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
Casra
This is why i dont drive for a Unionized company. You can blame bad management, and that is fair, but the unions are also to blame.
Driver Dave
Need to get it straight. Mismanagement, wasteful spending, C suite salaries and benefits, A central dispatch sh*t show and above all a useless, clueless CEO are the top of the list of why Yellow is in trouble.
The proposed change of operation is requiring ROAD drivers to work freight at foreign terminals. Road drivers are not dock workers, we didn’t sign up for that. Requiring generally older drivers that have 0 experience with fork lifts, pallet jacks and dock operations is a recipe for disaster not to mention the loss of jobs at said terminals.
Let’s not forget we’re only allowed a 14 hour work day. That combined with lack of skills etc. could put drivers at risk of injuries and or fatigue while driving or possibly a lay down/ layover.
In the words of the rank and file “ the consession stand is closed “
B. Holmes
As someone outside of this industry but in Business it is absolutely appalling to me to watch a company so poorly mismanaged not recently but for well over 20 years. I do not understand how the Board and the shareholders would allow their investments to dwindle YOY and not demand action? Is this because they planned on their employees union or non to continually give up their wages, pensions, and benefits? If any company that I know of public or private was run like this everyone starting at the top would have been eliminated from their roles? Which leads me to believe there is something bigger happening here. Sadly the men and women who have worked their whole lives will be a risk of retiring with nothing. This is complete disregard for the American working class.
Bill Bennett
I was with them for 28 years. Sad to see this company can’t get it together. I left to go to work for ABF working for them remind me of working yellow in the early years. I retired now. I hope the best for everyone working there now
John G.
I would just like to update your story that the teamsters are not bailing out yellow. The international Union has mailed out surveys to its members asking if they wish to save the company among other questions of importance for the upcoming national Master freight agreement. I think it’s important that you print an article stating that because the damage that has been done with the rhetoric going back and forth to our customers is of serious concern. I guarantee this survey will show the majority of yellow employees do not wish to lose their jobs, who would. So to my fellow Union Brothers please watch your mail for the survey scan the QR code go online take the survey. Surveys must be in by June 26th. To our customers we apologize for all the back and forth and the uncertainty this has caused but please hang in there with us we are worth it!!!! We appreciate your business and we look forward to continuing our partnership with all of you. The unionized employees of yellow freight do care about their customers and our sacrifices have shown it.
Gary Holfstra
Yep, Yellow has been mismanaged for years – the government forces it to mismanage itself. How? By forcing companies to keep Union drivers and contracts. Yellow management should press legislators to do away with Union mandates so trucking can join most of the rest of the employment world in freedom of association and labor issues.
Gaddi
Let’s see the ship sink CEO. My dad worked for yellow when it was still strong got to retire before the chaos of wages and pension golden 80. Now I’m here but also here to support my union brothers and sisters. It’s enough, you want everything from us drivers? Well are you willing to shorten your pockets on bonus pools so we employees can get everything back? (Golden 80 pension & wage increase)?. Many seniors and my retired dad were winning what we are winning now back in 2005 or 2007. Come on we desperately need wage increase not $.60 lol that’s a laughing joke. We need dollars in increase not cents. Plus pension if you want drivers pretty much to do everything. Want to keep drivers or attract dock to become drivers or even attract drivers from competitors?
Jim N.
This company has been disappointing to employees and investors. It is horribly managed. However, wage/benefits are still better than the non-union carriers that make up the bulk of the industry. The union should find a way to hold this company accountable and improve itself as part of any sort of agreement to keep it running. However, it is still better to keep it than to kill it. Of the 30,000 Yellow jobs, the majority of that freight will go onto non-union trucks if the company folds. That will make it harder on the remaining union companies.