Yellow Corp., the nation's third-largest less-than-truckload hauler and No. 6 on the FleetOwner 500: Top For-Hire fleets, officially called it quits on Aug. 6, announcing the filing of Chapter 11 in U.S. Bankruptcy Court in Delaware—but not without first laying much of the blame for the carrier's demise at the feet of the union that represented about 22,000 of its 30,000 employees.
"All workers and employers should take note of our experience with the International Brotherhood of Teamsters [IBT] and worry," CEO Darren Hawkins said in a lengthy Aug. 6 statement posted close to midnight on the company's website.
"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."
In their own statement later Monday morning, the union denounced “any attempt by the company to evade its financial obligations through legal manuevers.”
The new Teamsters statement follows similar language in earlier statements from General President Sean O’Brien, who during varying times of tumult for the company in the last three weeks accused Yellow of "gross mismanagement" and of being “a deadbeat company,” namely for announcing it would miss two payments on pension and health care benefits before a 30-day extension from fund administrator Central States averted a strike by July 24.
In the new Aug. 7 statement, O’Brien added: “Yellow may try to use the courts to eradicate its financial responsibilities, but they can’t escape the truth. Teamster families sacrificed billions of dollars in wages, benefits, and retirement security to rescue Yellow. The company blew through a $700 million government bailout. But Yellow’s dysfunctional, greedy C-suite failed to take responsibility for squandering all that cash. They still don’t.”
The union pledged in its statement to closely monitor Yellow's moves in the bankruptcy proceedings.
O’Brien continues in the statement: “They shamelessly pin their corporate incompetence on working people. This is what’s wrong with Big Business. This is a reminder of why workers’ ability to organize and collectively bargain is so crucial to protecting and creating good jobs in America,” adding that, in 2011, “Teamsters agreed to a massive pay cut to keep YRC Freight in business. The concessions from workers continued in the years that followed. In 2020, the government gave the company a $700 million pandemic relief loan in exchange for a 30% stake.”
See also: XPO shipments pop on Yellow fallout
Teamsters General Secretary-Treasurer Fred Zuckerman added to the fray on Monday, saying, “When mismanaged companies like Yellow cry about needing more flexibility to modernize, they’re telling you they want to take advantage of workers. They want to pay workers less, kill their pensions, and stop paying their benefits. They want to force workers to perform labor they weren’t hired to do. All things Yellow is outright guilty of. Yellow benefited from historically low labor costs compared to other freight leaders, yet they still managed to drive the company into the ground. Workers do not own that death. Yellow management must.”
The company and the union had clashed frequently during the company's almost 100-year history, but especially in 2022 and 2023.
In its Aug. 6 statement, Hawkins added: "It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business. 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."
Later in the statement, the CEO adds, referencing a $700 million pandemic-era government bailout: "While IBT leaders may believe they won a battle against Yellow, it's our employees and their families who have lost. We tried everything to work with IBT leadership and did all we could to save employees' jobs. Our employees are professionals who, despite heavy hearts, worked diligently to clear the docks, deliver remaining freight, and close our terminal doors one last time. It is with this same professionalism that we intend to wind down our business, maximize recoveries for creditors, and pay back the CARES Act loan in full."
As Yellow fades, lawsuit against the union apparently will not
Yellow sued the Teamsters in a U.S. District in Kansas for $137 million, accusing the union of breach of contract and trying to sabotage its third financial restructuring in 15 years, One Yellow, and putting the carrier at risk of needing to liquidate its assets, the exact course Yellow is on now. Yellow notes in its Aug. 6 statement that the lawsuit still is ongoing "and damages have grown since," so the company's lawsuit doesn't seem as if it will go away even after the bankruptcy filing.
Though Yellow was publicly silent for two weeks and word of its bankruptcy course actually was announced by the Teamsters on July 31, the carrier had in the last week sought funding called "debtor-in-possession" (DIP) financing from New York-based private equity firm Apollo Global Management to support the bankruptcy filing, which analysts had thought would be Chapter 7 liquidation, not Chapter 11 reorganization.
The now-defunct company, which traced its roots back to 1924 and an Oklahoma bus line and taxi cab service but started having serious trouble after an almost $1 billion merger with the No. 1 U.S. LTL Roadway in 2003, in its Aug. 6 statement also cited that DIP funding as liquidity Yellow would need to "support its businesses (national LTL YRC Freight, regional LTLs New Penn, Holland, and Reddaway, and a third-party logistics arm, which it had offered for sale on July 27) throughout the marketing and sale process, including payment of certain prepetition wages."
Yellow "filed a number of motions with the bankruptcy court designed to facilitate the company's orderly wind-down of the businesses," its statement also says. "Certain of these motions seek authority from the bankruptcy court for the company to make payments upon, or otherwise honor, certain obligations that arose prior to the filed voluntary petitions, including obligations related to employee wages, salaries and benefits, taxes, and certain vendors and other providers of goods and services essential to the company's businesses. The company expects that the bankruptcy court will approve the relief sought in these motions on an interim basis."
One Yellow restructuring caught in conflict with Teamsters
In Yellow's statement, the company concedes that several years ago it needed to modernize its operations "to compete with non-union carriers that increasingly dominated the industry" and developed the 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," it added. "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."
And the LTL also says in its lengthy statement that the union a year ago approved the first phase of One Yellow in the western U.S., but much like it did in its June 2023 lawsuit, accused the company of "a nine-month blockade" of the rest of the restructuring, "halting Yellow's business plan" and causing the company "irreparable harm."
"In the spring, while their blockade of One Yellow was ongoing, [Teamsters] leaders demanded that Yellow open its contract nearly one year early, and Yellow agreed, yet its goodwill was met with hostility," the company's statement adds. "Instead of negotiating a contract, Yellow faced months of public insult from the 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," Yellow commented on Aug. 6, "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."
Shock to trucking's LTL segment upon Yellow's exit
Impacts of the exit of Yellow were becoming plainly apparent a week into the union declaration that Yellow would cease: Most notably, layoffs at the company are widespread and its 30,000-some employees, including 22,000 union members, are being routed to placement services to find new jobs, namely an American Trucking Associations sharable database that Yellow said it had joined as a partner, adding that it was "committed to helping its employees find new work."
The Teamsters also are offering their Yellow employees transition assistance. The union addressed this in its Aug. 7 statement. “Our members’ loss of work at Yellow was no fault of their own. They should be the first in line for real relief as bankruptcy moves forward,” John A. Murphy, the Teamsters' national freight director, added in the statement. “While Yellow’s closure represents one last shameful act by a greedy employer, the Teamsters will never desert our brothers and sisters. We will do everything we can to prioritize our members at Yellow and their families during forthcoming bankruptcy proceedings.”
Yellow's loss of its business now to bankruptcy is other LTLs' gain, as competitors are gaining business from Yellow's shutdown to the point where the blips are already starting to show on their earnings reports.
The LTL has a lot of debt: about $1.5 billion in long-term obligations, including the CARES Act loan granted by the Trump administration, $138 million in pension liabilities, and $250 million in other claims and contingencies. But the company also has a lot of real estate and equipment: more than 300 terminals and, according to the for-hire FleetOwner 500, over 14,000 tractors, and more than 43,000 trailers.
While creditors led by Apollo Global Management were nearing the deal to provide Yellow with fresh cash for a coming bankruptcy through what is called debtor-in-possession financing, experts said that type of instrument usually is used by a company that is heading to Chapter 11. Yellow also said on July 27 that it was exploring a sale of its 3PL, Yellow Logistics.
J. Bruce Chan, director and transportation, global logistics, and future mobility analyst at Stifel, gave context on Aug. 4 to the DIP financing. "We believe [the DIP is] most likely for temporary ops to preserve asset value (working capital for security guard salaries, to allow facilities to stay open until freight is cleared from the docks to minimize loss claims, to prevent foreclosures and liens on properties, to relocate assets, etc.)," Chan told FleetOwner. "DIP financing is usually pretty safe (extra protections in bankruptcy), and it would make sense for Apollo to do this to preserve collateral value."
Plus, a major Yellow investor, Boston-based MFN Partners Management, upped its stake to more than 40% and now controls 22.1 million shares, which roller-coastered in value last week between per-share lows of about 50 cents to highs above $5. Yellow's shares were back down significantly to around $3.50 per share on the afternoon of Aug. 4. The stock was down more than 42% on Yellow's formal announcement of its bankruptcy.
In the wake of Yellow's padlocking of its terminals and freight yards last week and mass layoffs of its employees (around 8,000 are not union members, while roughly 22,000 are Teamsters), a new lawsuit alleges that Nashville, Tennessee-based Yellow and its subsidiaries failed to give the workers the required advance notice before the mass layoffs that began.
The trucking giant terminated the workers during mass layoffs that started July 28, but it didn't provide the 60 days of advance written notice required under the federal Worker Adjustment and Retraining Notification Act, according to the complaint filed in the U.S. District Court for the District of Delaware on Aug 1.
Senior Editor Geert De Lombaerde contributed to this story.