Is Yellow freight going out of business? Yellow Corp is one of the biggest less-than-truckload (LTL) logistics companies in the nation. It is in trouble as Wall Street pressures it as contract talks with the International Brotherhood of Teamsters stall.
The less-than-truckload carrier Yellow Corp. reportedly told Teamsters brass this month that if the proposed modification in operations isn’t approved, it will run out of money by August. Yet the union claims that Yellow has been poorly managed for years. It commits to avoid providing more help.
Three trucking industry experts told FreightWaves that it would be crucial for Yellow to continue. Let’s know in detail about this business in this article.
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About Yellow Corporation
An American holding corporation for transportation is called Yellow Corporation. Its main office is in Overland Park, Kansas. YRC Freight, New Penn, Holland, and Reddaway, three regional less-than-truckload (LTL) carriers, and freight brokerage HNRY Logistics are some of its subsidiaries. Yellow was known as YRC Worldwide from 2006 to February 2021. On February 4, 2021, YRC Worldwide changed its name again, returning to Yellow Corporation.
Yellow’s independent operating firms are being consolidated into a single platform for a network redesign. Some terminals will be shut down, and workplace policies will alter. The aim is to become a superregional carrier with a lower cost structure. More than 200 terminals in the East, Central, and South regions are affected by the process.
Wall Street calls for layoffs at Yellow Corp
The business implements the initial steps of Phase 2 of “One Yellow.” It is a plan to integrate the company’s numerous subsidiaries and many of its hubs. Thus, Yellow is completely overhauling its business model. The plan includes eliminating some of Yellow’s facilities and turning many employees into “utility” positions. The truckers will also have to work the docks at facilities within 175 miles of their home facility.
The Teamsters have openly opposed Yellow’s attempts to implement the One Yellow plan. But they haven’t spoken much about the effects the restructuring will have on the workforce. In its attempts to discuss the business changes with workers, it has instead concentrated on Yellow’s violation of the existing contract.
The Teamsters requested to advance contract negotiations by one year due to the One Yellow Plan. Yellow acknowledged that it would need the Teamsters to enact any changes to the workforce, and they agreed.
Yet, talks have halted due to strong public statements from the Teamsters. Also, the corporations are blaming one another for not bargaining in good faith. The union tries to force a deal through at ABF and is in contract negotiations at UPS. The public spectacle over One Yellow has been a clear attempt by the union to position itself as a force fighting for employees.
The Teamsters have often emphasized granting Yellow “billions in concessions.” This is even though the business has run itself out of business. This includes significant reductions in Yellow’s pension agreements, among other factors. Regional variations exist here. The corporation has completely abandoned the West Coast Teamsters pension fund in favor of a 401(k). Yellow has been permitted to contribute to the Central States Fund at a rate that is one-quarter of the standard rate.
There are only a few details about the actual negotiations. But it has been stated that the Teamsters and the company have decided to move forward with a 40-cent rise from the current contract scheduled for October. Also, the company is offering an extra pitiful 60-cent rise to get the contract through.
Yet Yellow faces a significant challenge: it lacks the funding to grant even this absurdly small rise. Yellow is in serious need of a new contract because it is broken. According to market analysts, Yellow could run out of money by August and declare bankruptcy later this year.
Yellow’s financial challenges
Yellow’s credit rating was downgraded in May. Due to Yellow’s incredible $1.6 billion in debt, of which $700 million is owed to the federal government, there is a big chance of default. According to Yellow’s most recent financial reports, the business is losing money. Even when it has generated a profit, it has done so on a relatively small scale compared to the company’s outstanding debt. Over $1.3 billion of Yellow’s debt will come due this year. Thus, it’s uncertain if Yellow can handle the pressure.
Yellow needs to raise more money to prevent the company’s financial collapse. Yet it cannot do so unless a new agreement with the Teamsters is reached. Yellow warned staff in a memo that the “business is out of cash and is in danger of closing or liquidation. Phase 2 and the One Yellow changeover delays have cost money. Without demonstrating to the market that we can carry out our One Yellow ambitions, the company will not be able to pay its obligations or get lender funding.”
In other words, Yellow risks going out of business. Unless it can prove to Wall Street that it can get the most value out of its employees while still making money for investors.
The Teamsters have not presented any arguments against salary decreases and job losses. They have acknowledged giving the businesses billions of dollars in employee funds. They offered it through pay, benefits, and pension reductions. But Yellow is still on the verge of insolvency.
O’Brien said in a statement, “We have contributed enough; the Teamsters are not left to preserve this business.” We have no control over what happens next.” In other words, the Teamsters will accept that thousands of Yellow workers may lose their employment.
Yellow wishes to interconnect networks
Yellow is a significant player in the less-than-truckload sector of the trucking industry. LTL carriers transport the goods of many clients in a single trailer. Logistics Management states Yellow is the third-largest LTL carrier, with about 10% of the market share.
Despite this size, Yellow hasn’t been a favorite among LTL insiders for many years. According to Gabe Pankonin, CEO of Rocket Shipping, an LTL brokerage, “People have been discussing Yellow going under for a while as I’ve been in the market.”
In 2009 and the first several months of the epidemic, Yellow came close to going bankrupt. Yellow got a contentious $700 million federal loan through the CARES Act initiative in the latter case. Thus giving the U.S. Treasury a sizable ownership stake in Yellow. According to a business representative, Yellow has repaid approximately $56.8 million of the debt.
YRC Freight is Yellow’s nationwide LTL carrier. Additionally, the business combines many regional LTL carriers that it has purchased over the years. They are:
- In 2003, New Penn, which serves the Northeast, was purchased as a part of the Roadway transaction.
- In 2005, Reddaway, which serves the West, was purchased as part of the acquisition of US Freightways.
- In 2005, US Freightways bought Holland, a carrier that serves the Midwest and a portion of the Southeast.
Today, two Yellow facilities from different historical companies may be located next to each other and run independently. This is according to a company representative. For instance, two drivers from different shipping companies might independently arrive at the loading dock of one client.
According to Yellow, consolidating these networks is essential for the business’ sustainability. Yellow is looking to merge two facilities in a Cincinnati suburb that are close to one another but
Have different workforces. Yellow is closing a Holland facility in Milwaukee within half a mile of a YRC terminal. Thus, it will affect 189 workers.
Yellow must have finished integrating its network in the western United States by September 2022. This is according to a statement released by the firm. Of course, consolidating more terminals would result in financial savings.
Additionally, Todd Maiden (Finance Editor) of FreightWaves noted that the money made from selling those facilities’ real estate would aid the carrier in paying down its large debt.
Teamsters are opposing Yellow
O’Brien has stated he will be harsh on employers since taking office as Teamsters president in 2022. That represents a turnabout from prior Teamsters leaders, especially regarding Yellow.
O’Brien stated in a video that “Yellow has been unable to handle itself for a long time effectively.” The business now claims that it will run out of money by August. Remember that the Teamsters previously returned everything they could to keep Yellow afloat? he added.
Uncertainty surrounds the number of Teamsters’ jobs that could be at risk from terminal consolidation. Yellow has informed facilities in states like Ohio, New York, and Wisconsin that layoffs may occur there. This is according to a March report by FreightWaves.
In a few warnings, the business stated it “hopes to carry on employing every one of the affected Employees at other Company Sites.”
Conclusion
Pankonin believes that Teamsters may be putting in the extra effort against Yellow to position the union for future conflicts with other freight companies.
“The leverage they have with ABF, TForce, and UPS will be reduced if they give in to their demands for paid transportation, pay increases, and other demands.” Sadly for Yellow, it would be a cycle if it were any other year. Yet, given that they’re attempting to merge, it puts them in a difficult position,” he warned.
O’Brien thinks that Yellow should be shut down nonetheless. The Teamsters president stated in the video that “Yellow will not be trusted” because “our members have proven time and time again that.” “These executives are completely incompetent. They have destroyed this business. Our members have already made a lot of sacrifices. They have made enough sacrifices. A poor job may not always be worth it.
According to O’Brien, Yellow has demonstrated that it doesn’t deserve and can’t be expected to continue with its current structure. “The Teamsters cannot and will not continue subsidizing this business with concessions.”
