One Scared Puppy

Why Dallas' Greyhound Lines is fighting for its life

A mere three years ago, optimism reigned at the Dallas headquarters of Greyhound Lines, Inc. The venerable bus company, thread of the American fabric for nearly eight decades, had cheated death--surviving a fractious drivers' strike and ensuing plunge into bankruptcy.

With the government's blessing, Greyhound had swallowed its only direct competitor several years earlier, leaving the company with an unchallenged monopoly for cross-country bus service in the United States.

Free of expensive labor contracts and bankruptcy shackles, new bosses took over the executive chambers--dowdy downtown offices that would soon be abandoned for swankier quarters--and promised to field a sleek new Greyhound.

The ascendant bus company planned to hack away at costs, buy some zippy computers, poach a few sales tricks from the airlines, and make a pile of money.

There would be toll-free numbers, computerized reservations, assigned seats, even a frequent rider program just like the airlines had. Wall Street analysts quickly bought into the company's ambitious dreams, issuing glowing prognostications that drove the company's stock onward and upward for almost two years.

Greyhound itself began strutting like a well-fed corporation, lavishing tens of thousands of dollars on furniture and decorations for new offices on the Dallas North Tollway near the Galleria, and paying former president Frank Schmieder more than half a million dollars a year to run the company.

"The 'Hound," one enamored transportation writer from the Dallas Morning News reported, was "about ready to run."

How, after all, could one of the best-known and most-trusted corporations in the country possibly take a national transportation monopoly--a bus system that sold tickets to more than 15 million passengers a year--and lose money?

Against all odds, Greyhound managed.
When the books are closed on 1994, the company is expected to have lost about $100 million. Last October, Greyhound once more was pushed to the brink of bankruptcy, this time against its will by creditors infuriated at the company's pitiful showing.

At last count, seven class-action lawsuits had been filed against the company and its top management, according to company spokesman Bill Kula. The suits charge that corporate leaders like Schmieder sold their own stock for profit while misleading investors about the company's precarious position.

Late last year, new bosses were brought in again. Craig Lentzsch, the latest president and chief executive officer, spent the holiday season traveling the country, cap in hand, scraping for money to keep the company solvent.

Lentzsch was able to raise $135 million--mostly from holders of Greyhound bonds who hope they aren't throwing good money after bad--and fend off the effort to force the company back into bankruptcy.

Temporarily mollified, investors say they were willing to grant Lentzsch--one of three men who purchased Greyhound and moved it to Dallas in 1987--a chance to salvage the operation.

"It's pretty easy to fix this," says one investor. "Just stop doing the stupidity."

As Greyhound tries again to bounce back from near financial ruin, a familiar litany of woes is recited by past and present company management, echoed in daily newspaper coverage of the company's slide: fewer people are riding buses, low-cost airlines are stealing Greyhound customers, the company was simply carrying too much debt.

All true enough. But Greyhound's fall from grace is only partially explained by fickle riders or unfortunate economics.

Mostly, Greyhound's management got burned by a corrosive blend of its own naivete and arrogance.

For the past three years, according to interviews and a review of documents filed with the Interstate Commerce Commission, Greyhound has systematically--and foolishly--violated the most basic practices and traditions of the bus industry, destroying decades-old business relationships and antagonizing the regional bus lines Greyhound needed for its own survival.

Emboldened by its monopoly status, Greyhound endeavored to go it alone, brushing off the smaller bus lines and mom-and-pop carriers that feed Greyhound's long-haul routes and fill out the national bus system in towns Greyhound does not serve.

Under former president Schmieder, Greyhound began forcing other bus companies out of its terminals. It gutted the long-standing industry practice that called for companies to honor each other's tickets when that made travel more convenient for passengers.

Greyhound stopped sharing its schedules with other bus lines, presumably to prevent competitors from skimming off potential Greyhound riders.

The company bet its future on an expensive reservations computer that failed miserably when it went on line, thwarting passengers who did try to ride the bus.

Smaller bus companies--which felt trampled by Greyhound's roughshod tactics--howled, filing complaints with the ICC charging that Greyhound was engaging in anticompetitive practices.

The ICC, ever gentle on its largest bus industry constituent, did little to block Greyhound's bold aggression. However, the U.S. Department of Justice, which is responsible for enforcing the Sherman Anti-Trust Act, is investigating the same complaints to see if Greyhound engaged in unfair trade practices.

The bungled business strategy, industry insiders say, explains how Greyhound was able to squander its monopoly position and lose so much money.

"It's a viable and potentially quite profitable business," says Gerald Connor, head of a Toronto-based investment company that is Greyhound's largest shareholder. "They have a stable base of riders. It's a necessary service. It's an icon as far as its identity with the consuming public. There's no reason why this company can't be quite profitable."

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