Where it all went wrong...
Compiled from an article posted by Trailways driver Charles Wiggins
(This was written before the acquisition of Greyhound by Laidlaw and then First Group America.)JOHN TEETS - Teets was the chairman of Greyhound, or as he later renamed the company, Armour-Dial. The name change was ironic due to the fact that it was the bus company and its money which purchased both Dial Pharmaceuticals and Armour Meats. Teets came from Armour, a hawker of hot dogs, as his detractors tell it, at the 1964 World's Fair in New York. Whatever his good points were, his employees, from top managers down, were terrified of him and despised him... and one other thing, he hated buses. The crowning achievement of his tenure at Greyhound - or Dial, was that he engineered a way to get rid of everything connected with buses. Greyhound had zero debt and returned 7% on equity. Teets declared to the investment community and stockholders alike that ALL components of Greyhound would henceforth have to return 15% on equity = everybody said YES, hell of a man!... Of course, he knew the bus company couldn't do it, so he set the stage to get rid of it and no one could open their mouth that it was a mistake because they'd already bought into his 15% plan. So he put Greyhound on the market. Several people looked at it but while Teets would mention a price, $385 million, he wouldn't what you'd get. He was waiting for a special fish.... FRED CURREY - Hailing from Chattanooga, Tennessee, Currey's uncle was one of the founders of Beneficial Finance and in the 1940's Beneficial financed M. E. Moore's purchase of Bowen Motor Coaches. Bowen became the nucleus of Moore's Continental Trailways system and Fred later became Moore's executive assistant. In the early 70's, Moore sold his company to Holiday Inns of Memphis and in a less than ethical end run play, Moore ended up on the outside and Currey ended up running the bus company for Holiday Inns.
Holiday Inns kept Continental for ten years, learning the bus business and the workings of the industry's trade association, the National Trailways Bus System, priming the company for sale to....
JIM KERRIGAN - Well, not actually to Kerrigan, he talked a Pittsburgh investor named Henry Hillman into buying it and letting him run it.
Kerrigan came up through the ranks at Greyhound and attained the position of president of the company when he got into a war with Greyhound's chairman and was escorted to the front door.
While Kerrigan's experience was running the largest intercity bus company in North America, he didn't have a clue about how to run one which actually had to compete for passengers and scratch for business. He had a mercurial personality, a huge ego, a short attention span and an all consuming passion to "get" Greyhound and avenge his dismissal. The combination was lethal for his company and unfortunately the farther into trouble his management took it, the further he retreated from reality and what had to be done. To say the least, Hillman was not a happy camper and Kerrigan received instructions to get rid of what wasn't profitable and pare the company back to black ink. Shrinking his empire was not what he had in mind, and while he continued to fiddle as Rome burned, Hillman took steps to extricate himself from the money pit and without Kerrigan's knowledge, cooked a deal to sell the company to....
FRED CURREY - As mentioned earlier, Currey had purchased Greyhound and had paid roughly three times what the company was worth. The cash outlay to Dial of %125 million financed mainly by Security Pacific Bank, was what the place was actually worth. Currey leveraged the balance and Teets at Dial graciously took the paper, thus insuring an even greater profit if Currey was successful by earning interest. But Currey wasn't having a success. He'd counted on taking the company public P.D.Q. to pay down the leveraged debt but the SEC. refused to give him permission... There weren't any assets in the new Greyhound to provide value for potential shareholder's investment. Now everyone knew just what he got for his $385 million - nothing, not even the name, Teets kept ownership of the name and running dog trademark. All but 400 of the oldest buses were leased, and Dial retained all the valuable real estate. While he was giving glowing reports on how everything was Jake, in truth, if he had filled every seat, on every bus, for every mile, every day, there weren't enough seats available to sell to cover his leveraged debt, but he didn't tell anyone.
Currey approached Henry Hillman and they cooked a deal for Hillman to sell Currey what was then called Trailways Inc., the successor to Continental. Of course, there was a very real chance that the Department of Justice wouldn't allow the country's two largest bus lines combine, it would be anti competitive so a deal was cooked so that it appeared Trailways inc. Was in immediate danger of collapse and the whole thing was served up to the government based on the "failing company doctrine." Currey campaigned ;like a politician at a county fair and it worked, the government passed on the deal without ever holding a hearing or giving anyone the opportunity to comment. Currey told the government their were no potential buyers for Trailways, Inc. That wasn't true, but none of us got to tell them that. He had now eliminated the majority of his competition
Currey still had a major fly in his ointment, the National Trailways Bus System. He had to make sure that other carriers didn't fill in the gaps by beginning new operations under the "Trailways" name, so he maintained membership in the association giving him control of it because under the by-laws, the largest carrier, revenue wise, had control. He also set out on a campaign to make the public think that Greyhound and Trailways were the same company. To salve the other Trailways members he dangled good times and a free lunch and the majority of them were so short sighted that they bellied up to the bar, giving up their terminals, dropping their information telephone numbers and waited for Greyhound to earn their living. He also came up with a concept of revenue sharing and offered it to four of the members, two accepted, Carolina and Southeastern Trailways and two declined, Capital and Colonial Trailways. Revenue sharing would come back to haunt everyone.
Trouble was Currey wasn't paying his bills, still couldn't pay his leveraged debt and finally he and the driver's union tangled with the result, a nationwide strike. As the strike bore on, Greyhound filed for protection from its creditors under the Federal bankruptcy code. While in bankruptcy, he got into arrears on dues and dropped his membership in Trailways. The association immediately moved to change the by-laws to prevent one carrier or group of commonly controlled carriers from ever taking control again, Trailways was free to reinstate service and compete again, except for... BILL STEELE of Carolina Trailways and MARTY KRAMER at Southeastern Trailways, their companies were part of Greyhound's revenue sharing scheme. East of the Mississippi, those two companies blocked any attempt to put Trailways back together again, no other carrier could use the Trailways name over their routes and under the terms of revenue sharing they were tied to Greyhound. They had no vested interest in seeing Trailways succeed and were quite aware of their role in helping Greyhound keep Trailways from reforming. They couldn't care less as long as they were taken care of and they let the rest of us know.
So that's a quick run down on how the bus industry and Trailways unraveled in the US.
..... I am quite interested in what you wrote... Could you continue the story with some background on Fred Currey??... What experience did he have in the bus industry??..
Fred Currey is from Chattanooga, TN and was a fighter pilot in the Korean War. Currey's uncle owned the Beneficial Corporation in Nashville and was one of the key players who financed M. E. Moore's purchase of Bowen Trailways in the 1940's, after the war. Moore, who was a DSM for Dixie Greyhound Lines, had begun Arkansas Motor Coaches (originally a Greyhound connector) and then purchased Bowen, which was the nucleus of Continental Trailways.
Through contacts made through his uncle, Currey, who was a financial guru, became M. E. Moore's financial advisor on investments pertaining to the stock market. Later, Currey became Moore's personal assistant at Continental.
When Moore sold Continental to Holiday Inns in the 1960's, one of Holiday Inns' practices was for the head of each corporate component to meet every week on Monday for a strategy and reporting session. Moore couldn't be bothered to fly to Memphis for this meeting and instead, sent Currey in his place.
Moore's failure to attend did not go well with Holiday Inns management, and this, along with Currey ingratiating himself to HIA's corporate management, led to Moore's departure from the company he created and Currey replacing him as head of HIA's Continental Bus System and everything that came with it, like Delta Steamship Lines, etc.
Currey wanted no part of running the bus company on a day to day basis and hired J. Kevin Murphy from Purolator to do that while he concerned himself with larger corporate matters, like figuring out how HIA could dump Continental and Delta Steamship. In 1975 he changed the name from Continental to Trailways, Inc.
In 1979, M. E. Moore had put things together to buy his company back, but HIA wouldn't even talk to him, Currey had found a buyer, a Pittsburgh investor named Henry Hillman Hillman was listening to the advice of James L. Kerrigan, who Gerald Trautman had fired as CEO of Greyhound several years earlier.
Currey, still the investment type, got together with Craig Lentzsch and formed (among other things) Bus Lease. This was a company formed to take advantage of the investment tax credit laws at the time and initially was set up for the preferred customers of the Merrill Lynch stock brokerage house. Lentzsch was a financial type and knew nothing about buses other than they cost money and he used to run around with Richard Trice's kids (Virginia Trailways) in his native Charlottesville, VA.
Bus Lease was very successful, but Currey knew it was a dead end because the tax laws were changing, so when John Teets began shopping Dial's Greyhound unit around, Fred was interested.
In the mid-80's he formed GLI Holdings with Lentzsch and a lawyer named Anthony Lanie and purchased Greyhound bus from Dial.
How was the purchase financed??..
It is what is referred to as a "highly leveraged transaction." Teets got about $125 million cash and the additional $260 million of the $385 million dollar purchase price was debt that Dial carried. Even people at Greyhound in Phoenix wondered what he was thinking about. Essentially, the cash he put down was what the bus line was worth. Currey knew he was over paying, but had a plan to take the new company public immediately, thus generating a huge infusion of cash from investors and paying down the horrendous debt. Only one thing queered the plan... the Securities * Exchange Commission had to approve the public offering - and they refused. The reason being that their was no equity in Greyhound to sell shares in, for all intents and purposes, all Currey was going to sell was debt. Greyhound owned almost no equipment by then and Teets kept all the valuable real estate for Dial.
What hopes did he have for Greyhound??...
Currey instantly realized he was in deep, deep fazoo. Secretly, he approached Henry Hillman who was trying to get out of Trailways Inc. Only three people at TWI knew of this, Kerrigan, Harry Lesko and TWI's financial officer, Ben Robinson. This was because they had to furnish inside financial information to Currey. Offers for portions of TWI had been made before this, but either Kerrigan queered the attempts or Hillman wasn't interested. Under Kerrigan's leadership, TWI was pouring red ink everywhere. For his part, Currey HAD TO get TWI. Eliminating the competition was the only hope he had to pull his Greyhound disaster out of the mire.
Did he have any clue as to what he was getting into?..
Not really, he never had an alternate plan to counter the SEC decision. Essentially, he was up to his ass in alligators before he realized that he'd forgotten to drain the swamp.
This wasn't the only problem for Currey. The bus company was on a collision course with disaster in every respect. Currey wasn't receptive to hearing more bad news, or that decisions he'd made based on idiotic proposals weren't working. Lentzsch was the only person in the organization who had the courage to tell Fred the house was on fire. Their relationship grew more and more contentious as Lentzsch tried to fix things. Finally, Currey brought this annoyance to an end and told Lentzsch, "...who the hell do you think you are, I taught you every thing you know about the bus business." That was their parting and Lentzsch left Greyhound, Currey, of course, having to buy him out. Shortly after, Currey brought in Frank Smeader and then Greyhound went into bankruptcy and, as you know, the whole thing went to hell in a hand basket.
I am also quite intrigued. Is Greyhound Lines a company that is still sought after by buyers???
Yes and no. Mostly no. There is no equity in the company, they don't own anything. It's just a corporation that generates revenue by running buses.
The name recognition is undeniable, but does an intercity bus company really interest outside investors??
At this point, the only people I see who would be interested would be principles from Mexico. However, NAFTA still hasn't been implemented to allow that.
Is the company still viable?
The basis for a service company to be viable is to provide "service." Greyhound has always been an operations driven company. They had the name and that carried them. "Kleenex" doesn't need to promote, everyone needs them is a good scenario. Greyhound only worries about sales when they are in desperate times financially. Additionally, while the concentration of management functions in Dallas is cheaper, the loss of local contact has been devastating. The only time Trailways was ever able to make inroads into Greyhound's markets was when they became sales oriented. The "Best Bus Going" campaign in the id-70's is a good example. Unfortunately, Greyhound is so weak financially at this point, that getting to tomorrow financially is the primary task.
Does it make money?
They just announced a $111 million dollar operating loss last year (2002). That's quite a trick when you're a government created monopoly. Unfortunately, to Greyhound's customer base, the citizens of the US and Canada, the vision of the company is as Jay Leno described on his NBC Tonight Show, when he referred to Greyhound as "...a bad neighborhood on wheels."
Hope this isn't more than you guys wanted to know.
I received this from Willima Kerrigan (daughter of Jim Kerrigan) added it here to give her a chance to defend her father.
Well, someone who *professed* to know my father "very well." Is it your custom to repeat nasty personal attacks on people you don't know, even when they come from people who claim to know the person they are attacking? You are of course, entitled to do all of the armchair quarterbacking you'd like about the performance of my father or any other leader in the company. But assaulting other's character, or repeating assaults made on other person's character, in the end, says more about you than it does the person being maligned.
New Concord Ohio
- Editors note: John Teets was never a favorite of either the rank-and-file or those immediately under him, whom he treated like serfs and lackeys. He was an egotistical snob who, as the article says, hated buses. Ironically, The Greyhound Corporation had reached its' apex before Teets came into power. The Corporation practically invented the word diversification, what with Armour, Dial, Booth Leasing, General Fire & Casualty Insurance, and several other companies already in the fold. Therefore this comment may be considered biased, and it is. This isn't 60 Minutes!
I guess the single fact that puzzled me the most was always Teets attitude towards the bus company. Now, not everyone loves buses, bus stations, and bus drivers.... but that's okay. You don't have to cherish something for it to serve your purposes.
Remember, this was the '70s and '80s... before the real emergence of plastic. Every purchase was not done with a credit or ATM card as it is today... especially by the folks who rode Greyhound. Nearly every ticket was paid for with cash. That means that if you wake up one morning and decide you want to acquire another little bauble to hang on your watch fob, you simply call the bank and tell them to "give me yesterday's receipts."
Now, I'll be the first to admit that I'm no financial whiz... but even I can figure that out. John Teets never did. Whether it was because of stupidity, prejudice, or obstinacy, Teets didn't get it... and the bus line paid the price.