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99-year-old trucking company Yellow shuts down, lays off 30,000

Jul 31, 2023

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Trucking company Yellow Corp., which has been in business for nearly a century, has halted operations on July 30, and will lay off all 30,000 of its workers. According to industry experts, the company is expected to file for bankruptcy as soon as Monday, July 31. It is poised to be the largest trucking bankruptcy in the history of the U.S. 

The International Brotherhood of Teamsters union has been battling Yellow over its failure to contribute to its pension and health insurance plans.

During the week of July 23, the union, which represents the company’s 22,000 unionized workers, canceled a threatened strike and granted the company an extra month to make the required payments.

After the strike threat, Yellow’s freight volumes fell 80% within the span of a week, according to one expert in the transportation sector. The union said it then received a legal notice that said Yellow was ceasing operations and filing for bankruptcy.

“Today’s news is unfortunate but not surprising,” Teamsters General President Sean O’Brien said. “Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry.”

Last year, Yellow reported a net income of $21.8 million. But according to the company’s latest quarterly report, it has $1.3 billion in loan debt that is due in the fall of 2024. 

Yellow received a $700-million loan from the government in 2020 as part of a COVID-19 rescue package. In return, the Treasury Department took a 30% stake in the company’s shares, which have since plummeted. 

In June, a congressional probe found that the Treasury Department made a mistake by disbursing the loan to the freight company. The corporation didn’t meet the standards to qualify for the business loan. 

Yellow handles pallet-sized shipments of freight across the country for companies like Walmart and Home Depot. It moves shipments from numerous customers in the same truck, a segment of the trucking industry known as less-than-truckload, or LTL.

Yellow handles only about 7% of the nation’s 720,000 LTL shipments. Since there is about a 10% excess capacity in the LTL sector, the closure of  Yellow shouldn’t cause a significant disruption in supply chains. But according to a trucking industry insider, it will cause higher rates for shippers who depend on LTL carriers since excess capacity sent prices lower. 

Yellow has not publicly announced plans for bankruptcy or potential shutdown, but said it will issue a public statement on July 31 about the state of the company.

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KARAH RUCKER: TRUCKING COMPANY YELLOW CORP., WHICH HAS BEEN IN BUSINESS FOR NEARLY A CENTURY, HALTED OPERATIONS ON JULY 30, AND WILL LAY OFF ALL 30-THOUSAND OF ITS WORKERS. ACCORDING TO INDUSTRY EXPERTS, THE COMPANY IS EXPECTED TO FILE FOR BANKRUPTCY AS SOON AS JULY 31. IT’S POISED TO BE THE LARGEST TRUCKING BANKRUPTCY IN THE HISTORY OF THE U.S. 

LAST WEEK, THE TEAMSTERS UNION, WHICH REPRESENTS 22-THOUSAND OF YELLOW’S WORKERS, CANCELED A THREATENED STRIKE AND GRANTED THE COMPANY AN EXTRA MONTH TO MAKE PAYMENTS TO ITS PENSION AND HEALTH INSURANCE PLANS. THE UNION SAID IT THEN RECEIVED A LEGAL NOTICE SAYING YELLOW WAS CEASING OPERATIONS AND FILING FOR BANKRUPTCY.

 

IN A STATEMENT, TEAMSTERS GENERAL PRESIDENT SEAN O’BRIAN SAID QUOTE: “TODAY’S NEWS IS UNFORTUNATE BUT NOT SURPRISING. YELLOW HAS HISTORICALLY PROVEN THAT IT COULD NOT MANAGE ITSELF DESPITE BILLIONS OF DOLLARS IN WORKER CONCESSIONS AN HUNDREDS OF MILLIONS IN BAILOUT FUNDING FROM THE FEDERAL GOVERNMENT. THIS IS A SAD DAY FOR WORKERS AND THE AMERICAN FREIGHT INDUSTRY.”

 

FOLLOWING DEBT FROM MERGERS AND LASTING EFFECTS FROM THE 2008 RECESSION, YELLOW RECEIVED A 700-MILLION DOLLAR LOAN FROM THE GOVERNMENT IN 2020 AS PART OF A COVID-19 RESCUE PACKAGE. IN RETURN, THE TREASURY DEPARTMENT TOOK A 30-PERCENT STAKE IN THE COMPANY’S SHARES, WHICH HAVE SINCE PLUMMETED. IN JUNE, A CONGRESSIONAL PROBE FOUND THAT THE TREASURY DEPARTMENT MADE A MISTAKE BY DISBURSING THE LOAN TO THE FREIGHT COMPANY, BECAUSE IT DIDN’T MEET THE STANDARDS TO QUALIFY FOR THE BUSINESS LOAN. 

 

YELLOW HANDLES PALLET-SIZED SHIPMENTS OF FREIGHT ACROSS THE COUNTY FOR COMPANIES LIKE WALMART AND HOME DEPOT – AND MOVES SHIPMENTS FROM NUMEROUS CUSTOMERS IN THE SAME TRUCK. IT’S A SEGMENT OF THE TRUCKING INDUSTRY KNOWN AS LESS-THAN-TRUCKLOAD, OR LTL. YELLOW HANDLES ONLY ABOUT 7-PERCENT OF THE NATION’S 720-THOUSAND LTL SHIPMENTS. ACCORDING TO ONE TRUCKING INDUSTRY INSIDER, SINCE THERE IS ABOUT A 10-PERCENT EXCESS CAPACITY IN THE LTL SECTOR, THE CLOSURE OF  YELLOW SHOULDN’T CAUSE A SIGNIFICANT DISRUPTION IN SUPPLY CHAINS., BUT IT WILL CAUSE HIGHER RATES FOR SHIPPERS WHO DEPEND ON LTL CARRIERS SINCE IT WAS THE EXCESS CAPACITY THAT SENT PRICES LOWER. 

 

YELLOW SAID IT WILL ISSUE A PUBLIC STATEMENT ON JULY 31 ABOUT THE STATE OF THE COMPANY.