The International Brotherhood of Teamsters said late Sunday that it had been notified that less-than-truckload carrier Yellow Corp. has ceased operations and will file for bankruptcy.
“Today’s news is unfortunate but not surprising,” stated Sean O’Brien, Teamsters general president. “Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry.”
The 99-year-old company posted signs on locked gates at its terminals at noon on Sunday, saying it was ceasing all operations.
After a heated battle with Teamsters over the better part of the past year, Yellow (NASDAQ: YELL) was unable to push through a proposed change of operations it said was the linchpin to its survival. A breaking point occurred on July 15 when Yellow missed contractually required payments to Central States Funds, a multiemployer fund manager overseeing its health, welfare and pension benefits.
The debt-heavy, cash-strapped company had previously asked to defer the payments with interest, but that request was denied by Central States even though similar requests had been granted in the past. The company’s delinquent status with the group would have left employees at operating companies Holland and YRC Freight without health insurance. However, a last-minute extension provided by the fund allowed Yellow to avert a planned work stoppage.
Teamsters announced the same day that it had officially reentered negotiations with the company for the first time in weeks.
However, the damage was done. After weeks of customers and brokers pulling freight from its network over concerns it would ultimately be forced to close, time ran out on the clock before it could hatch out a contract with the union, which in turn was expected to produce a lifeline from its lenders.
No change of operations, no more Yellow
The company maintained all along that the Teamsters’ refusal to approve the change of operations would eventually lead to its closure.
Yellow embarked on a second phase of a multiyear restructuring called “One Yellow” nine months ago. The plan was to follow similar changes the union blessed across its western network (Reddaway) last year. Initiatives included consolidating redundant terminals, increasing the number of utility positions requiring drivers to move freight on the docks and upping the percentage of third-party capacity the carrier could use, among other changes.
The goal was to emerge from the overhaul as a super-regional carrier with a national service platform and a much leaner cost profile. Yellow was also hoping to use momentum from the turnaround to restructure $1.3 billion in debt that matures next year.
However, the second phase would involve consolidating operations at regional carriers New Penn and Holland with its national freight network — roughly 70% of the network. The proposal received pushback initially, was reworked by Yellow and then officially rejected by the union.
Months of bad blood and finger-pointing would ensue.
Some hope for a resolution was seen when both parties agreed to pull forward negotiations on the five-year collective bargaining agreement and negotiate those issues (including wages) in conjunction with the change of operations proposal. That plan would be short-lived, however. The Teamsters decided it would not give any more after years of wages, benefits and work rules concessions it estimates to be in the billions.
Running out of options, Yellow sued the Teamsters for breach of contract. In the $137 million lawsuit filed late last month, the company said the union didn’t have the authority to block the operational changes and that the Teamsters violated the collective bargaining agreement by backing out of a required hearing on the matter.
As the months-long back-and-forth continued, Yellow’s financial position weakened, with the carrier losing market share and booking losses. Its credit ratings would take another hit as well.
Calls to senators and the White House and last-minute negotiations with Teamsters would prove fruitless. Yellow’s lenders, which include the U.S. Treasury, didn’t offer much of a lifeline, only agreeing to temporarily waive debt covenants.
The company lost a hearing to block the strike in a federal court earlier this month, but was ultimately spared the work stoppage when Central States provided the extension. Legal counsel for Yellow was hopeful more time could save the carrier.
“Your Honor, the situation here for Yellow and the stakeholders is binary,” said Yellow attorney Marc Kasowitz in court on July 21. “If there’s a strike, the company is gone. If a strike is at least temporarily enjoined … then there’s some possibility for the company to survive.”
The bankruptcy leaves 30,000 Yellow employees, including 22,000 Teamsters, without jobs.
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Greg
This will add to the driver shortage as some older drivers will just take their pension instead of learning a new routine at another company… Some say they will rebrand and come back as a non-union company, maybe I’m not seeing something, but how do you do that when the court will auction off all assets to pay the creditors (union). Management may rebrand, or start another company but in order to do it with Yellows assets, they will need cash in hand to bid at the auction. If they manage to start up again, whatever emerges as a company will be much smaller and non-union..
Some say the Teamsters were not to blame, OK then, the Teamsters won, Yellow and 33,000 employees lost.
Scott
Yellow had 15 years to get their finances in order. When phase 2 was presented the union discovered some contractual changes the company was trying to sneak through. All the union wanted was to open the contract and make it beneficial for everyone while informing the company from the start that it’s a process and they’ll be ready by August.
The company throwing demands on the table is not negotiating and they’re just not used to someone telling them NO or WAIT, so they throw the first dart by taking 22,000 employee’s health insurance away. The union had no choice but to threaten strike to get that insurance back. NOBODY, and I mean NOBODY was going to work without health insurance. Get the insurance back and then focus on contract changes.
Then when the freight levels drop the company has the audacity to blame the union for threatening a strike? I say again. The company gave them NO choice! 30,000 total people affected by this back and forth garbage.
And a special thanks goes out to Freightwaves for all of the one sided headlines before the actual facts were released. You don’t think it played a part in customers reacting early and taking their business elsewhere? I was hoping you were better than those one sided political news outlets. I guess not.
Mark DePiva
Imagine for a moment, 8000 linehaul drivers fighting to not have to fuel their trucks, drop and hook their own sets, fighting to keep mechanics and jockeys fueling their trucks instead of fixing equipment and moving equipment, fighting to do a 7-8 hour run and not at least strip there trailers, only to lose their job and go to a rival LTL Carrier, even ABF and TForce who do exactly as other non-union competitors do, and will perform that job as required, but simply couldn’t fathom that work at Yellow. You will become the thing you swore you hated, the very thing that you fought against at Yellow. That is the best part of all of this.
Freight Guy
The reality is both YRC management and the Teamsters are the cause of the demise of this company, neither exclusively.
hardline abfer
No worries Yellow now goes by the name Saia this was always the plan it just took a little time like CF became Conway I’m sure the game won’t end here.
David
Unions are the death knell of the people and jobs.
Charlie
Teamsters will still worship SOB, all the while he could care less about the 22,000 unemployed Yellow workers. Another union company out of the market is the only positive in this very sad story.
JHT
The CEO yelled in the press for months we’re going out of business we’re going out of business. What do you think the customers were going to do?
These genius executives were absolute morons when it came to logistics. They wanted utility drivers to drive less miles instead of being road/line drivers so they could work the dock. They had dock workers already making less money than the utility drivers. Don’t let the fact that the freight still has to go to the same number of miles so now you need a lot more people to move it. Seriously how stupid are these people? If this was so critical, like they said, and not bad business, then why didn’t they do this 15 years ago when they had every company then?
This was all about Apollo their lender not giving them another cent when they ran out of money early because this time they didn’t have Trump in the White House to give them 700 million. Apollo loaned Kushner 184 million to refi a building he had in Chicago then they got Yellow 700 million saving Apollo from disaster. This is public knowledge.
Yellow should’ve died three years ago and never gotten the $700 million loan and they sure weren’t asking for work rule changes then They were still too busy recovering from their terrible mistakes that they just kept doubling down on starting in 2008.
This was about bad management for the last 15 years. Now Apollo gets to liquidate an $800 million asset company to get their $500 million back and the government namely you and I are going to lose the 700 million. People had better go to jail for this.
That’s what cost 30,000 people their jobs.