Holiday Inns Inc. officials announced Tuesday that they are negotiating the sale of their Dallas-based bus company, Trailways Inc., but haven't disclosed the identity of the potential buyer and anticipated sale date.
Trailways officials declined to comment on the reports and referred all press inquiries to Holiday Inns in Memphis. But sources close to the bus company said Holiday Inns' President Michael D. Rose told senior Trailways officials of the pending sale at a meeting late Tuesday afternoon.
Sources also indicated that Rose wouldn't have made the announcement to the senior staff unless Holiday Inns was close to completing the sale.
It remained unclear whether J. Kevin Murphy, president and chief operating officer of Trailways, and Frederick G. Currey, chairman and chief executive officer of the bus company and president of Holiday Inns' transportation group, would remain with the bus company if it is sold.
Tuesday and again early today, Currey declined to comment on the announcement, saying only that the bus company hadn't been sold yet. "I've been a long-time board member of Holiday Inns, and I think their news release tells the whole story," he told a reporter today.
Murphy also declined comment today and maintained he doesn't know the identity of the prospective buyer. "I don't know if I will be leaving," Murphy said when asked about rumors circulating in the company that he and Currey wouldn't be retained by the new owner. "Those decisions have not been made. I am not involved in the negotiations."
Spokesmen for Holiday Inns have declined to answer questions beyond the two-paragraph news release, but did say today that reports about the future of Murphy and Currey "were premature." Holiday Inns spokesman Jerry Daly said, "Nothing has been agreed upon, and anything would be speculation at this point. As a result, it would be like saying taxes are going down. Politicians have been saying that for years."
Holiday Inns has stated publicly several times over the last year that it was studying the possibility of selling its transportation group, which includes Trailways and the Delta Steamship Lines of New Orleans. In a study completed this year, the company said it determined that the transportation properties don't fit into the firm's long-range plans for strengthening its position in the hospitality industry.
Moreover, Rose and Roy E. Winegardner, chairman and chief executive officer of Holiday Inns, have urged the hotel company to divest Trailways and Delta Steamship and enter the casino and the free-standing-restaurant business, which means restaurants not physically connected to a Holiday Inn hotel or motel.
Holiday Inns purchased Trailways and Delta Steamship in 1969, and by 1974 the transportation properties were contributing almost 40 percent of the total operating income of the firm. But since then, Trailways' profitability has been shaky. Rising labor and fuel costs, coupled with government regulations, and the lack of regular fare increases, have depressed earnings.
Trailways' revenues increased from $202.8 million in 1974 to $268.1 million in 1978, but operating income decreased from $25.6 million in 1974 to $19.7 million in 1978.Moreover, while bus revenues for the second quarter of 1978 were up due to increased passenger miles, operating profits dropped 16 percent to $5.6 million. The company operates about 2,100 buses over 70,000 miles in 43 states and carried about 20 million passengers last year.
Rumors have been circulating for months around the Dallas bus company that Holiday Inns is unhappy with Trailways' performance and that Murphy was considering leaving the company, possibly to become involved with the Republican Party during the 1980 presidential election.
Murphy has maintained a high profile in the motor transportation industry by campaigning on both the state and federal level for deregulation of the bus business, by publicly criticizing Amtrak and by working in programs for Vietnam servicemen missing in action and a legislative program to extend voting rights to overseas employes of private companies.
Sources said that Murphy has "pulled about every trick out of the hat possible" to improve the bus company's standing and was running out of ideas to cut Trailways' costs and to boost ridership. Those sources also say that Murphy's penchant for publicity and the sagging performance of Trailways has left the executive in poor standing with the more conservative Holiday Inns management.
When Murphy joined Trailways in 1977, he pared 1,000 employes from its staff and engaged in a fierce attack against the nations' largest bus company, Greyhound Lines Inc. of Phoenix, Ariz. In addition, Murphy instituted promotional fares to increase ridership and improved the company's package express in an effort to offset revenues lost as passengers left the buses to take advantage of bargain-basement airline fares.
As recently as two weeks ago Murphy is said to have told senior Trailways officials that the company must cut an additional 100-plus employes from the payroll and reduce costs in other areas, including maintenance, bus station repairs, advertising, telephone expenses and employe travel. Sources say the company wants to improve the profit picture by $14 million within the next 12 months.
Although Murphy declined to talk with reporters Tuesday, he had acknowledged in an interview last week that Trailways was taking additional cost-cutting measures but said he had no intention of resigning while the company was in trouble.
"It's not right to leave a company when it's in trouble," Murphy said. "I have a sincere obligation to make sure it's in the best shape possible if I leave.You just don't walk away from a company and the people who run it.
"If I ever leave Trailways, I hope it would be during a time when everybody here was enjoying much better conditions."
In that interview, Murphy blamed Trailways' problem on a complicated set of state and federal regulations that he said prevent the bus company from expanding and refining its route system, raising fares to cover increased operating expenses and competing more aggressively with other bus companies, mainly Greyhound.
Sources close to the company said that, until recently, Currey had not taken an active role in Trailways' day-to-day operations. But within the last couple of months, Currey has hired his own financial staff, which has apparently been "looking over the shoulders of Murphy's people," one source said.
Trailways insiders have interpreted Currey's activity as a further indication of the Holiday Inns' dissatisfaction with the bus company and of some development forthcoming. "Currey had left the day-to-day operations up to Kevin (Murphy)," said one source. 'But now Currey has his own people running around, and Murphy considers this to be meddling."
During the interview, Murphy played down Currey's activity, saying the head of the transportation group needed the help to report Trailways' activities to Holiday Inns.
However, sources said that, within the last 10 days, Holiday Inns has had its own financial experts and auditors at Trailways, apparently gathering information to be used during the ongoing negotiations.