Yellow Corp. trucks are seen at a YRC Freight terminal on Friday in Kansas City, Mo. After years of financial struggles, Yellow is reportedly preparing for bankruptcy and seeing customers leave in large numbers – heightening risk for future liquidation. Charlie Riedel/ Associated Press
Trucking giant Yellow is ending operations and on the verge of bankruptcy, dragged down by years of ballooning debt and a steep loss of business.
The Teamsters were notified Sunday of the company’s pending demise, which would throw 30,000 people out of work – including 22,000 union members – and mark the industry’s biggest failure.
The Nashville-based company did not respond Monday to a request for comment.
Formerly YRC freight, Yellow is a less-than-truckload shipper, which transports relatively small loads. It is the third-largest company in this category, having delivered more than 14 million shipments in 2022.
Yet, in recent months, tensions with the Teamsters and an inability to refinance $1.3 billion in debt have rocked the company. In late June, Yellow sued the Teamsters, alleging it had been blocking the company’s attempts to restructure its business and refinance debt that included federal government loans. Then in July, the union and the company narrowly averted a strike tied to health-care benefits, leading to a drop-off in business, said Jack Atkins, managing director at Stephens.
While the turbulence of recent months accelerated company losses, Yellow’s struggles can be traced back some 15 years, Atkins said – beginning with a series of acquisitions that the company failed to smoothly integrate into its business. That led to persistent inefficiencies, financial struggles and tensions with the union over wages and benefits.
Those tensions burst to the fore in June when the union refused to approve the company’s restructuring plan, which was necessary to refinance its debt. And company statements highlighting its financial struggles grew “increasingly concerning” to customers, who switched shippers and further strained the company’s business, Atkins said. In late June, matters did not improve when Sean O’Brien, the Teamsters’ general president, tweeted an image of a headstone bearing the company’s name. Yellow sued the union days later.
By the time Yellow and the union averted a strike, Yellow had lost 80 percent of its freight, Atkins said.
“We are also in the midst of a very challenging freight market broadly where freight volume, and Yellow’s part of the market, are down,” he added.
The freight industry is indeed in the midst of one of its most brutal recessions in memory, as consumers return to pre-pandemic habits and demand for freight shipments has cooled. While that has meant fluid supply chains and on-time shipments for consumers, some drivers are struggling to make ends meet.
Though Yellow’s absence will disrupt the less-than-truckload market – perhaps resulting in higher shipping prices for some customers – it won’t be enough to cause a repeat of the pandemic-era supply chain disruptions, Atkins said.
The shutdown also comes three years after the Trump administration gave the company a $700 million covid-relief loan, which a congressional report released in June said had been the result of “missteps.” That investigation found that the Treasury and Defense departments did not properly justify that Yellow qualified for the loan for national security reasons, adding that Yellow’s “precarious financial position at the time of the loan exposed taxpayers to a significant risk of loss.”
In return for the loan, the Treasury Department received a 30 percent equity stake in Yellow.
As of March, Yellow had repaid just under $55 million in interest – and only one $230 payment toward the in principal amount, according to a May report by the Special Inspector General for Pandemic Recovery. Yellow had $729.2 million in outstanding debt on the loan, including unpaid interest, the report said.
It’s unclear how the Treasury Department will recoup the apparent losses. The department did not respond to a request for comment.
The “news is unfortunate but not surprising,” O’Brien said in a statement Sunday. “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.”
The union said Sunday that it was working to help the company’s union members find new union jobs in freight and other industries.
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