Strikebound Greyhound Lines Files for Chapter 11 : Bankruptcy: The ailing bus company is suffering from low ridership and high costs for security.
The 13-week-old Greyhound bus strike, already mired in litigation and anger, grew even more complex Monday when financially ailing Greyhound Lines Inc. filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code.
Having suffered massive revenue losses this spring due to low ridership and heavy security costs, Greyhound attempted in past months to renegotiate its debts with creditors.
But on Monday, J. Michael Doyle, senior vice president and chief financial officer of Greyhound, acknowledged that the strategy had failed.
Doyle said the petition for protection, filed in the Southern District of Texas in Brownsville, is meant “to enable Greyhound lines to continue operation of its total system.”
The company, the country’s only nationwide bus system, has missed more than $16 million in principal, interest and lease payments since the end of April, putting it in default on numerous agreements with creditors.
For the Amalgamated Council of Greyhound Local Unions, whose 9,000 members struck Greyhound on March 2 after the bus company refused to grant an increase in base wages, Greyhound’s newest admission of financial woes was the second strategic victory in two weeks.
The first occurred last week when the National Labor Relations Board filed an unfair labor practices complaint against Greyhound.
By classifying the strike as one fueled by management provocation, rather than simply a dispute over wages, the labor board gave special protection to strikers. If sustained by the courts, the complaint assures the strikers that they will get their jobs back once the strike ends.
The labor board has scheduled a Sept. 17 hearing in Milwaukee on the complaint, which calls for Greyhound to fire its 2,700 replacement drivers and rehire the strikers. The union has formally offered to return to work under its old contract and to continue working while negotiating a new pact.
The union attempted to further exploit Greyhound’s weakness last week by announcing that it is trying to buy the company through a combination of employee-owned stock and third-party financing.
The union retained Brian Freeman, a long-time labor investment adviser who last year represented employees of United Airlines in a bid to buy their parent company, UAL Corp.
Freeman wrote Greyhound a letter asking whether management wished to participate in a buyout, but a company spokesman scoffed at the proposal.
Joseph Blasi, a Rutgers University labor-management professor, said the bankruptcy filing was merely the latest maneuver in an unusually contentious labor dispute.
“Basically, both sides refused to come to a labor-management settlement. Then they tore the company apart in a strike. Then management refused to entertain a financial compromise using employee ownership. And now employee ownership and every other issue will be fought out in bankruptcy court,” Blasi said.
Jim Cushing-Murray, head of Greyhound’s Los Angeles union local, said he views the bankruptcy filing as “a real positive development.” He predicted that union leaders will ask the bankruptcy court judge assigned to the case to replace Greyhound Chairman Fred G. Currey with a trustee. The union will try to persuade creditors to support that request by arguing that creditors will lose less by dealing with an employee-owned Greyhound than Currey.
In explaining Greyhound’s reason for seeking protection, executive Doyle said the company has “asked creditors for patience so that we could devote all available resources to running maximum service during the peak summer travel season. While most have been cooperative, we were faced with the threat of a ‘run on assets’ that could have crippled our ability to operate. . . . We are highly confident we will be successful in restructuring our debt.”
The company did not estimate how long it would need to remain under bankruptcy court supervision.
The Greyhound strike has increasingly resembled the prolonged Eastern Airlines strike, in which management angered workers by holding down wages, lost much of its market share in a strike and filed for bankruptcy protection.
In the case of Eastern, Frank Lorenzo, the head of Eastern’s corporate parent, was removed by a federal bankruptcy judge in April as chief operating officer of Eastern.
Greyhound Chairman Currey incurred massive debts in 1987 when he purchased the company in a leveraged buyout. By last year, Greyhound’s debt stood at $359 million.
Currey proclaimed a month ago, as Greyhound was operating most of its routes with replacement drivers, that the union’s strike had become “irrelevant.” Just two weeks later, however, the company proposed repurchasing $225 million of its junk bond debt at a steep discount, provided it could find enough financing to pay about $90 million for the bonds and leave the company with about $35 million in operating capital.