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More bad blood between Yellow and its union as Teamsters vow to strike

July 19, 2023
Union prepares to walk out July 24 after the LTL leader and No. 6 FleetOwner 500 for-hire company, which is facing the threat of insolvency, failed to make a July 15 health-care and pension benefits payment and said it will miss another in mid-August.

Embattled less-than-truckload carrier and No. 6 for-hire FleetOwner 500 company Yellow faces a July 24 strike by its Teamsters members after the company failed on July 15 to make a health-care and pension benefits payment and said it would miss another one due in mid-August.

As a result of the missed high-dollar payment and the announcement of another one, the Central States Pension Fund board of trustees decided to terminate Yellow's participation in the fund, effective July 23, the day before the Teamsters threatened a walkout and the date that the Yellow employees will stop, according to the Central States announcement, accruing pension benefits.

Because the company missed one payment and will miss another, the Teamsters members at Yellow also will have their health care coverage suspended after July 23, according to the pension fund's statement. However, the employees can continue their health coverage by making payments on their own.

In a statement, Teamsters President Sean O'Brien blasted Yellow for "gross mismanagement," calling the FleetOwner 500 carrier a "deadbeat company."

See also: Predictions of supply chain shock from UPS strike multiply

"Yellow has failed its workers once again and continues to neglect its responsibilities," O'Brien added. "This corporation's gross mismanagement is another affront to the livelihoods and well-being of 22,000 Teamsters nationwide. Following years of worker givebacks, federal loans, and other bailouts, this deadbeat company has only itself to blame for being in this embarrassing position."

In its own July 18 statement, Yellow said it deferred the pension and health contributions for June (due July 15) and one for July (due Aug. 15) "to preserve liquidity as it worked to obtain meetings with the [union] as well as secure additional financing." Yellow, which filed a more than $137 million lawsuit against the Teamsters two weeks ago in U.S. District Court in Kansas over the union's alleged efforts to block the company's third restructuring in 15 years, said the two months of "deferrals" equaled about $50 million.

"We are not giving up," the company said in its statement. "We will work with all parties involved to come to a speedy resolution." Company officials added that Yellow "intends to repay the funds with interest immediately upon securing additional financing and has asked the funds to discuss acceptable terms."

In the union statement, Teamsters General Secretary-Treasurer Fred Zuckerman added: "Yellow has a responsibility and obligation to workers. Our members should not suffer because of management's incompetence and financial irresponsibility. This is a new low, even for a company as dysfunctional as Yellow. The Teamsters are working with our local unions, and we will continue to regularly update members as this situation unfolds."

UPS strike would shock parcel; Yellow walkout could disrupt LTL

Even as the threat has been building of a strike at UPS Inc. (No. 2 on the FleetOwner for-hire 500), which would potentially be the most significant work stoppage in U.S. history and could shock the parcel-shipping segment, a walkout at Overland Park, Kansas-based Yellow and that company's possible insolvency has analysts concerned about how the less-than-truckload segment of trucking would cope.

UPS occupied a significant place in a recent analysis by third-party logistics provider AFL Logistics and investment bank TD Cowen, but Yellow came in a close second. The company's history goes back nearly 100 years, and bills itself as "the creators of the LTL industry." With 30,000 employees, including about 22,000 Teamsters members, Yellow operates more than 14,000 tractors and 43,000 trailers among over 300 terminals.

See also: Yellow tanks on Q4 report, delay in realignment work

The Yellow lawsuit states that the Teamsters' resistance to moving ahead with its latest restructuring, One Yellow, has come mainly from a broad demand to lift wages under the parties' contract, which runs until next March. After resisting that call for months, Yellow leaders late last month offered to increase wage and mileage rates with the condition that the company needs to restructure or refinance existing debt deals or secure new financing before it can begin paying those higher rates. Union leaders rejected the offer and told members the plan was "a non-starter."

The AFS/TD Cowen analysis foretold significant LTL disruption if Yellow has to liquidate. "A major threat to the current favorable trend for shippers is a potential Yellow bankruptcy. That's a wild card that could present an extraordinary opportunity for LTL carriers to push up rates in a way that's inconsistent with current data," AFS President of LTL Kevin Day said.

In a note published the day before Yellow went public with its lawsuit against the Teamsters, Stifel analyst Bruce Chan also painted a dramatic picture, calling Yellow's situation "precarious" because the company is nearing a big debt deadline.

"Time is of the essence for Yellow because the change of operations would help to mitigate costs and cash burn, but also because the company needs to refinance almost $1.5 [billion] in debt coming due next year before a potential covenant violation, which we estimate could come as early as next quarter," Chan and his colleagues Matthew Milask and Andrew Cox wrote in a report to clients. "The company has survived significant financial and operational overhauls in its tumultuous past, but without the support of the Teamsters, it's difficult for us to see a path forward."

Senior Editor Geert De Lombaerde contributed portions of this story.

About the Author

Scott Achelpohl | Managing Editor

I'm back to the trucking and transportation track of my career after some time away freelancing and working to cover the branches of the U.S. military, specifically the U.S. Navy, U.S. Marine Corps, and the U.S. Coast Guard. I'm a graduate of the University of Kansas and the William Allen White School of Journalism there with several years of experience inside and outside business-to-business journalism. I'm a wordsmith by nature, and I edit FleetOwner magazine and our website as well as report and write all kinds of news that affects trucking and transportation.

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