Yellow, the troubled trucking company that secured a $700 million loan from the federal government during the pandemic, has informed its employees of its closure and subsequent layoffs at all locations. This news comes as Yellow is expected to file for bankruptcy in the near future. The closure of the company will result in the loss of approximately 30,000 jobs and marks the end of a business that was once considered vital to the nation’s supply chains, prompting a federal bailout just three years ago.
In a memo reviewed by The New York Times, the company stated, “The company is shutting down its regular operations on July 28, 2023, closing and/or laying off employees at all of its locations, including yours.” Yellow has been engaged in prolonged labor negotiations with the International Brotherhood of Teamsters regarding a new contract that is crucial to its restructuring plan.
As of the end of March, Yellow’s outstanding debt totaled $1.5 billion, with $730 million owed to the federal government. While Yellow has paid $66 million in interest on the loan, it has only repaid $230 of the principal, which is due next year. The potential bankruptcy of Yellow, one of the largest freight trucking companies in the United States, could have far-reaching effects on the nation’s supply chain. This development comes shortly after United Parcel Service reached an agreement with its union, averting a strike.
Yellow’s management and union negotiators have been unable to reach an agreement on wages and benefits. The fate of Yellow’s assets remains uncertain. In 2020, the Trump administration granted the company a pandemic relief loan in exchange for the federal government assuming a 30 percent equity stake. Yellow sought the assistance of the Biden administration in brokering a deal with the union, but the White House has not provided any comment on the situation.
While Yellow was reportedly preparing for various contingencies, talks with the union were ongoing. However, a company spokesperson declined to comment on the future of the firm. The Teamsters, in a letter to local unions representing Yellow workers, warned that the company’s survival prospects were growing increasingly bleak. The letter recommended that employees retrieve their personal belongings and tools from the terminals.
As Yellow’s bankruptcy appeared more likely, shippers started diverting freight away from the company’s network, leading to a significant drop in its stock price. Analysts at financial services firm Stephens estimated that Yellow could be burning through as much as $10 million in cash daily. They described the trucking company as “mortally wounded” due to lost business and the strike threat, reaching the “end of the road.”
The financial struggles at Yellow, formerly known as YRC Worldwide, have been mounting for years. In July 2020, the Treasury Department approved a $700 million loan to help the company stay afloat. However, the loan raised concerns because the company was already facing financial difficulties and was being sued by the Justice Department for alleged fraudulent activities against the federal government over a seven-year period. Ultimately, the company agreed to pay $6.85 million to settle those allegations.
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