Laidlaw was a victim of CEO's overambition

Laidlaw Inc., which filed for bankruptcy protection this week, was a victim of the dreaded disease of overambition.

Former chief executive officer Jim Bullock attempted to do too much, too fast, because he became too excited about his growth plans, and his confidence became too great. And when it fell apart after he racked up $4.6-billion (U.S.) of debt, he unsurprisingly joined the ranks of Corporate Canada's most criticized leaders.

It's happened many times before. Many of Canada's biggest corporate collapses of recent years -- Royal Trustco, Confederation Life, Loewen Group, Philip Services, Livent -- share some common traits of enormous ambition, rapid expansion, excessive debt, poor execution and inattention to detail.

Reasonably, their CEOs have taken the brunt of the blame. Sometimes leaders are accused of cooking the books and manipulating shareholders, and deserve their pariah status. But it's hard not to feel a bit of sympathy for the others, those starry-eyed souls like Mr. Bullock who really believed they could pull off something that proved far too ambitious.

When Mr. Bullock took over at the helm of Laidlaw in late 1993, the former Cadillac Fairview executive began a restructuring to move the company out of garbage hauling and into faster-growth areas. Laidlaw quickly became the largest ambulance operator in the United States by consolidating an industry of tiny, single-city operations. In 1997 alone, Laidlaw bought 38 companies for $1.3-billion.

It wasn't just ambulances. Mr. Bullock got excited about the emerging business of contract emergency room management, making numerous U.S. acquisitions of companies that manage emergency wards for hospitals. As well, Laidlaw decided to expand its relatively small business of hazardous waste management through the catastrophic decision to buy Safety-Kleen Corp. for $2.2-billion. While all this was going on, Laidlaw also bought Greyhound Lines to get into intercity transportation.

In retrospect, the corporate mix was a wacky assortment. But Mr. Bullock kept insisting that the same logistical skills that keep thousands of school buses running each day were obviously transferable to ambulances, and then to emergency room management, and then to Greyhound. At one point even Safety-Kleen was in part justified as another logistics business, operating fleets of trucks that collect hazardous waste and carry it to treatment centres.

The logic was shaky, but execution was the bigger problem. The ambulance division, for example, couldn't integrate as quickly as companies were being purchased. Costs were bloated, there were excessive layers of management, and there was not enough due diligence exercised over what was being bought. Laidlaw ended up simply closing a number of its new operations.

Part of the story is also simple bad luck. The U.S. government in 1997 implemented big cost cuts for Medicare and Medicaid, leading health management organizations (HMOs) to insist on better deals from ambulance service providers. Many hospitals stopped using ambulances for non-emergency transfers. Profit margins fell sharply, just when Laidlaw was trying to cope with excessive expansion.

In 1998, Laidlaw announced huge job cuts and a restructuring of its ambulance division, then said it would try to sell all its health care operations. In 2000, the full extent of the Safety-Kleen disaster became apparent after it revealed years of accounting irregularitiesbeginning in 1998. The U.S. Securities and Exchange Commission began an investigation and Safety-Kleen filed for bankruptcy protection.

In 1998, Laidlaw announced huge job cuts and a restructuring of its ambulance division, then said it would try to sell all its health care operations. In 2000, the full extent of the Safety-Kleen disaster became apparent after it revealed years of accounting irregularities beginning in 1998. The U.S. Securities and Exchange Commission began an investigation and Safety-Kleen filed for bankruptcy protection.

In 2000, Laidlaw wrote off the entire value of Safety-Kleen. It also wrote off half the value of its ambulance operation, wiping out another $1.3-billion of wealth.

Busing has turned out to be Laidlaw's most stable business, and the one it will now make its core operation. If Laidlaw had stuck to school busing and intercity busing, it wouldn't be in its current mess. But Mr. Bullock had a grander vision.

Much has been written this year accusing corporations of contributing to Canada's poor productivity by being too conservative. But Laidlaw illustrates that only a rare CEO has the skills to be wildly innovative, and that ambition cannot be unchecked. Laidlaw's fatal error was not growing, but growing without absorbing the pieces and without taking the time to watch what it was buying. jmcfarland@globeandmail.ca