Greyhound Lines, Inc. Business Information, Profile, and History

Company Perspectives:

The Company's mission is to provide the opportunity for anyone to travel between cities in North America with safety, dignity and convenience.

History of Greyhound Lines, Inc.

Greyhound Lines, Inc. is the sole national provider of intercity bus service in the United States. Its fleet of 2,400 buses carries more than 22.5 million passengers each year over a route system that extends for more than 75,000 miles. Greyhound travels to more than 2,600 destinations, with 18,000 daily departures. In addition to its scheduled passenger services, the company offers charter bus service, express package service through Greyhound Package Express, and food service at some of its terminals. Greyhound is also involved in cross-border bus service through joint ventures with Mexican transportation companies. In March 1999 the company became a wholly owned subsidiary of Laidlaw Inc., a Canadian firm involved in bus transportation through its ownership of Greyhound Canada Transportation Corp., which was subsequently merged into Greyhound Lines.

Early History: From Hibbing to Coast-to-Coast

The bus company that became Greyhound was founded in 1913 by Carl Earl Wickman. Wickman was an immigrant who settled in Hibbing, Minnesota, because the weather there reminded him of his native Sweden. Wickman's first ambition was to be a car salesman, but when he could not sell a single seven-passenger 'Hupmobile' he founded the first U.S. bus company.

The company started by transporting miners from Hibbing to Alice, Minnesota, along the Mesaba Iron Range. The first roundtrip fares cost 25 cents. The secret to Wickman's early success was maximizing ridership, which took the form of stuffing 18 miners into a seven-passenger Hupmobile. Wickman's revenues began to increase, and he took on partners who helped him invest in larger vehicles. Since there were no buses in 1914, Wickman had large touring cars, mostly Studebakers and Packards, sawed in half and elongated. In 1916 the company, then known as 'Hibbing Transportation,' had its own bus station which was located in a firehouse.

Wickman and his partners were not the only motor coach entrepreneurs in Hibbing. By 1915 a motorcycle racer named Ralph Bogan began transporting miners from Hibbing to Alice for 50 cents. Hibbing Transport responded by reducing its fares to 40 cents. Thus began the first known price war among bus companies. Wickman eventually offered Bogan a share in Hibbing Transport, establishing a pattern of merging with competitors that would eventually result in the formation of the largest bus company in the world.

By the mid-1920s Wickman's company, renamed Mesaba Transportation Company, was worth several million dollars and had numerous partners. In 1925 the man who had started it all left the company and purchased a fledgling firm known as the White Bus Line. The following year Wickman and his partner, Orville Caesar, merged this company with others to form the Motor Transit Corporation, nicknamed 'Greyhound' because the buses it used, which were built by Safety Coach of Muskegon, Michigan, were sleekly designed and sported gray paint.

Greyhound came along at a time when the idea of the 'vacation' became firmly entrenched in the American psyche. The motorcoach, whose operating costs were a small fraction compared to trains, soon became the transportation of choice for vacationers, salesmen, and even jazz bands.

Despite the popularity of this new form of transportation, Greyhound nearly failed after the stock market crash of 1929. In 1929 Greyhound's net income was $1.3 million, but this dropped to $38,000 in 1930, the year the company changed its name to Greyhound Corporation. By 1932 Greyhound was $140,000 in debt. It was the 1933 World's Fair in Chicago that saved Greyhound by dramatically increasing ridership. Historian Carlton Jackson, in his Hounds of the Road, a history of Greyhound, claimed that ridership also increased after a 1934 movie entitled It Happened One Night was released, in which movie stars Claudette Colbert and Clark Gable take a cross-country bus trip.

During the following years Greyhound revenues climbed steadily, reaching $6 million before the end of the decade. In 1939 management of Greyhound anticipated the coming war, and began to stockpile parts. Greyhound suspected both that its buses would have a part in the U.S. war effort and that its supplier, General Motors, would be busy manufacturing jeeps. Both intuitions were correct.

One of Greyhound's principal duties during the war was to transport workers to shipyards and munitions factories. Military personnel were often transported via Greyhound to their bases. Wartime responsibilities and gas shortages made it difficult for Greyhound to serve all its civilian customers, and the company actually used advertisements to discourage ridership. 'Serve America Now So You Can See America Later' and 'Don't Travel Unless Your Trip Is Essential' were two Greyhound advertisements during World War II.

A 35 m.p.h. speed limit, imposed to save rubber, and a continual shortage of parts vexed Greyhound management throughout the war. America's most well-known motorcoach company found consolation in its balance sheets, however, as profits climbed to $10 million by the mid-1940s. At that time, Greyhound served more than 6,000 towns and carried one-fourth of all U.S. bus passengers--more than any other company. Its bus routes stretched like a net across the continental United States and Canada.

Increased Competition in the Postwar Era

In 1946 Carl Wickman retired as president of Greyhound and returned to Sweden. There he was knighted by King Gustav V 'for serving the unserved.' Upon Wickman's retirement, Orville Caesar became president of Greyhound. Caesar lobbied intensely for wider highways to accommodate his buses and fought to change the laws restricting the length of a bus to 35 feet. His new 'Scenicruisers' were 40 feet long and illegal in certain states.

The growth of Greyhound slowed to two percent a year in the late 1940s. Postwar prosperity brought with it thousands of new passenger cars, and the increase in cars meant fewer bus patrons. In addition, severe labor problems did not help the company. A series of walkouts in 1950 was prompted by a well-publicized incident in which 19 drivers suspected of skimming fares were lured to a hotel and held there against their will for 36 hours. Labor difficulties were nothing new for Greyhound. During World War II the Navy commandeered shipyard buses when the Greyhound drivers decided to strike.

In 1956 the company's president, Arthur Genet, decided to move Greyhound into the car rental business. There were several reasons for this move. One reason was that the car rental offices could operate out of Greyhound's urban terminals. The rental business would allow Greyhound to capitalize on something that had been a problem, namely, the popularity of the automobile. There was an unforeseen problem with the car rental strategy, however, and this was that the typical Greyhound bus passenger, to whom the rental business was geared, was not likely to rent a car. Within two years the car rental division was depressing revenues and had to be abandoned.

Not all of Greyhound's early attempts at diversification were as unsuccessful as the car rental business. Beginning in the 1940s Greyhound established a chain of restaurants, called 'Post Houses,' in its larger terminals. These were successful, as was the express package business, the implementation of which cost almost nothing at all.

Until the mid-1960s, Greyhound was primarily a bus company, and company management did everything it could to prevent passengers from defecting to trains or planes. Studies at the time showed that a large proportion of Greyhound's passengers were African American, and by the early 1960s Greyhound's marketing strategy was oriented toward this demographic. In fact, Greyhound was the transportation of choice for the freedom riders of the civil rights movement, and Greyhound buses were sometimes attacked by the Ku Klux Klan. While the company's promotion of black ridership was motivated by its quest for profits, Greyhound was also one of the first companies to implement something resembling an affirmative action program.

Beyond Transportation in the 1960s and 1970s

Greyhound began to diversify in earnest during the 1960s. Previously, diversification had been limited to the operation of restaurants in terminals, a van line, the express package service, and the manufacture of buses and bus accessories. All of Greyhound's original expansions were connected to its main business, namely, interurban transportation. Even the unsuccessful car rental business was meant to appeal to bus passengers, who were expected to rent a Greyhound car during their stay in the city. After 1962, however, Greyhound began to diversify into businesses not related to transportation.

In 1962 Greyhound purchased Booth Leasing and soon became the largest industrial leasing company in the world. Among the items offered for leasing were computers, locomotives, and jet airplanes. (In 1966 a separate computer leasing company was formed.) In addition, a money order firm, Traveller's Express, and an insurance company, General Fire and Casualty, had been added to Greyhound's list of purchases by 1965. Greyhound's food services were expanded in 1964 with the acquisition of a roadside restaurant chain, Horne's, and Prophet Foods, a large industrial and institutional caterer. In 1967 Greyhound continued to make acquisitions in the service industry. One of these purchases, Aircraft Services International, provided ground handling and janitorial services. Greyhound also began to provide food for the airlines.

The companies purchased by Greyhound during its 1960s acquisition program were all small, and the majority of Greyhound profits still came from the operation of buses. Even after its expansion, food services only accounted for five percent of profits, and financial and leasing activities for 20 percent.

The diversification of Greyhound into nonbus activity was necessary because the motorcoach industry was steadily shrinking, partly in response to an increase in inexpensive airfares. Even with some lucrative acquisitions, Greyhound lost money because profits from the bus line were down. Bus line profits hit a low point in 1967, when riots after the death of Martin Luther King depressed ridership.

Company management thought that a major acquisition would help Greyhound considerably. As a result, in 1970 Greyhound acquired Armour Foods for $400 million. To reduce its investment Greyhound immediately sold $225 million of Armour assets, leaving only the meatpacking and consumer products operations. Armour's pharmaceutical division was sold to Revlon in 1977. Despite some problems with the low-margin meatpacking business, the two remaining divisions generated a net income of $25 million on an investment that had been reduced to $100 million. Armour's contribution to Greyhound was superseded, however, by the financial services division with 1978 profits of $25.8 million.

Greyhound's success with its expansion into financial services and its initial success with Armour continued to be overshadowed by difficulties with bus operations throughout the 1970s. Though some decline in ridership was inevitable as people chose the convenience of air travel, many of Greyhound's problems resulted from poor management. One major problem was that Greyhound scheduling and routing favored long distance ridership, while over 80 percent of the company's customers used Greyhound for distances of 200 miles or less. This inappropriate routing and scheduling discouraged some short-haul passengers, as did the bus stations themselves, whose interiors were often regarded as uncomfortable and unpleasant; in fact, the washrooms were a major passenger complaint. To aggravate matters, rather than making an investment in upgrading facilities, the bus division engaged in a costly price and advertising war with Trailways motorcoach company.

In 1978 Greyhound's chief executive officer, Gerald Trautman, concluded that the company's health still depended on its bus operations. Since he wanted to leave the company in good financial condition when he retired, Trautman postponed his retirement, demoted his protégé James Kerrigan, and placed himself in charge of the bus operations that Kerrigan had supervised. After Trautman took charge of the bus line, more attention was paid to details such as clean washrooms and bus maintenance. Measures such as these, coupled with the gas shortage (which made car travel less desirable), helped increase bus profits 83 percent between 1978 and 1979.

Deregulatory Difficulties in the 1980s

In 1982 Trautman decided to retire. His successor, John Teets, while not unappreciative of Trautman's final efforts, had a different approach to the management of Greyhound. Upon becoming CEO, Teets immediately began to sell subsidiaries that were not performing well. The meatpacking division, which was earning $10 million on sales of $2 billion, was among the first to be sold. Teets blamed higher than average employee wages for Armour's difficulties; when the unions refused to accept a reduction in pay Teets closed all 29 meat-packing plants in one day.

Teets' handling of the violent 47-day bus driver's strike in 1983 was no different. With the deregulation of the U.S. transportation system leading to cheaper airfares and significant decreases in bus ridership, this strike was precipitated by management's demand that the drivers accept a 17 percent cut in wages and benefits. After a bitter series of negotiation meetings, the drivers were forced to accept a 15 percent wage reduction. Greyhound had won a major concession, but the price was costly--$25 million in lost revenues.

Overall, from 1980 to 1986, Greyhound suffered a decline in ridership of 55 percent. Part of the drop was engendered by Greyhound itself, which took advantage of the deregulated environment by closing unprofitable bus routes. The other factor was, of course, cheaper airfares which were drawing people away from bus lines. Greyhound's package delivery business was also feeling the effects of competition, as Federal Express and United Parcel Service were taking business away by offering faster service.

Late 1980s and Early 1990s: Bankruptcy

In March 1987 a Dallas-based investment group led by Fred G. Currey purchased the struggling bus line from Greyhound Corporation through a $350 million leveraged buyout (LBO). The bus operations were renamed Greyhound Lines, Inc., the headquarters of which were relocated to Dallas. Currey served as chairman and CEO of the now privately held company. (Greyhound Corporation continued as a separate firm involved in consumer products and services. It changed its name to the Dial Corporation in 1991, then divided into two companies in 1996, with the services operations becoming Viad Corp. and the consumer products businesses continuing as Dial.)

Currey's first major move was to acquire archrival Trailways Lines, Inc. and merge it into Greyhound. Upon the completion of the acquisition in July 1987, Greyhound Lines became the only national provider of intercity bus service in the United States, although it continued to face competition from regional lines. Currey moved quickly to revamp Greyhound, spending $30 million to renovate dilapidated terminals and to open new ones; increasing the company's advertising budget 50 percent to $27 million; and installing a computerized reservations and ticketing system to increase ridership and decrease the amount of time customers had to wait in lines. Ridership did in fact increase in both 1988 and 1989, and the company was able to post a small profit in the latter year on sales of nearly $1 billion. The turnaround proved short-lived.

When Greyhound headed into contract talks with its unionized employees (members of the Amalgamated Transit Union) in early 1990, Currey decided to take a hard line, telling the union that the company would hire permanent replacement workers if the union went out on strike. Underscoring his approach, he began hiring replacement workers even before the union decided to strike. The strike quickly turned violent, with drivers angered by some of Currey's proposals, most notably a route consolidation that would lead to the elimination of 2,000 jobs. Currey anticipated being able to maintain 80 percent of the bus line's routes by the end of March, but because of difficulty finding replacement workers and because very few of the unionized drivers elected to cross the picket lines, Greyhound was operating at only 36 percent of its normal capacity by that time. In early May the company, which was saddled with $340 million in debt from the LBO and the acquisition of Trailways, announced that it was near bankruptcy after suffering losses of $55.8 million during the first quarter of 1990. Having missed a $9.8 million interest payment due on June 1, Greyhound filed for Chapter 11 bankruptcy protection a few days later.

While the company attempted to reorganize, its creditors engineered the ouster of Currey. Frank J. Schmieder took over leadership of the company in July 1991. Three months later Greyhound emerged from bankruptcy as a publicly traded company with a restructuring plan that centered on cutting costs, including workers, routes, and the bus fleet itself, which was reduced from 3,700 to 2,400. In emulation of the airline industry, Schmieder adopted a hub-and-spoke system, which eliminated numerous long-haul--and direct--routes, forcing many travelers to take longer trips to reach their destinations. In July 1993 Greyhound launched a nationwide rollout of a computerized reservation system called 'Trips,' which executives viewed as the key to the company's future. Trips turned out to be a disaster: 80 percent of the reservations were for passengers who did not show up, the system's computers were quickly overloaded from the sheer complexity of the bus line's routes, the company's toll-free customer service center was understaffed and overwhelmed, and numerous passengers missed connections and lost luggage because of ticketing delays in the terminals. Customers were further alienated by a two-tier fare system charging passengers more for walk-up tickets than those made in advance. From a passenger standpoint, the new reservation system made little sense, given that most bus travelers make last-minute decisions to travel.

Greyhound's difficulties continued into 1994, when it posted a net loss of $65.5 million and carried only 14.9 million passengers, a steep decline from the 16.2 million figure of two years earlier. The company was near bankruptcy again when Schmieder resigned under pressure from shareholders in August 1994. Thomas G. Plaskett took over on an interim basis, before Craig R. Lentzsch was named president and CEO in November of that year. Lentzsch was a former executive of bus manufacturer Motor Coach Industries International and was part of the investor group that purchased Greyhound Lines from Greyhound Corporation in 1987, working at Greyhound Lines as vice-chairman and executive vice-president from 1987 to 1989. In early 1995 Plaskett was named chairman of Greyhound.

Mid-1990s and Beyond: Beginning a Turnaround

The new management team quickly secured an out-of-court refinancing with the company's creditors, thereby avoiding another bankruptcy filing. They also scaled back the reservation system, eliminated the hub system, fixed the phone system, reduced walk-up fares for long trips, brought back many of the long-haul routes that had been eliminated, increased departures, purchased more buses, and hired more drivers. The result was steadily increasing revenues, from $616.3 million in 1994 to $846 million in 1998. In addition, ridership increased to 22.5 million passengers by 1998. That year, the company posted net income of $35.2 million--its first full-year profit since 1993 and its most profitable year since the 1987 LBO.

Meantime, Greyhound entered the growing market for U.S.-Mexico cross-border bus service through joint ventures it set up with Mexican transportation companies. The Mexican market was an attractive one because many Mexicans working in the United States rode buses home to visit their families and because 98 percent of long distance trips in Mexico occurred via buses, compared to less than two percent in the United States. Greyhound also beefed up its U.S. network through the 1997 and 1998 acquisitions of Valley Transit, Carolina Trailways, and Golden State, the last of these a southern California line providing service to cities on the Mexican border. Additionally, Greyhound began seeking out alternative ways to grow its passenger volume and started delivering passengers to special destinations, such as casinos, airports, and Amtrak stations. The growth of the gambling market made casino service particularly lucrative and Greyhound carried more than 1.2 million passengers to casinos in 1998, garnering $30 million in revenue in the process.

It was thus a revitalized Greyhound that reached an agreement in October 1998 to be acquired by Laidlaw Inc., a Canadian firm based in Burlington, Ontario. Completed in March 1999 at a cash plus debt price of about $650 million, the transaction turned Greyhound into a wholly owned subsidiary of Laidlaw. At the time of the acquisition, Laidlaw owned Greyhound Canada Transportation Corp., an intercity bus operation serving five Canadian provinces from Ontario to British Columbia and the Yukon Territory. Greyhound Canada, which Laidlaw had acquired in October 1997, was subsequently merged into Greyhound Lines, creating the largest intercity bus line in North America. Laidlaw announced in September 1999 that it planned to focus on its bus passenger operations, which included school and municipal bus operations in addition to Greyhound. The company would divest its other interests, which included emergency and nonemergency ambulance services, a physician practice management service, and a minority interest in an environmental services firm. As part of Laidlaw, Greyhound would have access to increased capital to make further expansionary moves and to maintain its vastly improved level of customer service.

Principal Subsidiaries: Amarillo Trailways Bus Center, Inc.; Atlantic Greyhound Lines of Virginia, Inc.; Continental Panhandle Lines, Inc.; Gateway Ticketing Systems, Inc.; Greyhound de Mexico, S.A. de C.V.; Peoria Rockford Bus Lines, L.L.C.; Transportation Realty Income Partners L.P.; Union Bus Station of Oklahoma City, Oklahoma; Wilmington Union Bus Station Corporation; GLI Holding Company; ASI Associates, Inc.; Carolina Associates, Inc.; Carolina Coach Company; Red Bus Systems, Inc.; Seashore Transportation Company; LSX Delivery, L.L.C.; On Time Delivery Service, Inc.; Peoria Rockford Bus Lines, L.L.C.; Texas, New Mexico, & Oklahoma Coaches, Inc.; T.N.M. & O. Tours, Inc.; Valley Garage Company; Valley Transit Co., Inc.; Vermont Transit Co., Inc.; Sistema Internacional de Transporte de Autobuses, Inc.; American Bus Sales Associates, Inc.; Americanos U.S.A., L.L.C.; Autobus Leasing Co., L.L.C.; Autobuses Americanos, S.A. de C.V.; Autobuses Amigos, L.L.C.; Autobuses Amigos, S.A. de C.V.; Autobuses Crucero, S.A. de C.V.; Gonzalez, Inc. (dba Golden State Transportation); Los Buenos Leasing Co., Inc.; Los Rapidos, Inc.; Omnibus Americanos, S.A. de C.V.

Principal Competitors: America West Holdings Corporation; AMR Corporation; National Railroad Passenger Corporation; Coach USA, Inc.; Continental Airlines, Inc.; Delta Air Lines, Inc.; FDX Corporation; The Hertz Corporation; Northwest Airlines Corporation; Roadway Express, Inc.; Southwest Airlines Co.; Trans World Airlines, Inc.; United States Postal Service; UAL Corporation; United Parcel Service, Inc.; US Airways Group, Inc.; Yellow Corporation.

Chronology

• Key Dates:

• 1913: Carl Earl Wickman founds America's first bus company in Hibbing, Minnesota.
• 1926: Wickman merges several bus lines together to form the Motor Transit Corporation, nicknamed 'Greyhound.'
• 1930: Company changes its name to Greyhound Corporation.
• 1933: The World's Fair in Chicago saves Greyhound by dramatically increasing ridership during the Great Depression.
• 1946: Wickman retires as president of the company.
• 1962: Diversification beyond transportation-related businesses starts with the purchase of Booth Leasing.
• 1970: Armour Foods is acquired for $400 million.
• 1978: CEO Gerald Trautman takes charge of the company's bus operations and upgrades its facilities, resulting in increased profits.
• 1983: A violent 47-day bus driver's strike results in $25 million in lost revenues and ends with drivers accepting a 15 percent wage reduction.
• 1986: Ridership has declined 55 percent since 1980.
• 1987: The bus operations of Greyhound Corporation are purchased by a Dallas-based investment group through a leveraged buyout (LBO), and are renamed Greyhound Lines, Inc.; archrival Trailways Lines, Inc. is acquired.
• 1990: A bitter and sometimes violent driver's strike leads to huge first quarter loss and a bankruptcy filing.
• 1991: CEO Currey is pressured out by the company's creditors; Frank J. Schmieder takes over the company leadership; Greyhound emerges from bankruptcy in October.
• 1993: A nationwide rollout out of a computerized reservation system turns disastrous.
• 1994: Schmieder is forced to resign; Craig Lentzsch takes over and begins turning the company around; company reports net loss of $65.5 million.
• 1998: Company records its first full-year profit since 1993 and its most profitable year since the 1987 LBO.
• 1999: Company is acquired by Laidlaw Inc.