Pesa for Deutsche Bahn, a big business flop

The Bydgoszcz Pesa under state supervision still cannot go straight. The deal with Deutsche Bahn, which was supposed to be the contract of the century, came to an end and turned into a business disaster, writes POLITYKA. Railway Supply magazine offers you a translation of Cezary Kowanda’s article.

Pesa for Deutsche Bahn
Autor: Łukasz Antczak Agencja Gazeta

The Polish Development Fund, the current owner of a train and tram producer from Bydgoszcz, boasts that the deliveries of diesel trains for German railways were completed. A few days ago, Pesa itself officially notified it. This information should be accepted with mixed feelings. On the one hand, it is a great pity, because although the framework order from 2012 was for over 400 vehicles, ultimately Deutsche Bahn ordered only 72 units.

But at the same time, the end of this contract is good news, because it brought Pesa a lot of trouble and was one of the main reasons for the nationalization of the company. Without the intervention of the Polish Development Fund (i.e. taxpayers), it would cease to exist.

A victim of its own pride

When Pesa won the order from the Germans, it seemed that they had Lady Luck on their side. The management of the company was extremely proud of the contract, and many Poles drew attention to the Bydgoszcz-based company with the ambition to become one of the most important European players among rolling stock manufacturers.

Unfortunately, Pesa did not take into account that it will have to wait a long time for the German approval, which will end up paying huge penalties for delays and freezing a significant amount of cash in ready but not delivered warehouses. In the meantime, there were problems with other contracts in Poland, for example for the supply of Darts for PKP Intercity or trams for Polish cities. In each case, delays resulted in penalties, and additionally the production costs were higher than the contract values. Eventually, the company lost liquidity.

Is Pesa finally on the straight? Pure Marketing

The Polish Development Fund assures that after nationalization in 2018, the company has gone straight – of course thanks to the wonderful management by the new owner. Reality contradicts these marketing messages. Last year, Pesa continued to record losses – its financial result is half a billion zlotys in the minus. It is supposed to be better in 2020, but the company still bears the consequences of its own unreliability.

Earlier this year, it lost a large order for SKM Warszawa due to huge delays in delivering Elf2. It has recently completed the delivery of ten trams to Częstochowa, but the city will get one of them practically for free – these are the penalties for delayed delivery of the contract.

Pesa is already playing in a different league

Pesa boasts that it is also winning new, this time profitable contracts. For example, it will deliver trams to Romania, trains to the Czech Republic and Koleje Dolnośląskie. However, these are all small-scale contracts. Today, Pesa plays in a completely different league than a few years ago, and it still cannot go straight and start generating stable profits. What is worse, the Polish Development Fund has no sensible vision for it – nomen omen – of development. In this way, you can of course vegetate looking for small orders in Poland and neighboring countries, but you cannot use your potential. As a private company, Pesa fell victim to its pride when it overestimated its capabilities and won too many orders at once. Pesa as a state-owned company proves that the state, apart from saving for our money, can do little. Meanwhile, without international expansion, the company is doomed to trouble, because due to the pandemic, Polish cities and regions will probably limit the purchases of new rolling stock, both trams and trains in the near future. Especially since we do not know whether EU funds will be provided for this at all in the upcoming 2021–27 financial perspective.

Cezary Kowanda