A letter obtained by FreightWaves shows less-than-truckload carrier Yellow Corp. is seeking to defer health and welfare as well as pension contribution payments for the next two months.
A Friday letter penned by Yellow Chief Financial Officer Dan Olivier is asking for a deferral for plan contributions for the months of July and August. The company said it would repay the delayed contributions with interest once it is able to refinance its outstanding debt.
“As a consequence of the Company’s inability to proceed with One Yellow, combined with the challenging business conditions confronting the entire LTL industry, the Company has been operating at a loss and rapidly exhausting its liquidity,” the letter read.
A spokesperson from Yellow told FreightWaves that the company has taken other actions to preserve liquidity and that the deferral it is seeking would not interrupt employee benefits.
“Our request to Central States should not have any effect on the pension benefits of our union employees. We are asking the pension funds that there be no interruption in payments or coverage for our employees. Our beneficiaries should see no impact to the contributions employees receive from the Pension Fund or the Health and Welfare Fund,” a statement read.
In an intraquarter update issued on June 9, Yellow (NASDAQ: YELL) reported that tonnage declined 16% year over year (y/y) in April and May. Over the last two years the carrier has seen its tonnage fall by roughly one-third, in part due to yield improvement initiatives but largely due to a broader network overhaul called One Yellow.
As part of the plan, the company is in the process of consolidating its four LTL operating companies and closing terminals deemed redundant. However, a second phase of the operational changes has been rejected by the International Brotherhood of Teamsters, which says the changes would violate the current collective-bargaining agreement.
The two parties had agreed to reopen their five-year labor deal early to hash out requests to modify work rules and increase the use of purchased transportation while at the same time establishing new employee pay and benefits rates. However, talks appear to have broken down as the union is adamant it will not entertain another bailout of the company at the expense of its members.
Teamsters officials have said wages, benefits and work rules concessions have cost its members billions in the past.
Yellow repaid $66 million of contribution deferral agreement notes in early 2023. The sum represented deferred contributions and interest payments to multiemployer pension funds dating back more than a decade.
Just prior to receiving a controversial $700 million COVID-relief loan in the summer of 2020, Yellow received a grace period for contributions to health and welfare and pension funds. The extension was intended to give the carrier time to catch up on delinquent payments associated with a sharp falloff in volumes tied to pandemic-related lockdowns.
At the time, the Central States Health Fund, known as TeamCare, estimated a three-month delinquency would total approximately $75 million. With no concrete repayment terms established, the program slid into suspension status with eight weeks of “layoff coverage” being enacted to cover member medical claims. As layoff coverage was set to expire, the company received the relief loan. A first tranche of $300 million was used to repay contractual obligations, which included health insurance and pension commitments among other items like lease payments for real estate and equipment and interest on debt.
Yellow recently said that its bankers will only sign off on a debt refinancing and a proposal for employee pay increases if the second phase of the One Yellow overhaul is approved by the union in short order. The company has advised it will “be out of money by August” if the plan isn’t approved.
Yellow reported total liquidity of $168 million at the end of the first quarter, which was down $109 million y/y. However, the change included a $98 million reduction in debt. Cash flow from operations was $13 million in the period.
The company continues to record net losses and booked a 100.8% operating ratio (operating expenses expressed as a percentage of revenue) in the quarter, meaning it incurred slightly more than a dollar in operating expenses to generate each dollar of revenue.
“The Company has been experiencing a significant deterioration in business conditions, which began in Q3 of 2022 and has persisted throughout 2023,” the letter said. “Unfortunately, Yellow’s ability to respond to those conditions has been materially impaired by the Teamsters’ continued resistance to implementation of the Company’s One Yellow network modernization.”
The Yellow spokesperson said the company is still hopeful it will be able to engage with the union at the bargaining table.
“We are doing everything possible to meet with the IBT to discuss the future of One Yellow and the importance of our 22,000 union jobs. We have been clear with the IBT that meeting to discuss Yellow’s common sense, company-wide modernization effort is essential to preserving jobs and strengthening the future of Yellow. We stand ready to meet anytime and anyplace.”
The Teamsters see it differently, according to a notice to members last week.
“Yellow has been unable to effectively manage itself for a long time,” Sean O’Brien, Teamsters general president, told members. “It is not left for the Teamsters to save this company; we have given enough. What happens next is out of our control.”
Shares of YELL were off 8.7% at 10:17 a.m. on Wednesday compared to the S&P 500, which was down 0.6%. The stock was down 16.7% on Tuesday.
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Bud Starkey
ABF has no problem ,fact they just gave their employees a $3.50 per hour raise and have a modern new fleet of trucks. Why? Could be they have a management team that knows how to work with employees. Looks to me that top management at Yellow looks at the employees as their cash cow. Of course they will always blame the union .
Joyce
Close them pigs down now
Trucker chuck
New penn and holland were very profitable carriers, until yrc bought them ! Roadway was always profitable, what happened ? They merged with yellow ! What happened to the “velocity ” driver at Roadway ? Freight sits on the dock, customers see that and choose another carrier ! Hopefully the lenders will throw them a life preserver, if not they call in the loan and take over the properties. I think the response by all employees that the implementation of one yellow in the east. South and Midwest is a no go !!!
Mike Hunt
The Union workers that work for yellow are a bunch of slack ass do nothings. The amount of stuff you expense, and waste money on is what is breaking the company. Also if you are Union and YOU fail to send in your pay, do not cry to payroll you glorified cuck!
Patrick
Yellow executives should have to take a big pay cut before the workers should not have to give up there pay because of Yellow miss management by executives SMH!!!!!!!!!
Mike
I work their currently, many of the employees are and have been upset for over a decade due to taking a 15% hit in income then to find out the upper management took bonuses in millions of dollars, so many moved on to the next job and some stayed but refuse to work hard now. All the upper management personals are useless and dead weight on the company yet they are still doing dumb things and hoping the employees will bail them out again but according to most employees I spoke with are rejecting to help again. Now it’s time to bring those millions back to the table that most of the upper management took from all the hard workers or its going to back fire. It’s a sad situation how poorly this great company is being managed. Will defenately hate to see it shut down.
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