'Predatory' firm's tactics kill off rivals

CHRISTIAN WOLMAR

If the Government had wanted to choose the most controversial candidate as the flagship for its privatised rail programme, it could not have done better than going for Stagecoach. It is Britain's largest bus company and at once its most famous and most infamous.

Stagecoach has been built up by the brother-and-sister team of Brian Souter and Ann Gloag, both former bus drivers who started the company from redundancy pay-outs, and its profitability is demonstrated by the fact that Mrs Gloag recently bought Beaufort Castle, near Inverness, the seat of the late Lord Lovat, a far cry from the council house in Perth where she was brought up.

Stagecoach's infamy comes from its aggressive and predatory behaviour towards scores of bus companies which it has either bought up or driven out of business. Stagecoach Holdings now consists of an international empire of 7,300 buses, 20,000 employees, a turnover of pounds 430m and profits in the past six months of nearly pounds 20m. Its shares, now quoted on the Stock Exchange, recently hit an all-time high.

The company, a child of the 1985 Act which deregulated the bus industry, makes no bones about the fact that it feels a local monopoly is the best way to provide services. In a succession of battles it has either taken over all its competitors or flooded an area with so many buses that others could not compete.

In Darlington last year, for example, it squeezed out local operators by running free services for six weeks, behaviour which the Monopolies and Mergers Commission called "predatory" and "against the public interest". There have been five detailed MMC inquiries over the past year and other battles are looming. Drivers working for Selkent, one of the two London bus companies Stagecoach took over last year, were recently given 90 days notice of termination of employment in a fight against the unions as the company wants to reduce drivers' wages.

Unlike many other aggressive companies, however, Stagecoach does not fight shy of the media. Yesterday, Brian Cox, executive director and the director in charge of the southern area, spent all morning happily talking about his company's controversial record.

To gain control of South West Trains, Stagecoach has put in what looks like a very low bid requiring pounds 20m savings on variable costs of pounds 125m. Mr Cox said: "We think these cost reductions are realistic and achievable." However, a battle with the unions, particularly the train drivers in Aslef, seems inevitable. Mr Cox says Stagecoach's size is an advantage because "if a meltdown situation occurs we can survive it".

Nor does Mr Cox disguise the fact that there will be sharp reductions in the 4,000 staff at present employed by the train company. "In the bus industry we have got rid of a lot of managers and management layers. We also expect our staff to work harder than they might have been used to. We will be instilling the same culture in South West Trains."

There may be some relief in the bus industry if Stagecoach is now concentrating on the railways. As a senior London manager who fought off a bid from the company said: "Stagecoach tends to leave the other big players in the bus industry alone but it makes everybody who works for smaller companies apprehensive. They tend to go into companies and shoot the management. They also tend to reduce staff drastically."