Yellow Corp., a prominent trucking company, has officially declared bankruptcy after years of financial difficulties and mounting debt. This development has a significant impact on the transportation industry in the United States and affects shippers nationwide.
The Chapter 11 bankruptcy filing, submitted on Sunday, comes only three years after Yellow received $700 million in loans from the federal government during the pandemic. While Chapter 11 typically allows companies to restructure their debt while continuing operations, Yellow, along with other trucking companies in recent years, will liquidate. As a result, the company’s creditors, including the U.S. government, are unlikely to recover the funds they extended to Yellow.
Yellow’s dire financial situation can be traced back to decades of poor management and strategic decision-making.
In 2019, two other trucking companies, Celadon and New England Motor Freight, filed for bankruptcy protection and underwent liquidation.
Industry experts predict that former Yellow customers and shippers may face higher prices as they seek alternatives, such as FedEx or ABF Freight. Yellow was known for offering the lowest price points in the industry.
Yellow’s CEO, Darren Hawkins, expressed deep disappointment at the company’s closure after nearly a century in business. He highlighted Yellow’s contributions to job creation and fulfilling careers for countless Americans.
Formerly known as YRC Worldwide Inc., Yellow is one of the largest less-than-truckload carriers in the United States. Headquartered in Nashville, Tennessee, the company employed 30,000 individuals nationwide.
The Teamsters, the labor union representing Yellow’s 22,000 unionized workers, stated the company had issued a legal notice for bankruptcy and ceased operations. This followed the layoffs of hundreds of non-union employees.
In response to Yellow’s bankruptcy announcement, Teamsters general president Sean O’Brien expressed regret but acknowledged it was not entirely unexpected. O’Brien emphasized the negative impact on workers and the American freight industry.
Reports from publications like the Wall Street Journal and FreightWaves predicted the impending bankruptcy, noting a significant exodus of customers and a halt in freight pickups by the company.
These reports emerged shortly after Yellow managed to avoid a Teamsters strike through intense contract negotiations. The negotiation success led to a pension fund extending health benefits for workers at two Yellow Corp. operating companies, preventing the planned walkout. However, the deal required Yellow to pay its outstanding bills, including $50 million to the Central States Health and Welfare Fund. Yellow had requested a deferral of pension contributions but was denied by the fund.
Yellow attributed the prolonged negotiations as a contributing factor to the company’s demise, as it hindered the implementation of a new business plan to modernize operations and enhance competitiveness.
The company has petitioned the U.S. Bankruptcy Court in Delaware to allow payments for employee wages and benefits, taxes, and crucial vendors necessary for its operations.
Over the years, Yellow has accumulated substantial debts. As of late March, the company’s outstanding debt amounted to approximately $1.5 billion, with $729.2 million owed to the federal government.
In 2020, during the Trump administration, the Treasury Department granted Yellow a $700 million loan based on national security reasons. The Teamsters initially supported this loan. A recent congressional investigation concluded that the Treasury and Defense departments made mistakes in their decision-making process. The investigation also highlighted the risk of potential losses for taxpayers due to Yellow’s precarious financial situation at the time of the loan and ongoing struggles.
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