Yellow trucking could shutter within days leaving trucking firm's 30,000 workers out of a job
- The nearly 100-year-old American company could shut down as soon as Monday
- Reports of a cash crunch combined with major layoffs on Friday have observers preparing for the worst
- The company was given a controversial $700million COVID loan from the government that Congress now says should not have been granted
Yellow, one of the country's oldest and largest trucking businesses, is preparing to file for bankruptcy and may collapse within days, leaving some 30,000 workers without jobs.
The nearly 100-year-old company is known for its competitive pricing and has more than 12,000 trucks shipping freight across the US for brands including Walmart and Home Depot.
According to the Wall Street Journal, the company is preparing to file for bankruptcy and is in the process of selling off other parts of the business.
Total shutdown is expected within days.
Hundreds of non-union Yellow employees were laid off Friday from the Nashville, Tennessee, company, and about 22,000 Teamster members' jobs hang in the balance.
The 99-year-old American trucking business may shutdown as soon as Monday, leaving 30,000 workers without jobs
Yellow is the third-largest US carrier in the so-called 'less-than-truckload' segment, which operators carry goods for multiple customers on the same trailer
Since 2021, the struggling brand has implemented a cost-cutting plan that executives hoped would put the business back on track.
The company's circumstances have become all the more dire as shipping demand across the freight sector declined substantially this year.
In a memo sent out on Friday, Teamsters told local unions that 'likelihood that Yellow will survive is increasingly bleak.'
They urged employees to gather their personal things and prepare for the worst.
In a memo to staff, Yellow wrote: 'The company is shutting down its regular operations on July 28, 2023, closing and/or laying off employees at all of its locations, including yours.'
Last week, a company official told the New York Times that the company was preparing for 'a range of contingencies.' By Friday, a company spokesperson would not tell the Times anything more.
Yellow is saddled with some $1.5 billion in debt as of late March, including $729.2 million owed to the federal government for a controversial pandemic-era loan the Treasury Department extended on national security grounds in 2020.
A June 2023 congressional report concluded the Treasury Department dodged its own policies to issue the loan and the previous administration had made a mistake in doing so.
Last week, Yellow, which had $5.2 billion in revenue last year, narrowly avoided a driver strike by Teamster union members after failing to make a $50 million payment for employee benefits. The company now has a 30-day period to catch up on pension and benefits payments.
In May, Yellow reported a loss of $54.6 million, a decline of $1.06 per share, for its first quarter of 2023. Operating revenue was about $1.16 billion in the period.
An investors note from financial service firm Stephens last week estimated that Yellow could be burning between $9 million and $10 million each day.
Yellow is saddled with some $1.5 billion in debt as of late March, including $729.2 million owed to the federal government for a controversial pandemic-era loan the Treasury Department extended on national security grounds in 2020
Teamsters threatened to strike when they learned the company had stopped making pension and benefits payments last week
Using a liquidity disclosure from earlier this month, Yellow had roughly $100 million in cash at the end of June, the note added - estimating that the company has been burning through increasing amounts of money through July.
'It is reasonable to believe that the company could breach its $35 mil. liquidity requirement at any moment,' Stephens analyst Jack Atkins and associate Grant Smith wrote.
The reports of bankruptcy preparations arrive just days after a strike from the Teamsters, which represents Yellow's 22,000 unionized workers, was averted.
Yellow's CEO Darren Hawkins is pictured. His company faces potential bankruptcy
A series of heated exchanges have built up between the Teamsters and Yellow, who sued the union in June after alleging it was 'unjustifiably blocking' restructuring plans needed for the company's survival.
The Teamsters called the litigation 'baseless' - with general president Sean O´Brien pointing to Yellow's 'decades of gross mismanagement,' which included exhausting the $700 million federal loan.
On Sunday, a pension fund agreed to extend health benefits for workers at two Yellow Corp. operating companies, averting a strike - and giving Yellow '30 days to pay its bills,' notably $50 million that Yellow failed to pay the Central States Health and Welfare Fund on July 15, the union stated.
While the strike didn't occur, talks of a walkout may have caused some Yellow customers to pull back, Chan said.
Talks between Yellow and the Teamsters, which also represents UPS's unionized workers, are ongoing. The current contract expires in March 2024.
'The financial struggles of Yellow are not related to the union and the contracts,' Jindel said, pointing to management's responsibility around its services and prices. He added the union wages from Yellow are 'lower than any competitor.'
If Yellow files for bankruptcy and customers continue to take their shipments to other carriers, like FedEx or ABF Freight, prices will go up.
