Berlin  - Ruediger Grube, 57, currently a top executive at car company Daimler, was tipped Wednesday as the German government's choice to head the state-owned railways company Deutsche Bahn.

Sources said Chancellor Angela Merkel and key ministers had agreed late Tuesday to appoint Grube to the hot-seat job, replacing Hartmut Mehdorn, 66, who quit this week after Bahn had admitted to illicit surveillance of its employees.

Bahn is owner of the worldwide freight-forwarding company Schenker and operates Germany's bullet-train expresses as well as suburban rail services all over the country. Mehdorn restored the company to profit as a prelude to its privatization, now delayed.

The sources told the German Press Agency dpa that Grube was favoured, but his engagement would depend on the outcome of more talks. He heads Daimler's development division and chairs the supervisory board of European plane and defence group EADS.

The Bahn post is politically sensitive in Germany, with parties courting the votes of both the 220,000 Bahn employees and the millions of passengers who use rail services, many state subsidized.

Mehdorn denied any personal wrongdoing over the breaches of privacy, but said as chief of Deutsche Bahn he was responsible for what happened in such a large company whether he was aware of it or not.

He defended the efforts of the rail operator's compliance unit which as part of an anti-kickbacks drive had hunted through employee data for signs that Bahn staff might be in cahoots with suppliers. (dpa)