Yellow Corp. announced it is seeking Chapter 11 bankruptcy protection. Yellow will also be entering an agreement that would help it secure financing for the costs associated with a shut down.
The nearly 100-year-old company filed for bankruptcy in federal court in Wilmington, Del. In the agreement, Yellow said it would enter a “debtor-in-possession” agreement which it would be provided with “needed liquidity which will be used to support the businesses throughout the marketing and sale process, including payment of certain pre-petition wages.”
This agreement will help Yellow restructure its $1.5 billion in debt, which includes more than $700 million owed to the U.S. government.
In total, Yellow has 300 facilities and a fleet of more than 12,500 semi-trucks and 42,000 trailers.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” Yellow CEO Darren Hawkins said in the statement. “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.”
This shutdown will result in as many as 30,000 people being out of a job. This includes 22,000 workers who are represented by the International Brotherhood of Teamsters Union.
In the statement provided by Yellow, the blame for bankruptcy was placed on the union group.
“All workers and employers should take note of our experience with the International Brotherhood of Teamsters 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.”
While IBT hasn’t made a direct response to this claim, on July 31 union president Sean O’Brien said, “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.”
“We tried everything to work with IBT leadership and did all we could to save employees’ jobs,” Hawkins said in the Aug. 7 announcement. “We are crushed by today’s announcement, yet we are grateful to our tens of thousands of employees who took care of our customers until the end.”
Other industry professionals have also weighed in on the situation.
“The company was making incredible progress on its plan to reduce its cost structure and get back to profitability, but without an agreement with the union there was no possibility of the company continuing with the cost cuts and the consolidation plan, and there was no way to renegotiate the debt that was coming in 2024,” said Stifel research director for transportation Bruce Chan in the days following the company’s July 31 closure. “It was a slow bleed, but there was a sequence of events that really drove the timing that unfolded recently.”
“Yellow’s customers were nervous they were going to have a strike with the Teamsters, and they were worried whether the company was going to make its financial obligations [and] started pulling their freight from Yellow and sent the business to other LTL carriers,” said Michigan State University business professor Jason Miller. “It was a catastrophic failure, and they lost a substantial amount of freight, especially with the cash position they were in.”
Paul Bingham, director of transportation consulting with S&P Global Market Intelligence, said the U.S. Treasury will likely end up taking a significant hit. “Whatever the U.S. government owned — 30% of the stock — that goes to zero in bankruptcy court. The shareholders get zero,” he said. “There are not enough residual assets left where anybody but some higher-rated debt holders will get any money out of this.”
American Trucking Associations has created a website to assist former Yellow employees with finding new jobs in the trucking industry.
“Our message to former Yellow employees is that we want them to remain a part of the industry that they have done so much to build and strengthen,” ATA President Chris Spear said.
