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
Free
I have a great job at Yellow. AND, excellent benefits. I’m treated with respect. I own a home, two vehicles, and several off road vehicles. I go on vacation several times each year with my friends and family. I eat well….and probably too well. All of these are paid for by our customers, which I am eternally grateful for. Union members pay Sean O’Briens salary, not the other way around. And union members should decide whether or not Yellow’s offer is acceptable. Not Sean O’Brien. How disrespectful and arrogant it is to tell Yellow to ” go ahead and shut the doors. Sometimes a bad job isn’t worth it any more “. What kind of moron thinks not having a job is serving the people that pay his salary. Perhaps Mr. O’Brien doesn’t know that the other LTL carriers have had road drivers working the dock for 25+ years. They’re called Utility Drivers. They do it at ABF ( another union company ). They do it at XPO. They do it at Fedex Freight .They do it at Old Dominion. They Do it at R&L. They do it at Saia. They do it Estes. AND, it helps them be more profitable. So, Mr. O’Brien, why shouldn’t we do it at Yellow? Better yet, why shouldn’t we get rid of you before you get rid of us? Maybe then you’ll know what it’s like to be unemployed.
Marc M
It truly is sad to see a new regime of Teamsters management making their bones on Yellow, its 30k employees who keep it going have been knocked down enough. Do your damn jobs and get to the table to negotiate a deal. That’s what you get paid for, not sitting back throwing mortor shots at a defenseless company. If they think Yellow going down will be good for unions think again, they will lose 90% percent of those dues to non union companies. They will lose the freight they have fought hard to hold onto for decades. Its easy to pick on the company the union and management have picked dry. Try helping.
Still Around...
I’m curious what publication William Price is referring to with his comment “In closing, it’s already been published that they’re not going to be able to refinance because of debt to income ratio, and the overall company net worth. ”
I’ve been told that financing is lined up and awaiting YRC once the Union turmoil has been reconciled with a new contract and the COO approved. I had my doubts too on whether it would get funded but it seems like it is from my sources–it seems the interest on the loans are substantial enough for the financiers to keep rolling with it…like a college kid with a credit card only paying the interest each month.
ready for a change
Seen it before, YRC/Yellow Freight has been miss managed for sometime now. Numbers,numbers numbers is all they care about. Customers come last, even heard a city dispatcher tell a customer your freight is on its way to be delivered today after hanging up laugh and said (maybe next week its still on the dock they’ll get it when they get it). I can only speak for my terminal there has been no effort in trying to hire dock or city drivers. many of our managers were supervisors on the dock(very incompetent ) but were promoted to higher positions and are felling. I’ve been in LTL trucking 40 years, 25 at YRC and have never seen how poorly a company can be run. I fell if we want these changes in my opinion is this, 1:THE COMPANY PAYS 100% OF OUR PENSION’S 2: OUR MANAGEMENT ALL OF THE UP MANAGEMENT THAT RUN THIS COMPANY “HAVE TO RESIGN”! WITH NOTHING NO BUT OUT, NO NATTA NOTHING.
I SAY ITS TIME FOR THEM TO GO AND GET SOMEONE IN THAT CAN RUN IT THE WAY IT SHOULD!!!! I hope this makes a movement opens the employees/teamster eyes That we ask for them to step down than we’ll move forward
William Price
Yellow has been mismanaged for as long as I’ve been a union member, 25 years! I don’t work for Yellow, but have known many drivers over the years that do. Today, because of give backs, pension cuts being the most, many of our brothers and sisters who have worked 20-25-30 years, will be receiving pensions that are considerably less than their counterparts at ABF. Yellow executives have still received their bonuses and 7 & 8 figure salaries. In closing, it’s already been published that they’re not going to be able to refinance because of debt to income ratio, and the overall company net worth. More give backs are not saving them this time.
Boe Zoe
Once they sold their properties, and began leasing, the model was now patterned after Consolidated Freightways. The board of directors was for sale for the largest write-off they could muster from the government and Deutsche Bank. All the while the board of directors gave themselves pay raises. You know when you must end the suffering? I am so saddened, I worked with the finest workers America ever had. Deutsche Bank was allowed by the bankers to take ownership and begin dismantling. It’s over. End the suffering now. Please.
John G.
To Sean O’Brien,
I have worked at YRC/Yellow for almost 28years now. I have been through the worst of the worst over the last decade. I gave up tons of money and benefits to hang on to my position as a Teamster driver. As bad as it may sound it raised my family, bought us a house, paid out medical and dental bills and we were able to go on family vacations each year. It provided us a good life, a life a little better then a non-union driver. Sure I wished we were on par with our other fellow teamsters but our management ran the business into the ground. But you accelerated our demise!!!! Our contract was not up until 2024. You caught all of us by surprise when you without warning put the breaks on the company’s change of operations. Now 22,000 of us will be out of jobs with no health care in the coming weeks!! Sick members and sick family members who need medications daily to survive. You will bankrupt many families! Most of us will not find another Union job!! The non-union carriers will clean up on the fright left on the street. Local unions across the country will feel the pain and have to layoff agents. This will be a disaster for everyone!! The harm this will cause is not worth the results you wish to accomplish! And for what? To keep 600 hundred cry baby road drivers from having to get there hands dirty on the dock. Every company you have negotiated a contract with has some form of dock work the drivers are performing. So to put 22,000 people on the street over this is a crime. The damage you have caused because of your name calling and unprofessional behavior will not soon be forgotten. Your actions have caused this to be unrepairable!! After a decade of sacrifice we should have decided if we should let them survive on more concessions or not. Not you! You sacrificed nothing! We did! We should have decided not you. You failed your fiduciary responsibilities to the members with your gamesmanship! Now we will pay the price while you continue to collect over $400K a year. How do you look in the mirror everyday? I hope a class action lawsuit against you results from this because I believe you should be held responsible for your irresponsible behavior.
Freight Zippy
The union blames ‘bad management’
Why is it that when managers who once worked at Yellow to go another company, suddenly they become good managers?
Could it be the 1950 work rules these people are forced to manage workers with?
Yellow could not generate a profit in 2021 which was the greatest year for profits in LTL history. Thus they will never generate a profit big enough to operate this company properly without corporate welfare…
It is time to let this disaster sink…