Sudbury Bus Lines

"He has also invited several retired politicians and senior civil ser¬ vants to occupy senior executive posts or seats on the board of Power Corporation or its subsidiaries. A snapshot of the Power board in 1986 would have captured William Davis, retired Premier of Ontario, in a director’s chair (his predecessor in office, the late John Robarts, also sat on the Power board) and Senator Michael Pitfield, former Clerk of the Privy Council under Pierre Trudeau, who occupied a Power vice-presidency. The financing arrangements of the Quebec Autobus deal comprised a typically creative Desmarais package of personal cash and loans granted him because of his track record as a person who always meets his obligations and keeps his word. Industrial Acceptance Corpora¬ tion, one of his old creditors in Sudbury Bus Lines, which knew and trusted Desmarais, lent him $700,000; British American Oil Company (later Gulf) lent him $800,000 on his promise to buy all his gas from the company, and the Royal Bank lent him $500,000 against proceeds from the sale of Gatineau Bus."

"nodded agreement that it looked good as Desmarais explained its merits. Then Beattie pointed to the key numbers and asked where the funds would come from. Desmarais raised his eyes from the plan and said the money would come from Beattie. Beattie looked at Desmarais, picked up the ash¬ trays, the wallpaper rolled together with a snap, and Beattie showed Desmarais the door. Desmarais had set the ground for his battle. The rest of his creditors, who included the tax department, commercial lenders and suppliers, had already agreed to the plan. The creditors were ready to accept some cash immediately and payment over five years of the balance owing them from Sudbury Bus Lines, if Desmarais could swing a deal with Inco. Desmarais kept up the pressure on Inco, consistently pushing his plan and meeting with Inco personnel to negotiate some sort of deal involving the Copper Cliff run. Inco management knew it needed a reliable bus service between Sudbury and Copper Cliff. Desmarais was offering a plan that would guarantee the service. At the same time, Desmarais had drawn into the picture the man¬ agement of Local Lines, one of the regional bus lines, which carried passengers from points within Sudbury along routes outside the city limits. It was a company experienced in the economics of rural and inter-urban bussing, and in the strange schedule needs of the Copper Cliff run. It was also the company that had sold the Copper Cliff run to Sudbury Bus Lines in 1949, when the inter-urban route had been profitable. Desmarais didn’t let up on Inco executives. They finally agreed that the Copper Cliff run was essential to them and that they would have to pay for it. So they gave Desmarais his $138,000; it was neither gift nor loan, but a “purchase” of a guarantee of continued existence for the Copper Cliff run. Then Desmarais ensured the ex¬ istence of the run, and the survival of his company, by getting rid of it. He ceded the Copper Cliff run to Local Lines, which could operate the essentially inter-urban line at a profit. Desmarais then distributed that portion of the $138,000 earmarked for initial payments in his debt rescheduling plan, and got on with turning his urban bus operation to greater profit."

"He began in 1951, when he was 24, home in Sudbury on a hiatus from law school, not sure if the legal profession was for him. The family-owned bus company needed managing and he needed some¬ thing to occupy his energy. So, he took on the bus company and found, and showed, that he had the entrepreneurial spirit — the entrepreneur being no more and no less than an enterprising individ¬ ual. He turned the money-losing Sudbury Bus Lines into a money¬ maker by sharply defining what the business was really about and rationalizing the company’s management and operations. He began eagerly, applying his gut feelings about business as well as the the¬ oretical information gained from university studies in commerce. Initially, Desmarais employed a limited and narrow strategy — strategy being the general definition of overall and mid-to-long-term goals. His goal was very short-term: to see if he could succeed in business, before deciding on law school. Tactics are the plans by which a strategy will be implemented, and his were to turn Sudbury Bus Lines into a profitable business. Desmarais succeeded. By the age of 28, he had turned the bus company around, settled its debts of about $350,000, banked $100,000, and had professional management in place, running the company along lines he prescribed. The excitement of making the bus company work"

"debts had to be covered simultaneously, but the company as it operated when Desmarais stepped in wasn’t generating enough revenue to do so. The company’s one advantage was that the bus business is a cash business; as long as the busses roll out of the bams each day, some hard cash rolls in. Desmarais’s task with Sudbury Bus Lines was straightforward — keep it operating and bringing in cash, while fig¬ uring out how to earn more, cut costs, and make the debt manageable. Defining the task was simple; execution was another matter."

"While all this was going on Desmarais and Jean Parisien, the ac¬ countant who had helped him with Sudbury Bus Lines, formed Trans¬ portation Management Corporation Ltd., a partnership, with Desmarais as senior partner. Here Desmarais was setting up a new company, rather than buying an existing one. He was no longer content to buy what was available; he was now ready to bid for bus lines that weren’t being put up for sale. Transportation Management, a holding company, was going to be the umbrella under which he would build a transportation empire. The holding company structure would provide a system for manage¬ ment of tax and partnership matters while ensuring privacy, but would also provide centralized management for non-transportation elements of the empire Desmarais and Parisien were planning. Bus companies usually came with real estate — the land and buildings that housed administration, maintenance and operations; inter-urban bus lines had terminals with concession stands and restaurants. If Desmarais were to expand into a number of bussing operations, it would make more sense to run the bus companies as bus companies and have the holding company manage the real estate and properties, rather than have each bus company run its own real estate operation and duplicate man¬ agement jobs and costs."

"Desmarais saw a great opportunity in Gelco. It had a $ 10-million investment portfolio, but it could be bought for whatever the 3.3 million shares were worth on the open market. Demand was high for the shares after they were issued, in fall 1961, at $1.20, and prices rose to $3 at year end. After the initial euphoria and share trading, though, the investment and management rationales underlying Gelco were examined and found wanting by the market, and prices declined to a 60-cent low in summer 1962. Desmarais was keeping an eye on Gelco. It’s likely he held a block of shares in the company, which made it easier to watch its progress; shareholders have access to more information about the progress and management of a company than the general public, and can also acquire lists of all other shareholders. In July, 1962, Paul Desmarais was in the bush near Sudbury, treating some of his Sudbury Bus Lines employees to a few days of fishing at the boss’s expense. The bucolic peace of the fishing camp was broken when a message arrived from Montreal that Gelco’s prices had collapsed to 60 cents and showed no sign of revival. Desmarais rushed back to Sudbury, flew to Montreal and took the first connecting flight to London, England. He installed himself in a hotel and offered British Gelco shareholders $1 per share. The same offer was made to Canadian Gelco shareholders by Transport Management Corp. Ltd. Gelco’s shareholders were eager to unload their apparently worthless shares, and by December 1962, after five months of buying, Trans-"

"Success with the company earned Desmarais $100,0003 by 1955, when he was not yet 30. By then married to Jacqueline Maranger, whom he had known in high school and who was trained as a nurse, he resumed law studies at Osgoode Hall, though he kept ownership of Sudbury Bus Lines. But then Pierre Genest, Desmarais’s old room¬ mate at the University of Ottawa, told him that Gatineau Bus Lines, the Ottawa-Hull service, was for sale. Desmarais bought the company and moved to Ottawa to manage his new acquisition. He never got around to completing his law degree."

"Throughout this period, Desmarais worked with a skeleton office staff, himself and a secretary, to keep down administrative costs. Sudbury Bus Lines had the best drivers and mechanics in the city when he took over. They were loyal to him because he was the old boss, Mrs Desmarais’s son, taking over and saving their jobs. He recognized that good, reliable, loyal people were among his major assets, and he earned their loyalty to him personally by ensuring that everyone who worked for him got paid something, without fail, promptly at end of shift Friday, even if it meant he himself went home without being paid and empty of pocket."

"When Sudbury Bus Lines gave notice to city council that it was ready to fulfil the terms of the franchise by expanding service through the enlarged Subdury, city council decided it wouldn’t hold Sudbury Bus to the letter of the agreement. Council was worried that the other bus companies would be forced out of business and then seek com¬ pensation. Council feared it would have to pay the bill or, worse, that Sudbury Bus would pay, then run into cash-flow problems and approach the city for help handling even bigger bills. So Sudbury was effectively rendered an open city for bus transport, which meant that any operator could run busses anywhere. Transportation anarchy was averted by an informal arrangement among the four existing operators not to encroach upon the territory each had serviced at amalgamation."