Greyhound to Reduce Size of Its Bus System, Trim Work Force 16%

Greyhound Corp. on Thursday announced a major restructuring of its Greyhound Lines subsidiary that will drastically shrink the nation’s largest bus system, cutting its work force by nearly 16%.

In a multiphase program that will begin immediately and probably will be finished by the end of 1985, Phoenix-based Greyhound will lay off or offer early retirement to 400 management employees and 1,500 unionized rank-and-file employees out of Greyhound Lines’ total work force of about 12,000, the company said.

In subsequent stages of the restructuring, Greyhound Lines will continue a previously announced plan to reevaluate bus terminals and garages and will assess whether it should keep operating certain money-losing routes.

$1.3-Million Loss in 1984

The goal of the restructuring is to reduce the Greyhound Lines unit, which lost $1.3 million in 1984, “to a level consistent with the current competitive and economic climate in the intercity bus industry,” the Greyhound announcement said.

The structure and staffing of Greyhound Lines was meant to serve the 64 million passengers that traveled the system in the late 1960s but is too much for the 34 million passengers that Greyhound expects to carry this year, the company said.

When the restructuring is completed, Greyhound Chief Executive John W. Teets said in a statement, “Greyhound Lines will yield our target of a minimum of 15% return on equity and will be a profitable, viable company for shareholders and a secure environment for employees.”

Greyhound Corp. spokesman Don Behnke said that the company doesn’t reveal return-on-equity figures for individual units but added that Greyhound Lines had a much lower return on equity in 1984 than the parent company’s 11.6%.

Smaller Lines Profitable

Greyhound Lines has been under scrutiny by its parent corporation since early 1983, shortly after the bus industry was deregulated. Greyhound Corp. also owns some smaller bus companies, which have been operating profitably.

Earlier this year, Greyhound said it had begun selling and relocating some Greyhound Lines bus terminals, was switching its emphasis to trips of less than five hours because the long-haul business has been taken over by the airlines and was instituting a franchising program that would turn over some of the company’s routes to other bus operators.

Analysts said the restructuring is an important but not surprising move in light of Greyhound’s previous retrenchments.

“I hate to say that Greyhound (Lines) is a dog, but it’s been a troubled business for some time,” said Katherine Stults, an analyst with Dean Witter Reynolds in New York.

“For 30 years, you’ve had continuous competition (from other forms of transportation) and it’s sure caught up with them,” she said. “A bus is the transportation of last resort--by and large, people would rather not take buses.”

Analyst Gregory Kieselmann of Morgan, Olmstead, Kennedy & Gardner said Greyhound “decided it was time to really bite the bullet.”

The company’s previous restructuring efforts already appear to be paying off, because Greyhound Lines turned a profit--the size of which wasn’t disclosed--in the second quarter and probably will be profitable in the third quarter, he said. The latest move “could have a meaningful effect on the bottom line,” saving Greyhound perhaps $50 million before taxes in employee compensation, Kieselmann said.

Behnke said it is too soon to determine the financial impact of the restructuring, “but we hope the whole thing will end up saving us money.”

The reduction in management ranks will begin immediately and will be completed by Sept. 30, he said. Layoffs and early retirement of unionized workers will begin “in the coming months,” he said.

Behnke said it isn’t possible yet to determine how many employees will be fired and how many will retire or where the reductions would occur nationwide. Behnke also couldn’t say which of its 127 bus terminals the company is thinking of selling or relocating closer to freeways, or what routes Greyhound is considering abandoning.

Despite the cuts, Greyhound Lines will remain the nation’s largest bus system, he said.

Greyhound Corp.’s shares closed up $1.25 on Thursday at $27.75.

The company also produces consumer products and sells food, financial and other services. For the six months ended June 30, Greyhound Corp. had net income of $57.9 million on revenue of $1.25 billion, compared to income of $46.2 million on revenue of $1.1 billion in the same period of 1984.