Bankrupt Yellow Shutting Down: Report
Yellow Corp. ceased operations on Sunday, according to multiple media reports and a statement from the Teamsters Union. The company is expected to file for bankruptcy Monday.
A notice placed on locked gates outside Yellow’s terminals said the company ceased operations at noon on Sunday.
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All that’s remaining is an official statement from Yellow on its future. Sourcing Journal has reached out to Yellow for comment.
By the end of June, Yellow had more than $100 million in cash remaining, but that paled in comparison to the $1.5 billion in debt it owes, including $730 million it owed to the U.S. government stemming from a controversial $700 million Paycheck Protection Program (PPP) loan it secured in 2020 during the Covid-19 pandemic.
Yellow is believed to have burned through so much cash that it’s no longer a viable business. In particular, the trucking firm hemorrhaged money throughout July as major retailers like Walmart and The Home Depot reportedly pulled their shipments from the firm ahead of a potential strike by the Teamsters.
The closure would put nearly 30,000 employees out of work, including 22,000 represented by the Teamsters, who recently pulled off a milestone victory in negotiating a tentative new contract for 340,000 UPS workers.
The Teamsters Union said it was served legal notice early Monday that Yellow shuttered operations and would file for bankruptcy.
“Today’s news is unfortunate but not surprising,” said Sean O’Brien, general president, the Teamsters. “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.”
Yellow’s contentious relationship with the Teamsters saw the trucking company blamed the union for its demise.
Formerly known as YRC Worldwide, Yellow sued the union for $137.3 million, alleging that it prevented the business from implementing its One Yellow turnaround plan, which would have consolidated its four individual trucking firms.
The Teamsters threatened a strike after Yellow had been unable to make $50 million in pension and benefits payments, with the union reneging after the LTL provider said it could pay up by late August. In the end, the threat of a strike was too much for Yellow’s business.
The union says it is committed to ensuring members are protected, putting infrastructure in place to help affected members get assistance for job placement within freight and other industries.
With Yellow’s future union, LTL competitors have an opportunity to gain market share amid a freight recession where trucking companies across the board have seen year-over-year profits tumble on collapsing demand. Yellow has a roughly 8.9 percent share of U.S. revenue and 6.8 percent of shipments, according to data from logistics and transportation consultancy SJ Consulting.
“The industry is well positioned to pick up about 6.8 percent share of U.S. shipments, or some 48,000 a day since most carriers are running with slack capacity,” Lee Klaskow, senior freight transportation and logistics analyst at Bloomberg Intelligence, told Sourcing Journal. “Carriers can be selective about which freight they accept, and the market consolidation should provide them with pricing power.”
In a Friday earnings call, ArcBest said its week-prior asset-based segment experienced a more than 10 percent increase in core LTL rated shipments per day when compared to the same week in June.
“That would be consistent with some of the diversion from Yellow,” said Jason Miller, interim chairperson, department of supply chain management at Michigan State University’s Eli Broad College of Business. “But really, until we hear from FedEx Freight on how their volumes are moving, it’s going to be harder to tell because they are the behemoth now in the industry. FedEx and Old Dominion are the only two that potentially have the ability to pick up a substantial share of Yellow’s volume quickly, but I’m not sure they want to do that because this is lower-priced freight.”
This may signal a rate shift across the board, with Klaskow saying carriers may look to implement another general rate increase as Yellow customers seek out new trucking options.
“Customers might be hard pressed to find alternatives at similar prices found on Yellow,” said Klaskow.
Charles Haverfield, CEO of US Packaging & Wrapping, says businesses switching from Yellow to a more expensive rival carrier should expect costs to double.
Yellow still has valuable offerings that could be sold off in a liquidation, including the 3PL wing it put up for sale on Thursday. The company still operates a network of 317 terminals, which would also provide carriers with opportunities to upgrade facilities or expand into new markets, according to Klaskow. Last month, the company sold off its Compton, Calif. terminal for $79.5 million in an effort to help pay its outstanding loan balance.
