Yellow Corp., a 99-year-old trucking company, announced on Sunday that it will be halting its operations and laying off all 30,000 of its workers. The company has been in a battle with the Teamsters union, which represents a large portion of its workforce. Despite the union canceling a threatened strike just a week ago, Yellow failed to reach an agreement on a new contract.
Yellow Corp. has a long history in the trucking industry and once dominated the field. However, in recent years, the company has been struggling financially due to an unaffordable amount of debt. While the union made concessions to help the company, its debt service became overwhelming. Yellow’s two national competitors, ABF Freight and TForce, remained more profitable than Yellow.
Bankruptcy Filing and Impact
Reports suggested that a bankruptcy filing would occur by July 31, and on Monday, the Teamsters confirmed that the company is indeed filing for bankruptcy. This closure is detrimental not only to its employees and customers, but also to US taxpayers. Yellow received a $700 million loan from the federal government in 2020, resulting in taxpayers owning a significant portion of the company’s stock. Additionally, Yellow still owes more than $700 million to the Treasury department.
Higher Rates for Shippers
Yellow’s closure will lead to higher rates for shippers who relied on the company’s affordable services. While there is excess capacity in the trucking industry, Yellow’s closure will still impact supply chains and increase prices for shippers.
Reasons for Closure
In recent years, consumer spending has shifted from goods to services, causing a decline in freight demand. Yellow couldn’t sustain its operations amidst this slowdown in freight and the resulting drop in trucking rates. The company’s shipments declined, and customers started shifting to other carriers.
The Deregulation of the Trucking Industry
Yellow’s closure marks the end of an era. When the trucking industry was deregulated, non-union trucking companies dominated the truckload segment. However, the LTL segment, which requires a network of terminals, allowed unionized carriers like Yellow to continue being major players. Over time, non-union carriers also gained dominance in the LTL segment, leading to the demise of the once-dominant Yellow, Roadway Express, and CF.