Yellow freight going out of business, The trucking behemoth, Yellow, is on the verge of collapse and bankruptcy due to a staggering amount of debt and a significant loss of business just a few years after securing a substantial $700 million loan from the U.S. government.
Teamsters Notified of Impending Demise
The Teamsters were informed on Sunday about the company’s impending demise, which would result in a massive loss of employment for approximately 30,000 people, including 22,000 union members, marking one of the most significant failures in the industry.
Formerly YRC Freight: A Struggling Less-than-Truckload Shipper
Previously known as YRC Freight, Yellow operates as a less-than-truckload shipper, specializing in transporting relatively small loads. Despite being the third-largest company in this category and delivering over 14 million shipments in 2022, recent months have witnessed mounting tensions with the Teamsters and an inability to refinance its substantial $1.3 billion debt.
Legal Battles and Financial Struggles
In late June, Yellow took legal action against the Teamsters, accusing them of obstructing the company’s attempts to restructure its business and refinance debt, which included government loans. This legal dispute and a near-strike scenario in July over healthcare benefits caused a significant drop in business, further exacerbating the company’s financial troubles.
Roots of Struggles
Yellow’s struggles did not arise overnight; they can be traced back about 15 years when the company faced difficulties integrating a series of acquisitions into its business. This integration failure led to persistent inefficiencies, financial challenges, and ongoing tensions with the union over wages and benefits.
Customer Confidence Shaken
Customer confidence in the company was rattled when the union refused to approve Yellow’s restructuring plan in June, which was necessary for debt refinancing. Company statements highlighting financial struggles only added to the concerns, prompting some customers to switch shippers, further straining Yellow’s business operations.
Freight Market Challenges
The freight industry, including Yellow’s market segment, is currently experiencing a challenging period with reduced freight volume. These difficulties have been amplified by the recent turbulent months, during which Yellow lost 80% of its freight.
Impact on the Supply Chain and Truck Drivers
Yellow’s shutdown is expected to disrupt the less-than-truckload market, potentially leading to higher shipping prices for some customers. However, it is not anticipated to cause a repeat of the pandemic-era supply chain disruptions.
Government Relief Loan Controversy
Yellow’s closure comes three years after the Trump administration granted the company a $700 million coronavirus relief loan. A congressional report released in June highlighted “missteps” in providing the loan, citing the Treasury and Defense departments’ failure to properly certify Yellow’s qualification for the loan on national security grounds. Consequently, the loan put taxpayers at significant risk of loss.
Treasury’s Stake and Debt Repayment
The Treasury Department obtained a 30 per cent equity stake in Yellow in exchange for the loan. As of July, Yellow had repaid only about $68 million in interest and made just one $230 payment towards the principal amount, leaving an outstanding debt of $729.3 million.
The Union’s Perspective
The Teamsters’ General President, Sean O’Brien, expressed little surprise at Yellow’s fate and stated that the company had struggled to manage itself despite receiving substantial worker concessions and federal bailout funding.
Yellow’s History and Downfall
Founded in 1924 as Yellow Cab Transit Co. in Oklahoma City, Yellow evolved into a long-haul freight service after being purchased out of bankruptcy in 1952. The company experienced growth through acquisitions in the 2000s, including Roadway and USF. By December, Yellow operated a fleet of 12,700 tractors and 42,000 trailers, with approximately 300 facilities in North America.
Leonard Crack, who worked as a trailer loader and unloader in Copley, Ohio, expressed his dismay upon receiving a call informing him of Yellow’s closure. He had been with the company for nine years and cherished the job for its solid income and the sense of community it provided. Now, facing an uncertain future without healthcare and employment, he worries about his prospects as a dockworker without a commercial driver’s license and expresses mistrust in the union’s support.
In conclusion, Yellow’s bankruptcy comes from a long-standing struggle to manage debt, integrate acquisitions, and maintain a productive relationship with the union. The freight industry’s current challenges have only amplified the company’s woes, culminating in this unfortunate turn of events. As Yellow’s employees face an uncertain future, the focus remains on finding solutions to mitigate the impact on the industry and the affected workforce. Yellow freight going out of business