The union that represents Yellow Corp. workers announced Monday that the company intends to file for bankruptcy, which will put its 30,000 employees out of work and leave American taxpayers wondering how the company will be able to pay back the hundreds of millions of dollars it borrowed from the government during the pandemic era.
Yellow Trucking Company is the third-largest less-than-truckload carrier in the country having been in business for nearly a century.
The Teamsters Union, which at the corporation covers approximately 22,000 truckers and dock employees, has been at odds with the unionized company. The company’s failure to make contributions to the union’s pension and health insurance programs sparked a planned strike that the union just one week ago decided not to go forward with. The corporation was given one extra month by the union to make the necessary payments.
“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. This is a sad day for workers and the American freight industry,” said Teamsters President Sean O’Brien in a statement.
Tax Rates
The company’s closure is terrible news for US taxpayers as well as for its staff and clients, who tended to choose the Yellow Trucking Company because it provided some of the cheapest rates in the trucking industry. In 2020, the federal government granted the corporation a $700 million loan. In addition, this resulted in taxpayers owning 30% of the company’s outstanding stock.
According to its most recent quarterly report, the corporation still owes the Treasury Department more than $700 million, which represents over half of the long-term debt recorded on its books. Following news of the bankruptcy preparations, Yellow’s shares lost 82% of their value between when the loan was made and Thursday’s closure, finishing at only 57 cents per share.
A significant portion of the firm’s debt is also owed by investors: at the end of the first quarter of this year, the company reported total debt of $1.47 billion, compared to assets of $806 million. These money problems are not brand-new. For the past 20 years, Yellow has experienced difficulty. Early in the 2000s, The Yellow Trucking Company purchased a few other businesses, purchasing Roadway for $1.1 billion in 2003 and USF for $1.47 billion in 2005.
Future of the Trucking Industry
When the trucking business was deregulated over 40 years ago, non-union trucking companies quickly dominated the truckload sector of the industry, which handled entire trailers of merchandise. To enter that sector of the market, low-cost rivals merely need a truck.
However, a network of terminals is needed for the LTL segment to sort incoming and leaving freight. This restricted the admission of low-cost rivals but did not prohibit it.
Over time, non-union carriers also started to rule the LTL market. Many of the last major unionized LTL carriers, including Yellow and competitors like Roadway Express, New Penn, and Holland, amalgamated early in this century to survive.
