Trucking firm Yellow Corp. told workers it was shutting down, according to its union, jeopardizing 30,000 jobs as the historic freight brand faces heavy debt loads and operational woes.
(Bloomberg) — Trucking firm Yellow Corp. told workers it was shutting down, according to its union, jeopardizing 30,000 jobs as the historic freight brand faces heavy debt loads and operational woes.
The Nashville-based company notified union officials that it planned to file for bankruptcy after ceasing operations, according to a statement Monday from the International Brotherhood of Teamsters.
“This is a sad day for workers and the American freight industry,” Sean O’Brien, the Teamsters’ president, said in the statement.
Yellow, the third-largest less-than-truckload carrier in the US, didn’t immediately respond to repeated requests for comment. It has been struggling financially as it sought to refinance more than $1 billion of debt maturing in 2024.
The stock has been in a tailspin, plunging 72% this year and more than 94% since the beginning of last year. Its shares jumped 64% to $1.16 at 9:39 a.m. in New York, giving Yellow a market value of about $60 million.
What Bloomberg Intelligence Says
“Old Dominion, XPO and other LTL are well positioned to pick up about 6.8% share of US shipments, or some 48,000 a day. Carriers can be selective about which freight they accept, and the market consolidation should provide them with pricing power.”
— Lee Klaskow, transportation and logistics analyst
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Trucking firms and other companies across the shipping industry have been burdened by a slowdown in freight demand coming out of the pandemic. Yellow specializes in less-than-truckload service, which uses a warehouse network to combine several smaller shipments on one truck for short-haul deliveries. That makes it distinct from long-haul trucking and the parcel industry, which carries individual, usually smaller, packages.
Yellow has warned of challenges to integrate its various operations and of friction with its union. The Teamsters, which represent about 22,000 Yellow workers, threatened this month to strike after the company initially failed to make a $50 million payment for employee benefits. Yellow has about 30,000 total employees, according to its website.
The labor group said it’s “putting infrastructure in place” to help workers find union jobs in freight or other industries, according to the statement. In a memo last week, O’Brien warned workers that Yellow had stopped picking up freight from customers and the hope of the company continuing to operate “is fading.” The loss of the union jobs comes on the heels of the union winning large pay increases from United Parcel Service Inc.
The company has blamed the union for impeding a plan to combine its trucking divisions, which operate separately since the current incarnation of Yellow — a name in trucking that dates back decades — was formed from a string of acquisitions prior to the financial crisis of 2008 and 2009.
Yellow filed a $137 million lawsuit in June against the union for “unjustifiably blocking” the move.
Demand Decline
The shutdown of Yellow operations comes as the less-than-truckload demand has declined, making it easier for competitors to pick up the slack, said Melanie Burnham, chief financial officer of competitor Hercules, which has a fleet of 300 trucks and 30 facilities. The demise of Yellow would have been more disruptive for shippers if it had happened two years ago when there was little slack trucking capacity.
“There may be some small glitches. That’s going to happen,” Burnham said on Yellow customers switching to new carriers. “But there are some strong companies out there that can service the needs of the shippers.”
AFS Logistics, a broker that matches shippers cargo with carriers, recently pulled Yellow from the list of the more than 80 short-haul truckers that the broker uses. One of the biggest concerns is getting cargo stuck in a failed Yellow system, said Tom Nightingale, AFS’s chief executive officer. Still, Yellow has been struggling financially since the 2008-2009 downturn and shippers likely have contingency plans for their freight.
“Customers have been seeing this train coming down the track for a long time hoping that it wouldn’t happen, but nonetheless, they were anticipating that it certainly could,” Nightingale said.
(Updates share trading in fifth paragraph)
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