Teamsters brass said Monday that less-than-truckload carrier Yellow Corp. has informed them it will be out of money by August if a proposed change of operations isn’t approved. The union, however, says the company has been mismanaged for years and vows to not bail Yellow out again.
“Yellow has been unable to effectively manage itself for a long time,” said Sean O’Brien, Teamsters general president, in a video to members. “Now, the company says it’ll be out of money by August. Do not forget — Teamsters have already given back everything they possibly could to keep Yellow afloat.”
O’Brien said the union has given billions to the company in the form of wages, benefits and work rules concessions in the past. He also pointed to the $700 million the carrier received from the government in the form of a COVID-relief loan, which it used to catch up on delinquent health and pension payments and buy new equipment.
“It is not left for the Teamsters to save this company; we have given enough,” O’Brien said. “What happens next is out of our control.”
At the end of May, Yellow (NASDAQ: YELL) requested the Teamsters immediately approve a letter of agreement, allowing it to restructure operations in the East, Central and South regions. The company said the changes were similar to a change of operations previously approved by Teamsters and implemented in the West.
However, the new agreement seeks to further expand the use of purchased transportation as well as changes to work rules. A key sticking point has been the requirement that drivers work freight on the docks and potentially at locations other than their home terminals.
Teamsters contend the letter of agreement violates the current contract and would expand the use of these utility positions. A Monday letter from John Murphy, Teamsters freight division director, said the change of operations in the West was not similar to the current proposal as the utility role in that region was contractually permitted and “all affected road drivers had their earnings protected and were allowed to continue to perform traditional road work.”
Essentially Yellow is seeking to “assign employees to any job, anywhere, at any time across operating companies,” the letter asserted.
Yellow said in an internal memo to employees Thursday that only 1,000 drivers (20% of total road drivers) would be required to work the docks and that 400 are already performing these functions. The remaining 600 roles would be filled by employees with the least seniority. Those employees “would now be expected to handle freight at certain designated terminals, just like the hundreds of other Yellow drivers who have long been doing so, on a daily basis, throughout the entire term of the existing contract,” a spokesperson with Yellow told FreightWaves.
“Let’s be clear: If you were at a non-union company — a very realistic possibility for MOST of you if Yellow does not survive — ALL of you would be subject to potential dock work regardless of your time in the industry,” the internal memo read.
Yellow has offered to pull forward contractual wage increases (40 cents per hour and 1 cent per mile) slated for Oct. 1 and said it would seek to implement another pay hike (60 cents per hour and 1.5 cents per mile) to get a deal done quickly.
There is a catch. The carrier doesn’t have the ability to fund the latter increase currently and said it would need lender approval to do so, which it would seek when it refinances its $1.5 billion in debt at a future date.
“Yellow’s vague promise of small future increases that may or may not happen is insulting,” Murphy’s letter read. “Yellow wants to establish a one-way street that allows it to get everything it wants up front and early. The company wants our members to wait to see what happens down the road, even if it means workers are once again left holding the bag.”
“Sometimes a bad job isn’t worth it anymore,” O’Brien said.
The two parties had agreed to pull forward negotiations of their collective bargaining agreement, which expires March 31, 2024, and hash out the proposed operational changes at the same time. Yellow is saying time is of the essence, but the union maintained its stance that it will follow normal negotiating protocols and wouldn’t likely start meeting with Yellow until August.
The Teamsters are also negotiating labor contracts with UPS (NYSE: UPS) and TForce Freight, a TFI International (NYSE: TFII) subsidiary. It recently came to terms with ABF Freight, ArcBest’s (NASDAQ: ARCB) LTL unit.
Deteriorating market position, untenable financial condition
At the end of the first quarter, Yellow reported total liquidity of $168 million, which was $109 million lower year over year (y/y). However, over the same period it repaid $98 million in debt.
Cash flow from operations was $13 million in the first quarter.
However, the company continues to book net losses and teeters near breakeven on the operating income line (before interest expense and other items are considered). Yellow booked a 100.8% operating ratio (operating expenses expressed as a percentage of revenue) during the first quarter, meaning it spent slightly more than a dollar to generate each dollar of revenue.
An intraquarter update from the carrier released Friday after the market closed showed it has lost roughly one-third of its freight over the past two years. Tonnage declined 16% y/y in both April and May following similar y/y declines in the same two months of 2022.
The tonnage declines were previously explained as part of “One Yellow,” a multiyear overhaul of the organization, which includes the consolidation of its LTL brands and closure of redundant terminals. At the same time, the company has been taking yields higher on the freight it hauls. The operational changes and yield initiatives were reasons for the tonnage declines in the past, but it is now likely that some customers may be diverting freight to other providers to avoid service interruptions should labor actions occur.
The company’s lone debt covenant — adjusted earnings before interest, taxes, depreciation and amortization of at least $200 million over the past 12 months — was met in the first quarter. The company generated $325 million in adjusted EBITDA in the last year but just $89 million over the past six months.
The “company is running out of cash and is at risk of closure/liquidation,” the Yellow memo read. “Delays to Phase 2 and the One Yellow transformation has come with a serious cost. The company is unable to pay its bills and secure lender financing without showing to the market that we are able to implement on our One Yellow plans.”
Asked if Yellow would run out of cash in August and if customers have left due to the turmoil with labor, the spokesperson said, “We’re not giving up on that process. We have not seen evidence of customer changes.”
Yellow is encouraging full support of its proposed letter of agreement for its survival and the survival of 22,000 union jobs.
“Sean O’Brien’s baseless attacks are irresponsible when we have the jobs, lives and families of so many Teamsters and other employees on the line,” the Yellow spokesperson said. “Mr. O’Brien should come to the table so we and our employees can move on with their jobs and their lives.”
But O’Brien said the union will stand pat with the current deal in place for the time being.
“Yellow has shown that it doesn’t deserve and cannot be expected to continue under its current structure,” O’Brien said. “The Teamsters cannot and will not keep bailing out this company with concessions.”
More FreightWaves articles by Todd Maiden
- Yellow’s tonnage remains in free fall
- ArcBest’s chief yield officer steps down
- XPO’s tonnage dips again in May, inflects higher from Q1
Freight Zippy
The Teamsters have a seat on The Board of Directors, what is that person doing to save 22,000 jobs?
I fail to see the horror of road drivers working on a dock. Every non union carrier does that and their safety records are better or equal to than this disaster of carrier.
Is having 1950 work rules that important, just exactly what are the teamsters trying to protect?
Virtually very American no longer works the same as they did prior to the Pandemic. Every job in America has changed.
Except union companies that still exist as if Dwight Eisenhower were President….
What next, will unions demand we all go back to steam locomotives, buggy whips and crouching under our desks in the event of a Nuclear Bomb???
John G.
Sometimes a bad job isn’t worth it anymore,” O’Brien said.
Easy to say Sean when you make over $400,000 a year and you have never sacrificed a single thing and have never had any skin in the game when it comes to YRC/Yellow. Your pension is intact. The idiots you have supposedly spoken to across the country do not speak for the majority of us. 22,000 people out of jobs, you can sleep with that. Families with members being treated for cancer, prescriptions that need to bought and the list of things these families are counting on goes on and on! I appreciate what you want to accomplish but the cost is not worth the sacrifice. We allowed it to go on for the last decade we are in to deep now to hurt this many families at this point. We need to see where this will go. Give them an 18 month deal to implement their change. In 18 months we will know for sure if its working or not. This will give 22,000 hard working innocent Union members who don’t forget voted you in time to prepare for what they need to do. This event and the way it accelerated caught most of us by surprise. No one seen the brakes coming on this phase of the companies plans. You need to give us more time. Out of respect for our Union members and there families you need to extend this a little further.
Harry
The union is very clear about what they are willing and not willing to negotiate. It is in writing and in the minutes of the negotiation.
Yellow should not be using its employees to buy it more time. If they cannot compete in the LTL marketplace then it is time you put it to rest. Survival of the fittest. Not survival based on what you can get from the union/employee.
Jack
Not a chance your gona get me to drive 5-600 miles a day and work on a dock…. crazy… no wonder there drivers always look exhaustes
Lyndon R Girvin
I see Sean is playing God again. Just as he continues to screw up the UPS negotiations now he feels the need to play chief cook and bottle washer.
Ole peg leg will never learn.
Michael James Barnes
First of all, I would like to thank Todd Maiden for his very informative posts. At times I disagree. Yet, I understand he does not work there. I hired on with Roadway thirty seven years ago. Over the years and miles I have seen many differences between locations and companies. It would be hard to understand it all from the outside, even for someone who has made a career reporting on the transportation industry. Again, Thank you Todd Maiden. I fully support the International brotherhood of teamsters position. When the company says “if I worked for a non union company… I do not work for a non union company. (IF) my sister had a dick, she would be my brother. Those two letters: (IF) changes everything.
S G R
Where’s all the money? Last time we voted on concessions Ole James Welch and all his cronies got big fat bonuses! Willie dollars that’s Bill Zollars got fat too ! At that time we was overpaid un skilled labor ! Lmao where’s all the money ??? Again where’s the money??
Mr Gibson
Having heard the IBT video this morning at least 5 times I worry that negotiations are stonewalled. The drivers are scared and that legitimate. There are 22,000 jobs at stake..extrapolate that to include their families, retired employees on pensions, now include office workers and supervisors…we are talking 100,000 lives. If the IBT wants the CEO out then state that! Make your demand. I can’t argue against his removal. A true CEO would Lee Iacocca this situation and cut his salary FIRST, lead by example. I get the IBT’s points, but lay out a PATH for what you want. Don’t walk away from the table.