After 99 years of operation, the freight carrier company Yellow has shut down due to an overwhelming amount of debt and a standoff with the Teamsters union. On July 30, the company filed for bankruptcy following an inability to pay off a government loan in relation to its dwindling success. The Nashville trucker has been struggling for years, fighting to pay off the debt it has accumulated via a set of mergers as well as a federal Covid-19 relief loan received in 2020. Poor management and strategies have placed severe financial stress on the company.
The shutdown has led to the loss of 30,000 jobs, 22,000 of which were held by members of the IBT (International Brotherhood of Teamsters). To cover for payments such as wages, salaries, and benefits, the company has sought bankruptcy court authorization in Delaware. Estimates place their assets and liabilities anywhere from $1 billion to $10 billion. Yellow has also reported obtaining a loan and selling assets so as to aid in its chapter 11 bankruptcy protection.
The closure of Yellow also impacts the domestic transportation infrastructure, as the company owned more than “12,000 trucks and dozens of freight terminals across the country”. Its cut-rate prices had helped major retailers, such as Walmart and Home-Depot, supply their products to various store locations. Yellow had boasted success several years ago after acquiring rivals and gaining a 8% to 10% control of the freight market; however, it seems that declining shipping demands and failed operational changes have ultimately led to its financial downfall.
Interestingly enough, this is not the first time the company has faced bankruptcy threats. In 2010, Yellow avoided this issue after negotiations with Teamsters who eventually agreed to take cuts in pay and benefits. This spring, the Teamsters chose to block the company’s outlined operational overhaul. Consequently, Yellow lost significant business with customers and faced greater challenges in dealing with the $1.3 billion debt that will mature in 2024. Roughly $700 million dollars of this debt are a result of a federal government loan and more than $500 million is owed to the private equity firm Apollo Global Management. Despite hiring an investment bank, Yellow was unable to deal with its debt, especially in the face of compounding resistance from the Teamsters Union.
The company’s closure also has impacted the Central States Pension Fund as Yellow was an important contributor to the struggling program that had just received a federal bailout in December. Chief Executive Darren Hawkins primarily blames the Teamsters’ refusal to negotiate and their destructive methods as reasons for the company’s failure. A union spokesman refuted this by highlighting the billions of dollars in work-related concessions that Teamsters have made for over a decade. In the union members’ eyes, Yellow was incapable of managing itself.
Yellow’s Chapter 11 filing allowed it to restructure some of its debt while operations continued. Nevertheless, the imminent threat of liquidation has now become a reality. Even with having had 50,000 daily shipments, many industry experts are not fearful of a major supply chain disruption following the liquidation. In fact, previous freight sites have already been sold to other trucking companies, ensuring that domestic transportation routes are kept alive and well within the United States.
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