End of an era: 100-year-old Yellow Corp. enters Chapter 11 bankruptcy with ‘profound disappointment’ in sad day for freight

Yellow Corp. made it official Monday. It didn’t need a Teamsters’ strike to enter bankruptcy. In its 100^th year, Yellow did it completely on its own.

Yellow formally declared Chapter 11 bankruptcy protection. It came after the nation’s fifth-largest trucking company received $730 billion in loans in the final days of the Trump administration. Yellow reportedly has paid just $230 of the principal and $66 million in interest. The company is vowing to pay back the government loan “in full.”

The bankruptcy filing had been expected for weeks. It came barely three years after the Trump administration declared Yellow vital to Department of Defense shipments, despite DoD using hundreds of other trucking companies in that capacity as well.

It is unclear where the U.S. government, which in effect owns 30% of Yellow, stands in a bankruptcy reorganization.  That loan comes due next year.

Yellow has hundreds of millions of dollars in assets – terminals, real estate, truck cabs, chassis and trailers. Those assets will be sold in liquidation but it’s unclear where government loans rank in the list of hundreds of Yellow debt holders.

In its filing, Yellow estimated that it has more than 100,000 creditors and more than $1 billion in liabilities. Some of its largest unsecured creditors include Amazon ($2 million) and Home Depot, which is owed nearly $1.7 million, according to the bankruptcy petition filed in Delaware.

The Teamsters blamed the company for being poorly managed. In turn, the company said the union wasn’t willing to change with the times. But in the end, the brutal, cutthroat market place that is trucking in 2023 doomed one of the grand old names in transport and its nearly 30,000 workers.

Yellow, which had $5.24 million revenue in the $58 billion less-than-truckload (LTL) market, is closing following decades of losses that exceeded $1.5 billion.

“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” Yellow 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.”

Then the CEO took an unveiled shot at the union for its part in the company’s demise.

Hawkins said “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,” Hawkins said. “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.”

“Today’s news is unfortunate but not surprising. 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,” Teamsters General President Sean M. O’Brien said in a statement. “This is a sad day for workers and the American freight industry,”

Creditors led by Apollo Global Management Inc. were buying up stock days before Yellow’s official Chapter 11 announcement on Aug. 7. The asset manager owns most of Yellow’s loans and is Yellow’s largest creditor.

MFN Partners, a Boston-based hedge fund, also bought at least 22 million Yellow shares in the days prior to the Chapter 11 announcement.

Creditors and others are eyeing Yellow’s large portfolio of real estate, including 166 owned freight terminals with Yellow now worth more “dead than alive.”  Yellow recently sold a truck terminal in Southern California for $80 million. Yellow owns 166 terminals (10,000 doors), which could fetch a large sum in an auction process.

Yellow said it expected to enter into an agreement, setting forth the terms and conditions of a debtor-in-possession financing facility (the “DIP Facility”). Upon approval by U.S. Bankruptcy Court and the satisfaction of the conditions set forth in the agreement, Yellow said the DIP Facility will provide it with needed liquidity “which will be used to support the businesses throughout the marketing and sale process, including payment of certain prepetition wages,” according to the company.

Several years ago, Yellow recognized that it needed to modernize operations to compete with non-union carriers that increasingly dominated the industry. Yellow developed a business plan dubbed “One Yellow” to make it more competitive while strengthening jobs and improving customer service.

“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 company said.

But One Yellow turned out to be Last Yellow.

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,” Yellow said. “This caused Yellow irreparable harm.”

The company called the Teamsters’ opposition a “blockade of One Yellow.” The union demanded that Yellow open its contract nearly one year early, and Yellow agreed. But the company said 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,” the company said, calling the union’s plot a “ruthless campaign” that 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,” the company said.

But 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 earnings before interest, taxes, depreciation and amortization (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.

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.

“While IBT leaders may believe they won a battle against Yellow, it’s our employees and their families who have lost,” said Hawkins.

“We tried everything to work with IBT leadership and did all we could to save employees’ jobs. We are crushed by today’s announcement, yet we are grateful to our tens of thousands of employees who took care of our customers until the end.”

Yellow handled only about 7% of the nation’s 720,000 daily LTL shipments last year, according to estimates from trucking analyst Satish Jindel of SJ Consulting. Because of recession fears, there is about 8% to 10% excess capacity in the LTL sector right now. So Yellow’s cessation shouldn’t cause a significant disruption in supply chains, he said.

But Jindel is predicting higher rates for shippers who depend on LTL carriers, since it was the excess capacity putting downward pressure on pricing.

Big winners in this case will be rival large LTL carriers such as market leader Old Dominion Freight Line (ODFL), FedEx Freight, XPO Logistics, Estes Express and ABF Freight System. The latter is the only large Teamsters-covered carrier remaining in the LTL sector.

“Following years of worker givebacks, federal loans and other bailouts, this deadbeat company has only itself to blame for being in this embarrassing position,” the Teamsters’ O’Brien said.

The company said this has cost Yellow in excess of $137 million in adjusted earnings before EBITDA. Finally, the lenders said enough was enough. Yellow just ran out of time.