NEW YORK -- Trucking company Yellow Corp. is shutting down and headed for bankruptcy, the Teamsters said Monday.
An official bankruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt. Its expected liquidation would mark a shift for the U.S. transportation industry and shippers nationwide, and the potential loss of about 30,000 jobs.
"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 Monday. "This is a sad day for workers and the American freight industry."
Yellow did not have a comment when reached by The Associated Press on Monday. As of Monday afternoon, no bankruptcy filings from the company could be found on the Securities and Exchange Commission's website.
A spokesman for the Teamsters did not respond to a question about the number of Yellow Corp. employees who live in Arkansas. The company listed three facilities in the state, in Springdale, Harrison and Jonesboro.
The company's collapse arrives just three years after Yellow, formerly known as YRC Worldwide Inc., received $700 million in pandemic-era loans from the federal government. But the company was in financial trouble long before that -- with industry analysts pointing to poor management and strategic decisions dating back decades.
Former Yellow customers and shippers will face higher prices as they take their business to competitors, including FedEx or ABF Freight, experts say -- noting that Yellow historically offered the cheapest price points in the industry.
As companies compete to absorb the freight, the reduction in excess capacity may allow carriers to raise prices, said Amit Mehrotra, an analyst with Deutsche Bank.
"This development is clearly very positive for the companies that remain open for business," Mehrotra said Monday in a report.
The 99-year-old Nashville, Tenn.-based company is one of the nation's largest less-than-truckload carriers.
Safety vests that appeared to belong to former Yellow workers were zip-tied to the fence of a closed YRC Freight terminal in St. Louis on Monday. Names and years worked at the company were written on them.
"Ron Fisher 2017-2023 was here," was written on one vest.
Reports of Yellow preparing for bankruptcy emerged last week -- as the trucker saw customers leave in large numbers, according to articles in The Wall Street Journal and FreightWaves. And the company reportedly stopped freight pickups earlier in the week.
Yellow shut down operations on Sunday, according to The Journal, after hundreds of nonunion employees were fired Friday.
The bankruptcy preparation reports arrived just days after Yellow averted a strike from the Teamsters, which represents Yellow's 22,000 unionized workers, amid heated contract negotiations. On July 23, a pension fund agreed to extend health benefits for workers at two Yellow Corp. operating companies, avoiding a planned walkout. The fund gave Yellow "30 days to pay its bills," notably $50 million that Yellow failed to pay the Central States Health and Welfare Fund earlier in the month.
Yellow has racked up hefty bills over the years. 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. In June, a congressional investigation 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.
It's unclear how the Treasury Department will recoup the apparent losses. The department did not respond to a request for comment.
The current financial chaos at Yellow "is probably two decades in the making," said Stifel research director Bruce Chan, 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."
A Wednesday investors note from financial service firm Stephens estimated that Yellow was burning daily amounts of $9 million to $10 million in recent days.
Yellow handled an average of 49,000 shipments per day in 2022 according to Satish Jindel, president of transportation and logistics firm SJ Consulting. On Friday, he estimated that number was down to between 10,000 and 15,000 daily shipments.
Yellow's prices have historically been the cheapest compared with other carriers, Jindel said. "That's why they obviously were not making money," he added. "And while there is capacity with the other [less than truckload] carriers to handle the diversions from Yellow, it will come at a high price for [current shippers and customers] of Yellow."
Since trucking was deregulated in 1980, the industry has cycled through regular boom-and-bust episodes every 18 to 24 months, according to Ken Adamo, chief of analytics for DAT Freight & Analytics in Akron, Ohio. When times are good, new drivers flock to the business. The influx inevitably drives down rates, leading many of those new drivers to quit.
The covid chapter of this story was extreme. At its peak, roughly 8,000 trucking companies entered the market in a single month, compared with the long-term monthly average of about 700, Adamo said.
"There's still more capacity than freight to be moved," he added. "It's a tough time to be a carrier."
The freight slump is largely good news for consumers, who no longer must wait for goods they have ordered, and manufacturers that last year ran short of key materials such as semiconductors. Today, the nation's supply chain is operating more smoothly than at any time since late 2008, according to an index maintained by the Federal Reserve Bank of New York.
During the pandemic, there were too many goods and not enough ships, trucks and planes available to move them. Now, as merchandise consumption slowly returns to normal, the U.S. supply chain has more capacity than it needs.
"The freight recession is real and it stretches across modes, across air, trucking and rail," said Phil Levy, chief economist for Flexport, a San Francisco-based supply chain company.
Normally, a downturn in freight shipments would signal the approach of a broader downturn. But consumer spending, which accounts for 68% of the economy, isn't collapsing. It's gradually slowing and pivoting from merchandise to services, such as insurance and air travel. In the second quarter, consumer spending on services rose three times as fast as goods purchases, according to the Commerce Department.
This distinctive economic climate is making the freight recession more punishing than usual.
Lower freight volumes that are soon followed by a full-blown recession are ordinarily cushioned by falling gas prices, from weak demand, lower equipment costs and a soft labor market with wages under control.
None of those conditions apply today. Retail gasoline prices average $3.56 per gallon, according to the Fed. That's down about 18% from one year ago, but still high relative to most of the last five years. Likewise, inflation has pushed equipment prices up and the strong jobs market means that employers must compete for workers by offering higher pay.
The shutdown of Yellow operations would have been more disruptive for shippers if it had happened two years ago, when there was little slack in trucking capacity, said Melanie Burnham, chief financial officer of competitor Hercules, which has a fleet of 300 trucks and 30 facilities. Now, she said, "there are some strong companies out there that can service the needs of the shippers."
Information for this article was contributed by Wyatte Grantham-Philips and Matt Ott of The Associated Press, David J. Lynch and Julian Mark of The Washington Post and Thomas Black of Bloomberg News.