Yellow Corp., the nearly century-old trucking company (whose logo has always looked frustratingly orange, in my opinion), is folding and laying off all of its 30,000 workers.
"Today's news is unfortunate but not surprising," the Teamsters President Sean O'Brien said. "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."
Company officials did nor respond to requests for comment Sunday and Monday.
Here's the deal: Yellow (which, again, looks orange, right?) has been struggling to restructure a ton of debt while tussling with the union that represents most of its workforce of drivers and dock workers, my colleague Chris Isidore reports.
What happened?
- Things started looking dodgy a week ago, when the company stopped picking up new freight from customers, delivering only what it already had in its system.
- Meanwhile, the Teamsters union had agreed to suspend a threat of a strike to give Yellow more time to make payments to its pension and health insurance plans. But they still couldn't reach an agreement on a new contract, according to a memo from the union's negotiating committee.
- Early Monday, the union said it had been notified of the shutdown.
It might seem strange for a trucking company, of all things, to go out of business when the economy is as strong as it is now. Part of the problem, Chris explains, is that consumer spending has shifted from goods — the endless boxes of toilet paper and tech gadgets and accent pillows we had to have while we were stuck at home — to services. We're spending our money on concert tickets, flights, going out to restaurants and other activities that have made trucking demand shrink relative to 2020 and 2021.
But the reason Yellow has struggled more than its rivals has to do with its debt. The company simply couldn't get out from underneath a $1.5 billion debt load on its books.
Yellow posted only a narrow operating profit in 2021 and 2022, and a $9.3 million operating loss in the first quarter of this year. Its two other national competitors, ABF Freight and TForce, which are also unionized, were far more profitable.
Yellow's customers were using Yellow was because it was cheap, an industry analyst told Chris. "They're finding out that price was below the cost of supporting a good operation."
BIG PICTURE
Yellow's collapse into bankruptcy marks the end of an era in trucking.
When the industry was deregulated nearly 40 years ago, the segment that handled full trailers of cargo, known as truckload, was quickly dominated by non-union trucking companies. All you needed to get into the game was a truck and someone to drive it.
But Yellow is part of the so-called LTL, or "less than truckload" segment, which requires a network of terminals to sort incoming and outgoing freight. That limited, but didn't prevent, the entry of low-cost competitors. Unionized carriers such as Yellow continued to be major players, even as non-union rivals grew.
Eventually, non-union carriers came to dominate the LTL segment as well. Unionized carriers like Yellow had to merge with one another to survive. Yellow grew, but failed to streamline.
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