By Naveen Athrappully
U.S. trucking firm Yellow Corp. filed for Chapter 11 bankruptcy protection on Sunday after the company buckled under pressure from a mounting debt load as well as a standoff with employee union.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” said Yellow’s Chief Executive Officer, Darren Hawkins in an Aug. 6 press release. “Today, it is not common for someone to work at one company for 20, 30, or even 40 years, yet many at Yellow did. For generations, Yellow provided hundreds of thousands of Americans with solid, good-paying jobs and fulfilling careers.”
The Nashville, Tennessee-based nearly 100-year-old company’s bankruptcy filing puts about 30,000 workers at risk at a time when the freight industry is already grappling with slumping volumes.
The company is a dominant player in the “less-than-truckload” segment that hauls cargo for multiple customers on a single truck.
Its clients include large retailers such as Walmart and Home Depot, manufacturers, and Uber Freight. Some companies had paused shipments to Yellow on fears they could be lost or stranded if the trucking firm went bankrupt.
Prior to its demise, Yellow, one of the largest U.S. trucking companies, held roughly 8 percent to 10 percent of the market share, per brokerage TD Cowen.
Company Versus Union
Chief executive Hawkins blamed the company’s downfall on its botched relationship with the Teamsters union, which represented around 22,000 Yellow workers.
“All workers and employers should take note of our experience with the International Brotherhood of Teamsters (‘IBT’) and worry,” said Hawkins. “We faced nine months of union intransigence, bullying and deliberately destructive tactics. A company has the right to manage its own operations, but as we have experienced, IBT leadership was able to halt our business plan, literally driving our company out of business, despite every effort to work with them.”
Mr. Hawkins claimed that the company was on its way to becoming “industry-dominant” when the company’s efforts were thwarted by the IBT union.
He detailed an initiative called “One Yellow” that the company was undertaking. The union approved Phase 1 of the plan, which he claimed was a success as “redundancies were reduced, freight departed terminals earlier and customer service improved.”
“Unfortunately, despite Phase One’s approval and success, IBT leadership implemented a nine-month blockade, halting the remainder of Yellow’s business plan. This caused Yellow irreparable harm.”
A “ruthless campaign” ensued with the union calling for “Yellow’s demise,” said the CEO. The resultant delay was followed by losses of “more than $137 million in adjusted EBITDA.”
At the end of June, Yellow filed a lawsuit against Teamsters, citing breach of contract and loss of enterprise value.
According to another company press release, Yellow claims the defendants (Teamsters) “breached their binding union contract with Yellow causing more than $137 million in damages by unjustifiably blocking, for over eight months, Yellow’s restructuring plan to modernize its business.”
The company stressed: “Without these crucial reforms, which are standard practice in the industry today, Yellow likely will not survive, 30,000 jobs will be lost, including 22,000 union jobs, and its shareholders, including the federal government, which owns 30.1% of Yellow stock, will be severely damaged.
“Yellow remains a critical part of the domestic supply chain with hundreds of thousands of customers—large and small—relying on the Company to deliver freight coast-to-coast.
“For many months, we have made good faith efforts to meet with the IBT to propose a path forward that works for all parties, but they refuse even to meet, let alone engage in honest talks.
“We have communicated with all stakeholders in Washington, D.C., including the Biden Administration, to apprise it of the imminent loss of tens of thousands of jobs, the significant anti-competitive effects on the American economy and the devastating impact to the supply chain, and to seek their assistance in persuading the IBT to negotiate a mutually acceptable agreement.
“We are fighting for the livelihood of our 30,000 employees who are good hard-working people. We will do all we can to save these American jobs and to protect our shareholders, including the American taxpayer.”
Yellow blamed Sean O’Brien, the IBT general president, for worsening the negotiation attempts
Yellow’s bankruptcy puts at risk a $729.4 million U.S. Treasury loan maturing on Sept. 30, 2024. The loan was issued during the previous Trump administration.
The Teamsters union was served legal notice following Yellow’s bankruptcy filing.
“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 and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry,” said Mr. O’Brien on July 31.
Yellow is the owner of about 12,000 trucks and dozens of freight terminals, and has listed 30 unsecured creditors in its bankruptcy filing like BNSF Railway, Amazon.com, and Home Depot.
Loans made in previous years have come under criticism.
“Yellow had longstanding financial problems before the pandemic, was not essential to national security and should never have received a $700 million taxpayer bailout from the Treasury Department,” Rep. French Hill (R-Ark.) and member of the Congressional Oversight Commission, said in a statement last week, cited the Wall Street Journal.
“Years of poor financial management at Yellow has resulted in hard-working people losing their jobs.”
Yellow has faced the threat of bankruptcy a few times over the past two decades. According to the outlet, the company averted bankruptcy in 2010 after the Teamsters agreed to take cuts in pay and benefits.
Yellow and the Teamsters union have been reached out to for comment.
Reuters contributed to the report.