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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Major Williams
The Teamsters have priced themselves out of the market. If you paid them based on their productivity, they’d be the lowest paid in the industry. Since productivity isn’t in the union contract, there’s nothing management can do stop the Teamsters “slow roll”. All that being said, someone in YRC management signed the contract so they have ownership in this failure as well.
Eli zdunich
After losing my job with cf and then yellow laying me off on the 29 th day I say good riddins their hire and fire of new people suck and so does yellow!
Jason
The short of this outcome is Yellow management and their extreme incompetence. What good would continuous bailouts have with the same people at the top making bad decision after bad decision?
The union and managements chance to save the company was 2019 when Reddaway joined Master Freight opening the door to the misguided One Yellow initiative. After the dominoes fell this is the ONLY place Yellow was going to end up…bankruptcy!
Victor
Both management and the union were to blame for this. In the end, Sean O’Brien sacrificed 22,000 union members to make a point to UPS that he would strike. A point that didn’t need to be made because UPS would’ve avoided the strike anyway. It was a measuring contest and O’Brien thinks he won. 30,000 workers lost. Nice job….
Frank Hammond
Where will Sean O’Brien find the cash to make the Teamsters donations to the Biden 2024 campaign? 22,000 Teamsters have been erased from the donor rolls…
Me
Biden’s $36 billion to save Teamsters fund is largest-ever private pension bailout On December 8, President Biden announced a $35.8 billion payment to the Fund designed to allow it to remain solvent through the end of 2051. It had been projected to run out of money in 2025, just one of approximately 200 other multiemployer pension funds in the same sinking boat.Dec 27, 2022.
When we talk about bail outs for Yellow of course. Let’s also NOT keep skipping over the union bail out. Which for some reason is never in any article on the subject.
Lots of jobs were lost. Good people working to pay their kids tuition, mortgages, food, heath care, etc. lost their jobs. If they could have all gotten out of their own way, both union and company. Jobs could have been saved.
Yellow non union employees paid for their benefits and took many concessions.
To those who are happy about this good luck to larger union dues. Not easy to make up those funds lost with out raising your dues. The union didn’t win they lost in the long run.
Saul T
The union had no choice. The union wasn’t bailing the company out again. The union gave billions in concessions over the years. All the fault lies with Yellow management. As such they dug in their heels, stood by their guns, held fast…..and now wondering where their next paycheck is coming from.
When the mortgage, car note or kids tuition bill show up in the mail – let us know how that blame game flies with the bank.
Epic failure with leadership on both sides to not keep the acrimony in house and find a spot in the middle that was palatable to all stakeholders. Yellow management played their role in the collapse. The IBT did their part as well. Don’t insult anyones intelligence to insinuate otherwise by laying the blame entirely at the feet of one side or the other.
bob1219
The situation appears rather absurd. The Teamsters negotiated an $11 raise with ABF, and it seems unreasonable to expect the same deal with Yellow, especially without considering the implementation of OneYellow. For the approximately 22,000 Teamsters, a raise of $11 per hour would amount to a staggering $484 million, nearly half a billion dollars, based on a standard 2,000-hour work year.
Even if someone were earning $100,000 with an average 2% raise each year, it wouldn’t lead to a total of $122,000 ($100,000 + $11 * 2000 hours) within just 5 years at the same company.
The actions of the Teamsters leadership appear to show a lack of concern for Yellow drivers, and their pursuit of power is allegedly resulting in 8,000 job losses in other parts of Yellow. The responsibility for this situation is being placed on the Teamsters.