CEO change and doubts about the project

The announcement from Cargo Sous Terrain published on Wednesday was first and foremost a paean to its own project. The tunnel project for freight transport planned by the company, which will cost at least 30 billion Swiss francs and will be 500 kilometers long when fully completed, has received a lot of recognition. There is a broad consensus that it can ensure a “sustainable supply of goods.” Cargo Sous Terrain, or CST for short, is “indispensable.”

But after the self-praise came the big news: the board of directors wants to “re-examine all the parameters of the project”. This includes the route planning and the locations of the hubs, i.e. the facilities where the goods come from the tunnel system to the surface and are then distributed. But the financing and the requirements that “market and logistics” place on the project are also being examined, according to the statement.

The CEO leaves

As part of this adjustment, long-standing President and current CEO Peter Sutterlüti will step down from his position, but will remain on the Board of Directors. In addition, “the use of resources will be adapted to the new needs.” According to spokeswoman Jasmin Knight, this means a single-digit reduction in staff. The CEO position is to be filled in the second half of the year.

The announcement from Cargo Sous Terrain comes as no surprise. Back in 2019, the then SBB CEO Andreas Meyer and the transport entrepreneur Nils Planzer made it clear that they were skeptical about the project. Planzer, head of the largest private transport company, quickly withdrew after initially supporting it. The SBB announced its withdrawal in 2022.

The early critics were ignored. The initiators of Cargo Sous Terrain were adept at promoting their plans. They managed to put together a broad-based shareholder base and raise over 100 million francs to carry out the planning. At the same time, they got politicians moving. Parliament passed a law that made the construction of the underground freight railway from Lake Geneva to Lake Constance possible in the first place.

Post examines involvement

A few weeks ago, the “Blick” newspaper reported that Swiss Post was considering withdrawing from the project. Swiss Post spokesman Jonathan Fisch stressed that Swiss Post is still a shareholder in CST. It now wants to wait for the results of the review of the project initiated by the CST Board of Directors, Fisch continued. Swiss Post, however, considers the challenges for the project to be great and implementation to be difficult. “The latest developments give us reason to examine our continued financial involvement from 2025 onwards in detail,” he concluded.

Another major shareholder is the insurance company Mobiliar. It says it has “not yet decided at this point whether and how we will continue to support the project.”

The retailer Coop, which is also one of the 11 main shareholders, apparently does not want to provide any additional funds for the billion-dollar construction of the project, as two sources confirmed to the NZZ. Coop spokesman Thomas Ditzler says his company will not provide any information on further financial support for Cargo Sous Terrain. “Our goal was to develop Cargo Sous Terrain from a support association into a company that can carry out the project on its own two feet. We have achieved this today,” Ditzler continued.

«Withdrawal in installments»

For financial expert Christoph Hammer, it has long been clear that the project has no chance of being realized. Hammer was SBB’s chief financial officer from 2016 to 2021 and is familiar with both Cargo Sous Terrain and other major infrastructure projects from this time.

“Logistics is one of the most competitive markets of all due to low barriers to entry,” he says. The depreciation and operating, maintenance and financing costs of Cargo Sous Terrain are enormously high due to the billions of euros of investment required. “That’s why the project simply cannot be profitable for private investors,” he says.

There is also the question of what would happen if, for example, negative surprises during tunnel construction delayed the project or interest rates moved in the wrong direction. “The consequence is that the federal government and thus the taxpayers would have to step in to save the project.”

According to Hammer, Cargo Sous Terrain is an extremely innovative vision. “However, a vision must be financially viable.” Therefore, the question of financing must now be clarified. “If this does not happen, it is actually clear to everyone that the exercise must be aborted.”

Transport entrepreneur Nils Planzer says there is nothing wrong with developing completely new ideas like Cargo Sous Terrain. “But it should have been clear to everyone a long time ago that this project would not be possible.”

“Questionable” role of shareholders

At first glance, it may seem appealing to move freight transport underground in view of the congested motorways. However, according to Planzer, the major challenge in logistics is the distribution of goods on the so-called last mile – that is, the transport to the corporate customer or private individual. “Cargo Sous Terrain has not yet presented a new and convincing concept here.”

The second problem is the cost. This is evident in the SBB’s freight transport. SBB Cargo has been struggling with red figures for years. “How can a project that requires such enormous new investments be successful?” asks Planzer. It is therefore much more important to make better use of the existing transport system “before we dig new tunnels costing billions.”

Planzer is critical of the role of Cargo Sous Terrain’s shareholders. The post office and the retailers represented among the shareholders have long said behind closed doors that the project cannot be implemented. “But in public they have a completely different attitude,” says Planzer. That is questionable. It has not only led to more and more money being invested in project studies, but also to “the fact that many people in the public and politics still believe in the project today.”

Fear of increased traffic

But it is not just the financing that is controversial at Cargo Sous Terrain. In the recent past, the question of where exactly the tunnels will end and how the distribution of goods will work has also been raised. When Cargo Sous Terrain presented its first plans in recent months, the reactions were sometimes very negative.

The “Tages-Anzeiger” reported in May that the city of Zurich could not understand to what extent the desired traffic relief could be achieved at all. In fact, a significant increase in traffic was to be expected around the hubs. The canton of Zurich expressed similar concerns in a statement published a few days ago. It did not deny the supra-regional benefits, but warned of additional traffic around the hubs.

The statement from the municipality of Spreitenbach is also telling: The municipality expressed a positive opinion on the basic idea. However, it was heavily critical of the planning: the planning gave greater weight to the interests of rapid feasibility than to “a long-term, spatially sensible solution”.

CST remains optimistic

Cargo Sous Terrain remains optimistic. According to CST spokeswoman Jasmin Knight, the company is sufficiently financed to carry out the current project review and to move forward with further implementation. What the business plan looks like and how high the financing costs are will be reviewed in this context.

According to Knight, there are also interested parties within and outside the shareholder base who are prepared to finance the upcoming construction phase. CST is also in talks with banks and other institutional investors. “The project review increases the quality and feasibility of CST and is in the interest of investors,” she says. The critical review of the parameters and the adjustment of the schedule would significantly increase the chances of success for the realization of CST.

CST will communicate the new timetable for construction and operation of the first section, Knight continued, once the project review has been carried out and agreed with the authorities.