Yellow Avoids Teamsters Strike but Bankruptcy Isn’t off the Table

Glenn Taylor
·4 min read
19

Yellow Corp. averted a threatened strike by 22,000 Teamsters-represented workers on Sunday, after the less-than-truckload (LTL) company agreed to extend healthcare benefits for employees at the firm’s YRC Freight and Holland divisions. But even with a strike out of the equation, the trucking giant is still at risk of going bankrupt.

Central States Pension Fund will pay more than $50 million it owed in worker benefits and pension accruals to the union employees. The fund’s board of directors initially suspended the benefits when Yellow had first missed a July 15 deadline to make its healthcare and pension payments to the fund.

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The new agreement gives Yellow 30 days from Sunday to pay its bills. The Teamsters in a statement said that they understand the company will make the payment by Aug. 6.

Union brass, which is already embroiled in a high-profile contract negotiation with UPS which could lead to a potential strike on Aug. 1, met with Yellow representatives Sunday night in Washington, D.C. to review the current contract.

Although this represents a major win for Teamsters employees, which comprise most of the company’s 28,800 workers, the future of the company remains in doubt amid reports of companies diverting freight to other carriers.

At the end of June, Yellow reported having more than $100 million in cash holdings, but said it could run out of cash by mid-July. It recently had to secure a waiver from lenders that allows its finances to drop below predetermined levels tied to its loans.

One logistics academic believes the market can bear a worst-possible outcome for Yellow.

“They will most likely go bankrupt or reduce their operations significantly, but there is sufficient capacity in the market to absorb the freight,” Dr. Chris Caplice, executive director at the MIT Center for Transportation & Logistics, told Sourcing Journal on Monday.

Walmart and The Home Depot have pulled their business from Yellow in recent weeks, Reuters reported, and Twitter commentary seems to confirm this development. Yellow CEO Darren Hawkins said in a February earnings call that the company’s retail clients “tend to be very large shippers.”

Sourcing Journal reached out to Walmart for comment. The Home Depot declined comment.

Earlier this month, Uber’s freight division said it paused sending shipments to Yellow.

Dr. Thomas Goldsby, professor and Haslam Chair of Logistics at the University of Tennessee’s Global Supply Chain Institute, told Sourcing Journal that major clients like Walmart still have options if reworked their Yellow relationship.

“Walmart operates one of the world’s largest private fleets, so they have the luxury of deciding, ‘What are we going to control ourselves?’ And then for the freight that’s not so economic for them, they’ll go to the market,” Goldsby told Sourcing Journal. “To some extent, your domain, if you will, is going to be defined based on size.”

Goldsby said major retail networks likely will continue to shift volume to both LTL, which includes shared trucking space with other shippers, and full truckload (FTL) carriers, which are exclusively shipping goods from one customer.

“If I was doing the calculus, first of all, LTL is usually not your first choice anyway,” said Goldsby. You’re going to be trying to divert as much as you can via full truckload. But it’s a good option, if you’re not going to be filling up that truck, or your frequencies are not that great. It’s great to have that option.”

Estimates suggest that Yellow controls up to 10 percent of the total U.S. LTL market, according to TD Cowen. Echoing Caplice’s comments, Goldsby noted that the strength in capacity, also indicating that LTL is far less consolidated as a whole than the small parcel industry, where UPS has a 24 percent share of total volume shipped. This makes a potential bankruptcy less of a wider national concern than the impact of a possible strike.

“Particularly right now, with trucking prices down, it’s a good time to say, ‘Hey, big truckload carrier, we’re thinking about shipping more business to you.’” Goldsby said. “Depending on what sector you find yourself, you may be able to avoid LTL almost entirely.”

Yellow’s detente with the Teamsters doesn’t meant the tension is gone completely. The trucking firm’s $137.3 million lawsuit accuses the Teamsters of preventing the LTL company from implementing the second phase of its One Yellow restructuring plan.

Under this plan, Yellow would consolidate its four LTL operating companies and close some terminals to slash costs. While Yellow accuses the Teamsters of breaching their collective bargaining agreement, the union alleges a restructured Yellow would risk union jobs.

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