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
Tom Hall
Yellow should be go out of business. We quit shipping with them. Late deliveries, missing freight… I had a shipment going to Pittsburgh disappear, 3 weeks later it showed up in Tucson!!! They try to gouge the customer for fake charges like residential delivery, they explained they have to drive through a residential neighborhood to get to our industrial park. Always try to reclassify freight and ding you twice as much as quoted for reweighs, even though no other LTL carrier has a problem. Maybe if the workers were competent Yellow wouldn’t have financial problems, from what I have seen the drivers are decent, know how to back up, but after that it’s a complete clusterf*ck with those guys always!!! I have a guy with a cargo van that takes our shipments now, they deliver direct and in the end for about the same price, and he brings donuts when he shows up. BYE YELLOW, good riddance!
Mark Chapman
Seems the executives at Yellow/Roadway/USF/Preston never seem to lose out on the money grab during the shell game that has gone on for decades. Crying broke last time. then in the next breath trying to buy another company. Don’t blame Teamsters for this debacle. UPS & ABF make money as do many other Union companies. Everything these “executives” touch turns to crap while they fill their pockets.
Donald Cunat
The Union did not put Yellow on the ropes, historical mismanagement did. The union carriers were responsible for all carriers being forced to increase wages and benefits to attract the best employees. The continual reluctance of the US Congress to address the issue of multi- employer fund pensions meant last employers funding must pay for everyone that left before. UPS had the foresight to bail out before it became critical. Until recently, trucking companies had no respect for labor, now with a driver shortage its a different world. Yellow even questionably spent the 700 million dollar government loan . Dont blame the workers UPS proves union can be efficient and profitable
CARLOS USA 🇺🇸
These #ESG Controlled Corporations are all Top Heavy wasteful bloated administration that pumps money into things that don’t make profit for the company. It’s time that the ESG and DEI are outlawed in the USA as it’s destruction is growing among business controlled by this FASCISM
William Wilson
So a few years ago Bill Zollars said that shippers love YRC’s capacity they bring to the market. Meaning without Yellow’s capacity LTL rates would increase. I found it interesting that he wasn’t promoting service or points served just Capacity. With the economy the way it is and the way the other carriers are adding doors and in some cases terminals. I think Yellow is on its last legs. As a customer they are hard to deal with and the service is not reliable. It will be sad for the employees when they close.
Joe
Question: If Yellow goes under where do you go? They are one of the last of the Union carriers. Are there still enough Teamster jobs out there to fill all of the jobs lost at Yellow. I agree. Yellow’s management seems incompetent, but it seems to me the Teamsters future is tied to the future of Yellow and other companies like them. The few left.
Bill Hawkins Knoxville tn.
Yellow has to much fat at the top. Holland was making money hand over fist. Then Yellow stuck there head in and had us loosing money in no time. If they want in my pocket again they can lock the gate.
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Anthony Pezzino
Are some of you people numb for all we have givin!!! And to give up more!!! I traveled to 2 terminals now since the change. This company has taken away so much with out approval. It has to stop. They are only extending their payoff even longer. 15 % pay cut, No payment into our pension for 18 months, Took a week vacation, RAISED our retirement age to 65. Come on people go get another job. These people are hurting us!!! And if anyone of you would read this new proposal instead of just ready to say yes you wouldn’t say yes!!! How about the 700,000 million that was a gift to this company and they used half of it to repay the Teamsters for delinquent health and welfare. Not to mention all the out of state meeting they go on Taylor swift suites in Nashville and the bonuses they take. Enough with these terrible managers!!!