West Coast Saga Splits FirstGroup Investors

FirstGroup’s biggest investors are split over how the debt-laden transport company should move forward after the collapse of its winning bid to run the West Coast main line. The company’s victory in August had alleviated concerns over FirstGroup’s stressed balance sheet and flat-to-falling cash flows this year. But the government’s decision to cancel the award has put the group under renewed pressure. Analysts put the company’s 2013 net debt at three times earnings – below the level at which it would breach banking covenants but above a targeted multiple of 2.5. Brewin Dolphin’s preferred solution is a dividend cut rather than a rights issue – which it believes would need to be done at a fairly significant discount – or a disposal of one of FirstGroup’s bus divisions. FirstGroup’s board has promised a dividend this year that is 7 per cent higher than last year’s payout. After falling profitability at its US school bus and UK bus divisions, however, and the West Coast cancellation, the company might have to pay that with debt. Barclays analysts on Monday estimated that shares in FirstGroup were already factoring in a £500m rights issue. They added: “Additional earnings weakness through the year would push management to more aggressively de-lever, in our view: by lowering its dividend (which we now assume) and/or raising equity.” go to link>>>

Award of West Coast Rail to FirstGroup Cancelled

The government’s rail franchising policy has been thrown into disarray after the award of a new contract to run the West Coast mainline rail franchise was cancelled because of “technical flaws” in the bidding process. This is a partial victory for incumbent Virgin Trains, which had mounted a legal challenge to the decision to award the contract to rival FirstGroup and will also come as a blow to FirstGroup where investors had welcomed the new franchise as a strong revenue generator. Shares in the company fell by as much as 20 per cent in early trading. Patrick McLoughlin, the recently appointed transport secretary, said he was talking to Virgin Rail about the possibility of continuing to run the line after December 9 having previously indicated it would nationalise the line. The only certainty, the DfT said, was that “it won’t be FirstGroup”. go to link>>>

FirstGroup Finances in a Pickle

For Tim O’Toole, chief executive of FirstGroup, two of the three defining episodes of his two-year tenure have seen this committed rail man struggling with problems in the bus business. In March last year, Mr O’Toole sent FirstGroup’s shares tumbling when he warned that falling margins in the US school bus division would dent group profits. A year later, he did it again, this time citing the UK bus arm: passengers had retreated in the face of price rises and route cuts, he said; the resulting fall in profitability is expected to wipe 14 per cent off 2013 earnings. He sought to reassure investors that the company was dealing with the problems, despite the recession making it harder to find buyers for the bus operations it has identified as non-performing. Investors will be keen to hear this week how the sell-off is going. The company is aiming to raise £100m by disposing of businesses that produce £130m in revenues annually – a challenging feat in the current environment, argue analysts.

When the company in August was selected as preferred bidder to run the West Coast main line over the next 15 years, it promised to add at least an extra £800m in annual revenues – a steady stream of cash that should help the board stick to its promise of paying big dividend this year in spite of the problems in the bus business. But the controversy surrounding the West Coast franchise– with runner-up Virgin Rail challenging it in court – is not the only reason the win has failed to calm nerves entirely. “The continuing dividend paying policy looks a bit odd,” says Peter Hyde, an analyst at Liberum Capital. Another City analyst, who asked not to be named, agreed: “Paying a dividend by selling off assets on the cheap is a bad idea in my book.” go to link>>>

Passengers Have to Sit on Floor

A Greyhound spokeswoman said it’s against company policy to overcrowd buses and that asking passengers to sit in aisles “would be unheard of” for the bus line. According to the Federal Motor Carrier Safety Administration, every passenger on a bus must have unobstructed access to exits. The company’s website says seating on Greyhound is “first-come, first-served” and that buying a ticket in advance doesn't guarantee a seat. The website says Greyhound sometimes adds extra buses to routes during peak travel times. “That’s something we would never allow,” the spokeswoman said about passengers’ sitting on aisle floors. go to link>>>

More On Former ATU Int. Pres. Heintzman

Ron Heintzman should be a familiar name if you have been following what has been going on at the ATU international since the last Convention. You will recall that was the election that saw current international president Larry Hanley defeat Heintzman who had served as international president following the resignation of former president Warren George, and was backed by George as a successor. In that election Hanley pledged to focus ATU’s attention on organizing and political activism. Heintzman ran as part of a three-person slate that included Oscar Owens. Owens won re-election as international secretary-treasurer. Heintzman was president of ATU Local 757 from 1988 until 2002, when he was appointed international vice president and relocated to Washington, D.C. Following his defeat he returned to his Oregon local (go to link). In a recent election for president of ATU Local 757 four months ago Heintzman emerged as the runner up to ATU Local 757 President Bruce Hansen. Heintzman has initiated an election challenge and a series of live votes taking place this week across Oregon and Washington will determine whether his recent vote-by-mail election loss will be overturned and trigger a rematch. go to link

Ron Hientzman Former ATU Int. Pres. in the News

What is going on in ATU Local 757, former ATU International President Ron Hientzman's old Local? You will recall that Hientzman served as president of the local from 1988 to 2002 when he was appointed international vice president and relocated to Washington. In the September 2010 International Convention in Orlando, Larry Hanely was elected over Hientzman to the position of international president of the Amalgamated Transit Union (ATU). Since then Hientzman has returned to his Oregon Local and ran for president of Local 757 in an election held four months ago. In that election Hientzman lost to Bruce Hansen, a longtime TriMet bus driver and past union officer. Heintzman is an ally of outgoing two-term president Jon Hunt, so Hansen’s victory puts a new, largely untested face at the front of the union as it heads into an escalating battle with TriMet management over retiree benefits. Heintzman, who as recently as 2010 served as president of ATU’s international union, had been endorsed by much of the union’s establishment: its retiree chapter, most TriMet executive board members and by the executive boards of the union’s units with Lane Transit, CHERRIOTS and C-Tran. Portland Afoot interviewed Hansen about his candidacy last month. He called for the end of what he called “a dictatorship” within the union by the Hunt-Heintzman faction. Asked what else he would change in the union, Hansen said: “Understanding the membership’s needs by regular property visits, getting out there, understanding what they’re going through, why our buses are dirty, why we don’t have enough buses in service.” Hansen also promised that his presidency would take a $20,000 pay cut, a significant sum for a union that burned through several hundred thousands of dollars from its cash reserves last year. In 2011, federal records show, Hunt took home $108,434 in salary and another $22,105 in disbursements for official business. Al Margulies, a retired operator who supported Hansen and blogs about union issues, said Hansen was “part of the network,” but expected him to use power differently than Hunt or Heintzman had. “This control has been in the hands of these people for quite a long time,” Margulies said. “I hope he’s going to open up things and stop keeping everything so secret. They operate like TriMet, really.” go to link>>>

Bus Driver Acts in Self-Defense is Suspended

Veteran driver, Artis Hughes, has a great reputation in the 22-years he’s been on the job and is a family man that loves to come to work. He was suspended after punching an unruly passenger in a viral video seen worldwide. Amalgamated Transit Union president of Local 2689 William Nix, Sr. says Hughes, 59, acted “human” in defending himself, adding, ” We’re not gonna say the driver is just supposed to go and attack someone. If someone is violating their space and attacking them, what do you want them to do.” On September 18th passenger, Shidea Lane, 25, refused to pay the fare at a stop in Beachwood. Nix says Lane got physical when Hughes threatened to put her off his bus. The transit union president is now calling on the RTA, Cleveland council members and state leaders to draft legislation that would ultimately protect bus and rapid drivers against unruly passengers. “They gotta go home safe and whole, like they came to work,” Nix says, “They shouldn’t have to come losing an eyelid, eye or limb or die because they’re trying to do their job.” go to link>>>