Major trucking company, Yellow Corp (YELLO) has filed for Chapter 11 bankruptcy protection resulting in a significant surge of job cuts on an unprecedented scale and the possibility of escalated shipping expenses.
Approximately Yellow 30,000 workers have been laid off, according to Reuters.
Having operated for nearly a century, the company ceased its activities on 30 July. It had held a significant market presence in the “less-than-truckload” category, specialising in transporting cargo for multiple customers using a single truck.
The company attributed its bankruptcy, which is likely the largest ever seen in a US trucking firm, to the International Brotherhood of Teamsters union. This union represents approximately 22,000 of the company’s employees.
Yellow CEO, Darren Hawkins, said in a statement released on 6 August that Teamsters leadership “was able to halt our business plan, literally driving our company out of business.” However, the International Brotherhood of Teamsters argued that Yellow executives were to blame for the company’s demise, reported Reuters.
“Yellow’s dysfunctional, greedy C-suite failed to take responsibility for squandering all that cash. They still don’t… They shamelessly pin their corporate incompetence on working people,” said Teamsters General President, Sean O’Brien.
According to Reuters, financial analysts found that Yellow’s ongoing financial struggles were linked to debt incurred through acquisitions, the substantial expenses of operating disparate companies, and the impact of low shipping rates, all of which led to a decline in revenue.
Reuters also reported that, according to brokerage TD Cowen, Yellow held around 8-10 per cent of market share, and its customers included major retailers including Walmart, Home Depot, manufacturers and Uber Freight.
As part of its Chapter 11 filing, Yellow’s total assets stood at $2.15 billion, while its total debt amounted to $2.59 billion.
Yellow was bailed out under a pandemic relief programme in 2020 for $700 million, a loan that the company’s executives have announced they intend to repay. The company has $1.3 billion in debt payments that are due in 2024.
However, bankruptcy experts hold that repayment will likely depend on the total proceeds the company can retrieve from selling its properties and roughly 12,000 trucks, reported Reuters.
The US government warned about potential losses for US investments in the company due to its financial woes earlier this summer.
Notably, the Treasury Department holds a stake of almost 31 per cent in Yellow, having acquired 15.9 million company shares as added collateral for a loan. Shareholders damningly have the lowest priority in reclaiming their investments in wake of a company’s bankruptcy.
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Additionally, Yellow holds a secured revolving loan of approximately $450 million, obtained through a consortium of banks organised by Citizens Bank, Merrill Lynch, and other institutions, leaving the taxpayer in the most precarious position, reported Reuters.
Yellow managed to prevent a strike involving 22,000 workers represented by Teamsters by committing to settle over $50 million in owed worker benefits and pension accruals. This was a major factor leading to the company’s demise, court records indicated.
In a separate development, Yellow employees filed two lawsuits on Monday, alleging that the company violated the requirement of providing a 60-day notice before terminating their employment.
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