A letter obtained by FreightWaves shows less-than-truckload carrier Yellow Corp. is seeking to defer health and welfare as well as pension contribution payments for the next two months.
A Friday letter penned by Yellow Chief Financial Officer Dan Olivier is asking for a deferral for plan contributions for the months of July and August. The company said it would repay the delayed contributions with interest once it is able to refinance its outstanding debt.
“As a consequence of the Company’s inability to proceed with One Yellow, combined with the challenging business conditions confronting the entire LTL industry, the Company has been operating at a loss and rapidly exhausting its liquidity,” the letter read.
A spokesperson from Yellow told FreightWaves that the company has taken other actions to preserve liquidity and that the deferral it is seeking would not interrupt employee benefits.
“Our request to Central States should not have any effect on the pension benefits of our union employees. We are asking the pension funds that there be no interruption in payments or coverage for our employees. Our beneficiaries should see no impact to the contributions employees receive from the Pension Fund or the Health and Welfare Fund,” a statement read.
In an intraquarter update issued on June 9, Yellow (NASDAQ: YELL) reported that tonnage declined 16% year over year (y/y) in April and May. Over the last two years the carrier has seen its tonnage fall by roughly one-third, in part due to yield improvement initiatives but largely due to a broader network overhaul called One Yellow.
As part of the plan, the company is in the process of consolidating its four LTL operating companies and closing terminals deemed redundant. However, a second phase of the operational changes has been rejected by the International Brotherhood of Teamsters, which says the changes would violate the current collective-bargaining agreement.
The two parties had agreed to reopen their five-year labor deal early to hash out requests to modify work rules and increase the use of purchased transportation while at the same time establishing new employee pay and benefits rates. However, talks appear to have broken down as the union is adamant it will not entertain another bailout of the company at the expense of its members.
Teamsters officials have said wages, benefits and work rules concessions have cost its members billions in the past.
Yellow repaid $66 million of contribution deferral agreement notes in early 2023. The sum represented deferred contributions and interest payments to multiemployer pension funds dating back more than a decade.
Just prior to receiving a controversial $700 million COVID-relief loan in the summer of 2020, Yellow received a grace period for contributions to health and welfare and pension funds. The extension was intended to give the carrier time to catch up on delinquent payments associated with a sharp falloff in volumes tied to pandemic-related lockdowns.
At the time, the Central States Health Fund, known as TeamCare, estimated a three-month delinquency would total approximately $75 million. With no concrete repayment terms established, the program slid into suspension status with eight weeks of “layoff coverage” being enacted to cover member medical claims. As layoff coverage was set to expire, the company received the relief loan. A first tranche of $300 million was used to repay contractual obligations, which included health insurance and pension commitments among other items like lease payments for real estate and equipment and interest on debt.
Yellow recently said that its bankers will only sign off on a debt refinancing and a proposal for employee pay increases if the second phase of the One Yellow overhaul is approved by the union in short order. The company has advised it will “be out of money by August” if the plan isn’t approved.
Yellow reported total liquidity of $168 million at the end of the first quarter, which was down $109 million y/y. However, the change included a $98 million reduction in debt. Cash flow from operations was $13 million in the period.
The company continues to record net losses and booked a 100.8% operating ratio (operating expenses expressed as a percentage of revenue) in the quarter, meaning it incurred slightly more than a dollar in operating expenses to generate each dollar of revenue.
“The Company has been experiencing a significant deterioration in business conditions, which began in Q3 of 2022 and has persisted throughout 2023,” the letter said. “Unfortunately, Yellow’s ability to respond to those conditions has been materially impaired by the Teamsters’ continued resistance to implementation of the Company’s One Yellow network modernization.”
The Yellow spokesperson said the company is still hopeful it will be able to engage with the union at the bargaining table.
“We are doing everything possible to meet with the IBT to discuss the future of One Yellow and the importance of our 22,000 union jobs. We have been clear with the IBT that meeting to discuss Yellow’s common sense, company-wide modernization effort is essential to preserving jobs and strengthening the future of Yellow. We stand ready to meet anytime and anyplace.”
The Teamsters see it differently, according to a notice to members last week.
“Yellow has been unable to effectively manage itself for a long time,” Sean O’Brien, Teamsters general president, told members. “It is not left for the Teamsters to save this company; we have given enough. What happens next is out of our control.”
Shares of YELL were off 8.7% at 10:17 a.m. on Wednesday compared to the S&P 500, which was down 0.6%. The stock was down 16.7% on Tuesday.
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Freight Zippy
This is a systemic issue for this company. In the greatest freight market of all time, when every LTL carrier recorded record profits, Yellow was unable to earn a profit.
Simply stated it is a broken object and must be discarded.
Teamster LTL carriers are all stricken with an incurable disease, the union. Once this disaster of a company finally takes its dirt nap, there will be just 2 Teamster LTL Carriers surviving. Their futures are also questionable.
Today there is more than enough capacity to absorb all of the business from this pitiful organization.
In 14 days no one will ever miss this leech of a carrier… The industry will be better off without them…
Todd McCann
The problem here is management, not the union. Yellow has more revenue than most other LTL companies, yet they can’t seem to make it profitable. Not to mention for the last 13 years they have had a 15% wage advantage and a 75% pension contribution advantage (employee givebacks) over other union LTL carriers like ABF Freight. Yet even with that, they claim to be broke. At the same time, they are leaving shipments at customers that are ready to be picked up. They actually tell drivers not to pick up some freight! You can’t make money if you don’t pick up freight! I think my cat could run this company better.
Michael Ward
I worked for Roadway Express in management from 1969 to 2005 when the so called merger happened.
They slashed a large amount of management with years of experience, including me. Fortunately I was close to retirement so I faired ok, however it would have been nice to work a few more years. I feel terrible about the way Yellow handled that and what they are now continuing to do 23 years later.
Dick Bischoff
“Over the last two years the carrier has seen its tonnage fall by roughly one-third, in part due to yield improvement initiatives but largely due to a broader network overhaul called One Yellow.” Revenue is down due in a large part to shippers moving to better service providers offering faster transit times, fewer damaged/lost shipments, accurate billing with fewer accessorial charges being assessed. Yellow is signaling they are in their last days. If O’Brien doesn’t assist, 22,000 teamsters will hit the soup line. We’ve seen it happen 100 plus times since deregulation happened almost 50 years ago. Ain’t nothing new here folks, so very predictable.
Lori
These workers have bailed out this company by kicking back 15% of their pay. Meanwhile the top executives got bonus checks and pay raises. They need to cut the fat at the top! Stop looking for employees to bail them out. Why would you start another company when you can’t run the one you own?
Ray
They fire people who care, and keep dead weight. They released managers that try to change the system for a load of @$$ kissers. Pathetically run. The upper management “team” is clueless and weak. The middle managers they kept are unknowledgeable, and useless. with no spines. The middle management they have in place for sales is mostly made up of “buddies” and friends from other failed companies. Or people that just keep peddling the same old garbage. And the people they have in charge of “customer support” are literally worthless. Time to drain the swamp and either stake up all new management, or let them fade away. I would hope anyone in a leadership role would have a hard time finding employment elsewhere…but I’m sure they will be fine. plenty of the good ole boy club out there to give them another shot at ruining another company.
Ray
They fire people who care, and keep dead weight. They released managers that try to change the system for a load of @$$ kissers. Pathetically run. The upper management “team” is clueless and weak. The middle managers they kept are unknowledgeable, and useless. with no spines. The middle management they have in place for sales is mostly made up of “buddies” and friends from other failed companies. Or people that just keep peddling the same old garbage. And the people they have in charge of “customer support” are literally worthless. Time to drain the swamp and either stake up all new management, or let them fade away. I would hope anyone in a leadership role would have a hard time finding employment elsewhere…but I’m sure they will be fine. plenty of the good ole boy club out there to give them another shot at ruining another company.
Scott
I worked for Yellow back in 2006 to 2009 and after reading this article I can see nothing has changed. YRC model has simply out lived its time, maybe it is time to let them move on into the sunset and allow other more secured companies to come in and move the freight. In less than 20 years they have been having the exact same issues and always blame it on the market and the union.
Now to be fair from the side of the union what I saw there from the union made me understand why people had the opinions they have, I see alot of talk about waste by YRC in means of management but trust me when I say this there is an enormous amount of waste caused by the union members also. I worked in 4 different terminals in my time with YRC and saw the us vs them mentality all the time, saw union members costing the company undue money in so many instances I don’t have enough room to write about it here, so to say the union is completely innocent in this failure is completely absurd, I would say it is at the least a 50 50 failure fault. The company is poorly run by management and have very poor support from the Teamster members. The best thing that could happen would be that YRC simply be allowed to collapse and allow the companies with better structures take over the freight and we move on as an industry.