U.S. trucking firm Yellow has laid off large numbers of workers as the company faces a cash crunch, and is reportedly considering options including an imminent bankruptcy filing.
On Friday, the trucking giant told employees it was “closing its regular operations” and laying off non-union employees “at all of its locations”, according to a memo seen by DailyMail.com.
The layoffs could immediately affect up to 8,000 members of the company’s sales force, business operations and technology departments – and if the company fails, another 22,000 unionized drivers and handlers could be out of work.
Yellow is saddled with about $1.5 billion in debt at the end of March, including $729.2 million owed to the federal government for a controversial pandemic-era loan that the Treasury Department extended for national security reasons in 2020.
Earlier this week, Yellow, which made $5.2 billion in revenue last year, narrowly avoided a drivers’ strike by members of the Teamster union after failing to pay $50 million for employee benefits.
U.S. trucking firm Yellow has laid off large numbers of workers as the company faces a cash crunch, and is reportedly considering options including looming bankruptcy
Footage shared on TikTok shows a yellow worker shouting angrily after learning that his healthcare benefits and pension payments had stopped.
The worker, who is believed to be operating in Florida, says: ‘It’s the fucking mothers up there, I worked my a** for this company.’ It’s my money you’re playing with. F*** this s***.’
THE the wall street journal first reported that Yellow was preparing to file for bankruptcy, a move that could come as soon as next week.
For now, Yellow is keeping some customer service employees in place, as the company still has freight in transit that it is trying to route to destinations or return to customers, according to the Journal.
A company spokesperson declined to comment immediately when contacted by DailyMail.com on Saturday morning.
The company is the third-largest U.S. carrier in the so-called “less than trucking” segment, in which operators haul cargo for multiple customers on the same trailer.
The U.S. trucking industry in general has faced recent challenges as operators adjust to a return to normalcy after the pandemic shipping boom, when demand for freight and delivery soared . But Yellow’s debt puts him in a particularly precarious situation.
In a memo on Friday, John Murphy, who is the Teamsters’ national freight manager, advised union employees to collect all personal effects from all offices and terminals, in case the facilities close and become inaccessible.
He wrote that “the probability of Yellow surviving is getting smaller and smaller” according to a copy of the note posted by FreightWaves.
“Yellow continues to clean up its system and appears to be laying off staff and shutting down entire terminals across the country,” Murphy wrote.
An upset worker was filmed screaming in a yellow warehouse after learning his pension was at risk due to the company’s dire financial situation
“All Yellow employees should, in our view, prepare for the worst, as Yellow appears to be heading for a complete shutdown in the coming days.
According to Satish Jindel, president of transportation and logistics company SJ Consulting, Yellow handled an average of 49,000 shipments per day in 2022.
Since this week, he estimates that number has fallen to between 10,000 and 15,000 daily shipments.
With customers leaving — along with reports that Yellow halted merchandise pickups earlier this week — bankruptcy would be “the end of Yellow,” Jindel told The Associated Press, noting an increased risk of liquidation.
“The likelihood of them surviving and remaining solvent is really decreasing day by day,” added Bruce Chan, director of research at investment bank Stifel.
In a Wednesday statement to the Journal, the company said it continues to “prepare for a range of contingencies.” On Thursday, Yellow said it was in talks with multiple parties regarding the sale of its third-party logistics organization.
Even if Yellow were able to sell its logistics business, it “wouldn’t generate enough cash to keep them operating permanently,” Chan said. “Without a large injection of equity, it would be very difficult for them to survive.”
At the end of March, Yellow had approximately $1.5 billion in outstanding debt. Of this amount, $729.2 million was owed to the federal government.
In 2020, under the Trump administration, the Treasury Department gave the company a pandemic-era loan of $700 million for national security reasons.
Last month, a congressional investigation concluded that the Treasury and Defense Departments had “missteps” in the decision – and noted that “Yellow’s precarious financial situation at the time of the loan and ongoing struggles exposed taxpayers at a significant risk of loss”.
The government loan is due in September 2024. By March, Yellow had made $54.8 million in interest payments and repaid only $230 million in principal owed, according to government documents.
Yellow’s current finances and the prospect of bankruptcy “have probably been in the making for two decades,” Chan said, pointing to mismanagement and strategic decisions dating back to the early 2000s. bailed out so many times, there’s more appetite to do it.”
Yellow is the third-largest U.S. carrier in the so-called ‘less than truck’ segment, in which operators haul cargo for multiple customers on the same trailer
In May, Yellow posted a loss of $54.6 million, a decline of $1.06 per share, for its first quarter of 2023. Operating revenue was approximately $1.16 billion on the period.
An investor note released Wednesday by financial services firm Stephens estimated that Yellow could burn between $9 million and $10 million a day.
Using a cash disclosure from earlier this month, Yellow had around $100 million in cash at the end of June, the note added – estimating the company spent increasing amounts of money until July.
“It is reasonable to believe that the company could exceed its 35 million dollars. need liquidity at all times,” wrote Stephens analyst Jack Atkins and his partner Grant Smith.
Reports of bankruptcy preparations come just days after a strike by the Teamsters, which represents Yellow’s 22,000 unionized workers, was averted.
Yellow CEO Darren Hawkins is pictured. His company faces bankruptcy
A series of heated exchanges have built up between the Teamsters and Yellow, which sued the union in June after alleging it was “unjustifiably” blocking restructuring plans necessary for the company’s survival.
The Teamsters called the litigation “without merit” – with General Chairman Sean O’Brien pointing to Yellow’s “decades of gross mismanagement”, including the exhaustion of the $700 million federal loan.
On Sunday, a pension fund agreed to extend health benefits to workers at two Yellow Corp. operating companies, averting a strike – and giving Yellow “30 days to pay its bills”, including $50 million that Yellow failed to pay to the Central States Health and Provident Fund on July 15, the union said.
Although the strike did not take place, discussions of a walkout may have prompted some yellow customers to pull out, Chan said.
Talks between Yellow and the Teamsters, which also represent unionized UPS workers, are ongoing. The current contract expires in March 2024.
“Yellow’s financial struggles are unrelated to the union and contracts,” Jindel said, stressing management’s responsibility for its services and prices. He added that Yellow’s union wages are “lower than any competitor.”
If Yellow files for bankruptcy and customers continue to route their shipments to other carriers, like FedEx or ABF Freight, prices will rise.
Yellow’s prices have always been the cheapest compared to other carriers, Jindel said.
“That’s why they obviously weren’t making any money,” he added. “And while there is capacity with other LTL carriers to handle diversions from Yellow, this will result in a high price for (current shippers and customers) of Yellow.”