Report: Yellow is Preparing to File for Bankruptcy
The end for Yellow Corp. could be near.
The less-than-truckload (LTL) giant is preparing to file for bankruptcy, according to The Wall Street Journal.
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Sourcing Journal reached out to Yellow for comment.
Yellow recently got a break from lenders that give it some breathing room on loan obligations.
Yellow previously reported having more than $100 million in available liquidity, but said it could run out of cash by the middle of July. It also has to refinance $1.2 billion in debt by 2024.
Although the trucking company averted a strike from its 22,000 Teamsters-represented employees, many customers, Walmart and The Home Depot reportedly among them, still diverted their freight elsewhere.
This shift is making an impact. In a research note, Stephens estimated that Yellow may be close to burning through whatever cash it has left. The investment bank said revenue per day is 70 percent below where it was in the second quarter.
“If [Yellow] had roughly $100 million in cash at the end of June, burned $4 to $5 million a week during the first two weeks of July, burned an additional $20 to $25 million last week and is now burning $9 million to $10 million per day, it is reasonable to believe that the company could breach its $35 million liquidity requirement at any moment,” the note read.
According to FreightWaves, Leah Despain, vice president of sales at Yellow, informed staff on Wednesday that their last day would be Friday and that the company will file bankruptcy on Monday.
The employees were reportedly instructed to tell customers of the bankruptcy plans and to take paid time off for the rest of the week.
Yellow’s possible bankruptcy comes amid a major freight recession which has seen trucking rates collapse amid declining consumer demand. According to the Federal Motor Carrier Safety Administration (FMCSA), more than 50,000 active motor carriers including truckload, last mile and LTL fleets stopped operating between May 2022 and June 2023, a 13 percent decline.
The volume of freight shipments moved by truck declined in the first quarter of 2023 by 6.1 percent year-over-year, according to the Q4 2022 U.S. Bank Freight Payment Index. This marked the fourth quarter in a row where volume has contracted on an annual basis.
While trucking capacity has dwindled over the past year, the lack of consolidation in the LTL industry—where Yellow is reported to command 10 percent of the market—has left shippers with more options on where they could divert freight.
This is also beneficial for the 28,800 Yellow employees who could end up out of a job in the event of a bankruptcy.
“I have to believe that these folks at Yellow are thinking, whether they’re a driver, a handler, a clerk, wherever you might be in that organization, ‘I’m working for Yellow today, and I could be working for someone else tomorrow,’” Dr. Thomas Goldsby, professor and Haslam Chair of Logistics at the University of Tennessee’s Global Supply Chain Institute, told Sourcing Journal. “There still is pretty robust demand in many geographies for logistics, certainly drivers. I mean, we’ve had a driver shortage going back to the Great Recession. Every trucking company was trying to find drivers from 2008-2010, when unemployment was considerably higher than it is today.”
The labor environment played a role in the problems at Yellow, which has a tense relationship with the Teamsters, who represent about 22,000 of the company’s employees.
Yellow sued the union last month for allegedly preventing the company effectively restructuring.
The Nashville, Tenn.-based trucking firm wanted to consolidate its four LTL operating companies—national carrier YRC Freight and regional carriers New Penn, Holland and Reddaway—and close some terminals to pay off debt and cut costs. But Yellow accused the Teamsters of blocking the changes by refusing to negotiate on the restructuring terms.
“When you look at the market context, and you look at the prevailing economics, it’s frankly an environment where labor can afford to be very, dare I say, pushy and demanding,” Goldsby said.
The Teamsters dismissed the lawsuit as “baseless,” saying its members have adhered to their collective bargaining agreement and fully honored all contractual commitments and obligations.
Tensions escalated when YRC Freight and Holland missed a combined $50 million payment to the healthcare and pension fund that provides the Teamsters-represented employees with benefits. Yellow later agreed to extend the healthcare benefits.
