“All workers and employers should take note of our experience with the International Brotherhood of Teamsters and worry.”
By Wolf Richter for WOLF STREET.
Yellow Corporation, formerly YRC Worldwide and formerly one of the largest truckers in the US with 30,000 employees and 12,000 trucks, filed for Chapter 11 bankruptcy protection and said that it will liquidate, three years after having received a $700-million taxpayer bailout in July 2020 that has been condemned in maddening detail by the Congressional Oversight Commission.
On July 28, it told employees that it would shut down and laid off its non-union employees. It then also laid off 22,000 employees who are members of the International Brotherhood of Teamsters. Many drivers and other employees are likely to get hired by other trucking companies.
Yellow said today that it “has partnered with the American Trucking Associations ATA to launch its first searchable job database, specifically for Yellow employees. This initiative intends to streamline job placement while giving ATA member companies the ability to connect with thousands of skilled freight and operations professionals, mechanics, logisticians and more.”
Its customers have already moved on to other trucking companies. The freight business goes on, and trucks move a big part of it, but it’s going to be without Yellow.
The last two major trucking companies to file for bankruptcy and liquidate were New England Motor Freight, a less-than-truckload (LTL) carrier, in February 2019; and truckload carrier Celadon, brought down by accounting fraud, in December 2019. Celadon was the largest truckload carrier ever to file for bankruptcy. But it was much smaller than Yellow.
Yellow was a major contributor to the Central States Pension Fund, which was among the nearly insolvent multiemployer pension funds that got bailed out last December by the government.
The company has long been bogged down in debt — as of Q1, it had $1.47 billion in long-term debt – resulting from a series of acquisitions of competitors – the two largest were Roadway in 2003 and USF in 2005 – whose operations it then failed to fully integrate for cost savings.
The US government, Yellow’s largest creditor following the misbegotten bailout in 2020, is owed $700 million in unsecured debt, due in September 2024; the government also received 29.6% of the shares of Yellow. We hope that it dumped those shares in recent days into the laps of the meme stock traders, but probably didn’t.
A group led by PE firm Apollo Global Management is the second largest creditor, owed $567 million in secured debt, due in June 2024.
Yellow listed the top 30 of its other creditors in its bankruptcy filing, including BNSF Railway, Amazon, Home Depot, and Union Pacific.
Yellow said in its statement that it expects to enter into a debtor-in-possession (DIP) financing agreement that would allow it to wind down operations, including paying wages and benefits incurred before the bankruptcy filing.
Among its assets are 166 freight terminals, per its annual report for 2022, that other trucking companies might be interested in buying. It leases another 142 terminals.
In its Q3 2022 earnings call, it announced that it would try to sell 28 terminals. In July, it pulled off a big one; it sold a 24,000-square-foot terminal in Compton, California, for $80 million. Other terminals aren’t going to be worth that much.
Proceeds from the sale of the terminals and other assets will be used to pay back the DIP financing, which has priority over other creditors, and the remaining proceeds will go to creditors under the supervision of the bankruptcy court.
The stock will be delisted and will trade over the counter, but won’t represent anything anymore. Stockholders will get to ping-pong the shares back and forth amongst each other until they get tired of it. In early trading today, the shares gave up one-third of the crazy meme-stock spike since the July announcement.
CEO Darren Hawkins blamed the Teamsters for the demise of Yellow in stunning announcement.
He dedicated a big portion of Yellow’s press release about the bankruptcy filing to a review of the company’s issues with the Teamsters. For a CEO to make this public statement is just stunning.
There is lots of blame to go around, including and particularly with management, going back many years. But here he is singling out the Teamsters union as an organization (he is specifically not blaming the union members, but is lauding them, all of them).
“All workers and employers should take note of our experience with the International Brotherhood of Teamsters (“IBT”) and worry.
“We faced nine months of union intransigence, bullying and deliberately destructive tactics. A company has the right to manage its own operations, but as we have experienced, IBT leadership was able to halt our business plan, literally driving our company out of business, despite every effort to work with them.
“Several years ago, Yellow recognized that it needed to modernize operations to compete with non-union carriers that increasingly dominated the industry. Yellow developed the common-sense ‘One Yellow’ business plan to make Yellow more competitive while strengthening jobs and improving customer service. One Yellow called for raising employees’ pay and creating more jobs, while providing stability for all stakeholders. One Yellow aimed to put Yellow on the right path, fixing legacy issues created long ago, making Yellow the industry-dominant company it once was.
“The operational changes necessary to implement One Yellow required approval from IBT leadership.
“In August 2022, IBT leadership approved the first phase of One Yellow in the western U.S. and the plan was a success: redundancies were reduced, freight departed terminals earlier and customer service improved.
“Unfortunately, despite Phase One’s approval and success, IBT leadership implemented a nine-month blockade, halting the remainder of Yellow’s business plan. This caused Yellow irreparable harm.
“In the spring, while their blockade of One Yellow was ongoing, IBT leaders demanded that Yellow open its contract nearly one year early, and Yellow agreed, yet its goodwill was met with hostility. Instead of negotiating a contract, Yellow faced months of public insult from IBT, including a social media post depicting a tombstone with Yellow’s name on it along with the dates 1924-2023.
“This ruthless campaign included repeated public taunts calling for Yellow’s demise and was intended to put Yellow out of business. At the same time, IBT leadership spread false claims that Yellow was trying to exact ‘concessions’ from its union employees. Nothing was further from the truth.
“Combined with months of refusals to negotiate, IBT leaders’ campaign against Yellow caused grave concern among investors, drove away customers, and put 30,000 jobs at risk.
“By summer, Yellow’s losses from the delay in implementing One Yellow had reached more than $137 million in adjusted EBITDA.
“On June 26, 2023, Yellow filed a lawsuit against IBT citing breach of contract and loss of enterprise value. The lawsuit is pending, and the damages have grown since.
“As the IBT continued to stonewall and publicly disparage Yellow, Yellow management kept employees informed that the situation was increasingly dire.
“Yellow made it clear to IBT leadership that their blockade of One Yellow severely constrained Yellow’s cash flow and its ability to refinance debt.
“Yellow was forced to take measures to preserve liquidity to give IBT leaders more time to finally engage. Instead, IBT leaders announced a strike against Yellow’s then-significantly wounded company. Customers fled and business was not recoverable.”
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