Risks of additional administration and outstanding cross-national-alignment (e.g. NSA s) must be balanced + Opportunities Risks Cost reduction/ realization of synergies because of international flexibility Effective and suitable maintenance plan through the joint technical know-how Harmonization of - national laws and - specification of NSAs - technical standards DB SR The ECM-REG offers opportunities for DB SR Additional administration effort because of implementation of ECM Nationally different interpretations of ECM DB SR is pioneer in the field of ECM certification according to ECM-REG but faces the risk of changes resulting from different national certification processes 16

ECM is a chance for DB SR to get from patchwork to Network The implementation of ECM supports DB SR strategy to get from patchwork to network also concerning maintenance rules & guidelines A separation of the roles RU, Keeper and ECM leads to more flexibility within the European Railway System & business models The opportunity to subcontract sub-functions in ECM leads to more competition in maintenance business Harmonization of national laws and specifications of NSAs decrease the complexity of the rolling stock in maintenance Keep ECM certification manageable - Fast and lean ECM certification process based on SMS must be established Potential Risks of additional administration and outstanding crossnational-alignment (e.g. NSAs) must be balanced 17

Thank you for your attention. 18