Yellow lays off huge swath of workers as embattled 99 year-old trucking firm teeters on brink of bankruptcy
US trucking firm Yellow has laid off a large number of workers as the company copes with a cash crunch, and is reportedly weighing options including an imminent bankruptcy filing.
The trucking giant on Friday told employees that it is 'shutting down regular operations' and laying off non-union employees 'at all of its locations' according to a memo seen by DailyMail.com.
The layoffs could immediately impact up to 8,000 members of the company's sales force, business operations and technology departments -- and if the company fails, another 22,000 unionized drivers and freight handlers could face unemployment.
Yellow is saddled with some $1.5 billion in debt as of late March, including $729.2 million owed to the federal government for a controversial pandemic-era loan the Treasury Department extended on national security grounds in 2020.
Earlier this week, Yellow, which had $5.2 billion in revenue last year, narrowly avoided a driver strike by Teamster union members after failing to make a $50 million payment for employee benefits.
US trucking firm Yellow has laid off a large number of workers as the company copes with a cash crunch, and is reportedly weighing options including an imminent bankruptcy
Footage shared on TikTok shows one Yellow worker angrily shouting after learning his health care benefits and pension payments had ceased.
The worker, who is believed to be operating in Florida , says: 'It's the motherf******s up there, I worked my a** for this company. This is my money y'all are playing with. F*** this s***.'
The Wall Street Journal first reported that Yellow was preparing to file for bankruptcy, a move that could come as early as the coming week.
For now, Yellow is keeping some customer service workers in place, because the company still has freight in transit that it is trying to get to destinations or back to customers, according to the Journal.
A spokesman for the company declined to immediately comment when reached by DailyMail.com on Saturday morning.
The company is the third-largest US carrier in the so-called 'less-than-truckload' segment, in which operators carry goods for multiple customers on the same trailer.
The US trucking industry in general has faced recent struggles as operators adjust to a return to normal after the shipping boom of the pandemic, when demand for goods and delivery soared. But Yellow's debt load puts it in a uniquely precarious condition.
In a memo on Friday, John Murphy, who is the Teamsters National Freight director, advised union employees to collect collect any personal belongings from all offices and terminals, in the case the facilities shutter and become inaccessible.
He wrote that 'the likelihood that Yellow will survive is increasingly bleak' according to a copy of the memo published by FreightWaves.
'Yellow continues to clear its system, and it appears to be laying off personnel and closing entire terminals across the country,' wrote Murphy.
An upset worker was filmed screaming at a Yellow warehouse after learning his pension was in jeopardy over the company's financial dire straits
'All Yellow employees should, in our opinion, prepare for the worst, as Yellow appears to be headed to a complete shutdown within the next few days.
According to Satish Jindel, president of transportation and logistics firm SJ Consulting, Yellow handled an average of 49,000 shipments per day in 2022.
As of this week, he estimates that number is down to between 10,000 and 15,000 daily shipments.
With customers leaving - as well reports of Yellow stopping freight pickups earlier this week - bankruptcy would 'be the end of Yellow,' Jindel told the Associated Press, noting increased risk for liquidation.
'The likelihood of them surviving and remaining solvent diminishes really by the day,' added Bruce Chan, a research director at investment banking firm Stifel.
In a Wednesday statement to the Journal, the company said it was continuing 'to prepare for a range of contingencies.' On Thursday, Yellow said it was in talks with multiple parties about selling its third-party logistics organization.
Even if Yellow was able to sell its logistics firm, it would 'not generate a sufficient amount of cash to keep them operational on any sort of permanent basis,' Chan said. 'Without a major equity injection, it would be very difficult for them to survive.'
As of late March, Yellow had an outstanding debt of about $1.5 billion. Of that, $729.2 million was owed to the federal government.
In 2020, under the Trump administration, the Treasury Department granted the company a $700 million pandemic-era loan on national security grounds.
Last month, a congressional probe concluded that the Treasury and Defense Departments 'made missteps' in this decision - and noted that Yellow's 'precarious financial position at the time of the loan, and continued struggles, expose taxpayers to a significant risk of loss.'
The government loan is due in September 2024. As of March, Yellow had made $54.8 million in interest payments and repaid just $230 million of the principal owed, according to government documents.
Yellow's current finances and prospect of bankruptcy 'is probably two decades in the making,' Chan said, pointing to poor management and strategic decisions dating back to the early 2000s. 'At this point, after each party has bailed them out so many times, there is a limited appetite to do that anymore.'
Yellow is the third-largest US carrier in the so-called 'less-than-truckload' segment, in which operators carry goods for multiple customers on the same trailer
In May, Yellow reported a loss of $54.6 million , a decline of $1.06 per share, for its first quarter of 2023. Operating revenue was about $1.16 billion in the period.
A Wednesday investors note from financial service firm Stephens estimated that Yellow could be burning between $9 million and $10 million each day.
Using a liquidity disclosure from earlier this month, Yellow had roughly $100 million in cash at the end of June, the note added - estimating that the company has been burning through increasing amounts of money through July.
'It is reasonable to believe that the Company could breach its $35 mil. liquidity requirement at any moment,' Stephens analyst Jack Atkins and associate Grant Smith wrote.
The reports of bankruptcy preparations arrive just days after a strike from the Teamsters, which represents Yellow's 22,000 unionized workers, was averted.
Yellow's CEO Darren Hawkins is pictured. His company faces potential bankruptcy
A series of heated exchanges have built up between the Teamsters and Yellow, who sued the union in June after alleging it was 'unjustifiably blocking' restructuring plans needed for the company's survival.
The Teamsters called the litigation 'baseless' - with general president Sean O´Brien pointing to Yellow's 'decades of gross mismanagement,' which included exhausting the $700 million federal loan.
On Sunday, a pension fund agreed to extend health benefits for workers at two Yellow Corp. operating companies, averting a strike - and giving Yellow '30 days to pay its bills,' notably $50 million that Yellow failed to pay the Central States Health and Welfare Fund on July 15, the union said.
While the strike didn't occur, talks of a walkout may have caused some Yellow customers to pull back, Chan said.
Talks between Yellow and the Teamsters, which also represents UPS's unionized workers , are ongoing. The current contract expires in March 2024.
'The financial struggles of Yellow are not related to the union and the contracts,' Jindel said, pointing to management's responsibility around its services and prices. He added the union wages from Yellow are 'lower than any competitor.'
If Yellow files for bankruptcy and customers continue to take their shipments to other carriers, like FedEx or ABF Freight, prices will go up.
Yellow's prices have historically been the cheapest compared to other carriers, Jindel said.
'That´s why they obviously were not making money,' he added. 'And while there is capacity with the other LTL carriers to handle the diversions from Yellow, it will come at a high price for (current shippers and customers) of Yellow.'
Source: Daily Mail
