Yellow Corp. trucks sitting idle at a company facility on July 31 in Hayward, California. (Justin Sullivan / Getty Images via CNN)
(CNN) — Yellow Corp., a once-dominant US trucking company, has filed for bankruptcy as it winds down its 99-year-old business that employs 30,000 workers.
The Nashville-based logistics provider announced Sunday it had filed for Chapter 11 relief in the US Bankruptcy Court for the district of Delaware.
“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” CEO Darren Hawkins said in a statement.
“Today, it is not common for someone to work at one company for 20, 30, or even 40 years, yet many at Yellow did. For generations, Yellow provided hundreds of thousands of Americans with solid, good-paying jobs and fulfilling careers.”
Yellow said it expects to reach an agreement with its creditors, pending approval from the court that will allow it to pay certain wages and benefits, as well as some obligations to vendors and suppliers.
The company disclosed a long list of creditors in its court filing, with Amazon (AMZN), Home Depot (HD) and Goodyear Tire & Rubber Company (GT) among the top 30 with unsecured claims.
The filing comes more than a week after the trucking company halted operations, putting 30,000 people out of work. It warned in a lawsuit last month it was at risk of running out of the money it needed to continue to operate.
As it sought a cash infusion that never came, it struggled with slowing business, an unaffordable debt load and a long-running battle with the Teamsters union, which represented 22,000 of its 30,000 employees, including its drivers and most of its dock workers.
Once an industry stalwart
Yellow Corp. was started in 1924, primarily operating under the name Yellow Freight.
The company was one of the dominant carriers in a segment of trucking known as “less-than-truckload” (LTL) — moving pallet-sized shipments of freight. Along with two other unionized LTL rivals — Roadway and Consolidated Freight — Yellow made up what was known as “the Big Three.”
But with deregulation of trucking in 1984, the Big Three and other unionized LTL carriers faced greater competition from nonunion carriers. Consolidated went out of business in 2002.
While the nonunion LTL carriers started with a significant cost advantage, repeated concessions by the Teamsters union helped close much of that gap. So did a shortage of drivers nationally, which helped lift wages at the nonunion carriers.
But Yellow faced other problems. It started taking on debt to buy many of its unionized rivals, including Roadway for nearly $1 billion in 2004.
The company had about $1.5 billion in long-term debt on its balance sheet in its most recent financial report. Nearly half that debt came from a pandemic relief loan it received from the federal government in 2020, with the US Treasury taking a 30% stake in the company in return. Those shares have lost nearly all their value since then.
In its final year, Yellow was still a major player but its dominance had faded. The company handled only about 7% of the nation’s 720,000 daily LTL shipments in 2022, according to trucking consultant Satish Jindel.
Mounting troubles
While the US economy has remained strong, consumers have shifted their spending away from the goods purchases they made early in the pandemic.
Instead in recent years they have been more focused on services, such as travel and going to sporting events, concerts and eating out. Less money on goods meant less need for trucking.
LTL shipments fell 17% between 2021 and 2022, and another 5% in the first quarter of 2023 compared to the same period a year earlier, said Tom Nightingale CEO of AFS Logistics, a third-party logistics firm.
Nightingale said that while Yellow could have been profitable when demand for trucking was strong, it couldn’t survive in the face of the slowdown in freight, and the drop in trucking rates that went with it.
Shippers who worried about Yellow’s future started shifting to other carriers — its shipments fell 13% in the first quarter compared with a year earlier, according to the company’s earnings statement.
Last month, Yellow missed payments to union pension and health insurance funds, bringing on a threat from the Teamsters that they would go on strike on July 24. At the 11th hour, the union agreed to keep working and to give Yellow another month to make the payments.
But customers had already started to bolt for other carriers. Within days, Yellow began preparations to shut down, halting pickups of freight at customers and only delivering freight that was already in its system. On July 30, it notified employees and the union that it had halted.
Yellow management and the union blamed each other last week for the decision to close the company.
The company had recently pressed the Teamsters for a new contract that would allow it to merge operations of its various trucking companies and the seniority lists of its drivers. The union, concerned that the move would cost some its 22,000 members their jobs, balked at the move.
“The company did everything within its power to fight for and protect employees’ jobs. The International Brotherhood of Teamsters refused to negotiate with Yellow for nine months, jeopardizing 30,000 jobs. Instead of working with Yellow to negotiate a new contract, the IBT made its intentions clear: destroy Yellow,” the company said in a recent statement.
Yellow said it had offered to increase the pay of Teamsters as part of the agreement, a claim the union disputes.
In its statement Sunday, Yellow again accused the Teamsters of driving the nearly century-old company “out of business.”
The union said it did everything it could to keep Yellow alive in recent years and blamed Yellow’s mismanagement for the company’s failures.
The decision to close Yellow “is unfortunate but not surprising,” Teamsters President Sean O’Brien said in a statement the day after the closing.
“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,” said O’Brien.
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