New Laidlaw president eyes growth prospects

NAPERVILLE, Ill. — Earlier this year, Douglas Carty, executive vice president and chief financial officer of Laidlaw International, was asked whether he would be interested in taking over as Laidlaw Education Services’ new president and CEO.

“It was a no-brainer,” Carty said. “It took me about 30 seconds to say yes.”

In taking over the position on July 11, Carty replaced Laidlaw International President and CEO Kevin Benson, who had added the duties of president and CEO of Laidlaw Education Services after the departure of Hugh MacDiarmid last year. Benson continues as the top executive at Laidlaw International.

Over the past few months, Carty has been getting up to speed on the school transportation industry, although he already had a strong background in the financials of Laidlaw Education Services. He recently spoke with Editor Steve Hirano about his new position.

STEVE HIRANO: Tell us a little about your background, both before and after joining Laidlaw.
DOUGLAS CARTY: I joined the company in January 2003 as executive vice president and CFO of its holding company, Laidlaw International. I spent the first 31Ú2 years principally focused on finance and strategy matters for the holding company and its three operating companies: Laidlaw Education Services, Laidlaw Transit Services and Greyhound.

I’m a Canadian by background and have been living in the U.S. since 2001. Before joining Laidlaw, I worked in the aviation business, again mostly as chief financial officer, first with Canadian Airlines and later with a cargo airline in the New York area called Atlas Air.

Laidlaw’s fleet size has been fairly stable for the past few years. Do you see any changes on the horizon?
In the 1990s, pre-dating my arrival here, Laidlaw was growth-oriented and made a lot of acquisitions. It went through some difficult financial times in the early 2000s and dialed itself back from the acquisition activity.

After Kevin [Benson] and I arrived, we started asking our companies to focus more on quality of revenue. That manifested itself in a network overhaul at Greyhound, which kept revenue relatively flat or slightly down. Similarly, here at Laidlaw Education Services we ask for a discipline around contracts to ensure that they’re strongly profitable. As you would expect, there were some contracts that were not strong. We took an aggressive position to get prices that would compensate us for the costs we had or to let them go. We had a higher than usual number of contracts not renew. But, again, it was part of a corporate strategy that focused on the quality of our revenue.

I think our attitude now is we’ve done a lot of repair on the quality of revenue, and we’re going to focus now on resuming some growth. We have a great story to tell to school boards and other customers, and I’d like to see the business start growing again.

Although they’ve come down recently, fuel prices are still high. How have high fuel costs affected Laidlaw’s bottom line?
It’s been a difficult period for the past 12 to 18 months because of fuel prices. In our case, we consume approximately 65 million gallons of fuel per year. Some portion of that is provided to us by school boards; some other portion is subject to fuel escalators; we take the risk on an awful lot of it.

Fuel is a tremendously more expensive cost to us today. Happily, there are a lot of cost-saving initiatives here at Laidlaw and over the last couple of years, our operating costs have been relatively flat, meaning that we’ve found ways to offset increased fuel costs.

Fortunately, in the last month or so, we’ve seen fuel come down. It’s still a long way from where it was in ‘04 and early ‘05. But I think all of us are working very hard to defray that cost.

Are you finding that more school districts are interested in having their school buses tracked using GPS?
We’re seeing more interest in GPS, but it’s still relatively new to our customer base. Having said that, I’m very interested in it because I think it provides us with an opportunity to run our businesses better. We’re doing in-house studies to see how GPS could be used to help us monitor our performance better. As you monitor things better, you perform better.

So many of us in the industry dispatch our buses in the morning and, in effect, lose sight of that bus until it comes back after the routes. I’d like for us to use vehicle location systems as a way to measure our performance better. As we perform better, that will show up in our customer relationships.

For a number of reasons, the cost of a new school bus is going up significantly. How is that impacting Laidlaw?
We deal with it the best can we. We have a bit of an advantage because we buy so many buses every year. I think we get as favorable a purchase price as anyone can have. But it is a cost that is rising, making us more focused on where we can recoup those costs. I think it’ll force our industry to be much more innovative about finding other cost savings. And I think it further underscores the point I made earlier. If I can use technology to refine the process of how I run the business, maybe I can find cost savings to help defray the cost pressures. It’s a significant issue for everybody.

What are your personal challenges as you enter your third month as the new chief executive?
To keep this company on the upward trajectory. We have a great company; I want it to be greater. I want to re-engage in growth, as we talked about earlier. I want us to rapidly consider the use of improved processes and technology to manage our business better and make that show up in better performance for our school board customers. The early challenges are to get to know the business and the people and customer relationships. I would say my challenges are to induce change and make it more relevant here at Laidlaw.