A year ago.
Yellow was one of the largest freight companies in the US specializing in less than
truckload.
But the 99 year old truck giant just collapsed.
They've been relatively close to bankruptcy at times this time.
It looks like that.
There are no more rabbits to pull out of any hats.
Over the last two decades,
Yellow merged with rivals received numerous union concessions and
secured a $700 million government bailout but it wasn't enough.
By the end of July,
the company's share price lost nearly 100% of its value from its peak in
2005 trading it less than $2 per share with 30,000
jobs on the line.
Experts say it's the largest trucking bankruptcy in the US.
So what went wrong?
Yellow started in 1924 as a small taxi and bus operation in Oklahoma
City.
It only became a national force after it filed for bankruptcy.
In 1951 a banker bought the struggling business and turned it into a long
haul trucking operation.
They really took off in the 19 fifties with the advent of the international highway
system that connected cities and towns and ways that hadn't been connected before,
billions of dollars will be spent for city streets and express.
While other large retailers shipped full truck loads to stores and warehouses.
Yellow is a less than truck load or LTL carrier.
This business model gave customers an opportunity to fill their inventory gaps with smaller
quantities.
A super LTL carrier covering all of North America coast to coast.
Yellow over the years has been known as a low cost carrier.
That's actually one of the issues that really aided their finances.
In 2022 Yellow had more than 12,000 trucks moving freight across the
country for Wal Mart Home Depot,
Amazon and many other smaller businesses.
By the end of the year,
it was the fourth largest LTL carrier by revenue.
The root of Yellow struggles began two decades earlier with a string of acquisitions
that the company failed to smoothly integrate into its business.
Yellow for a long time had a strategy of growing through acquisitions that sort of reached
its apex in 2003 when they bought Roadway Yellow acquired its
chief competitor for around $1 billion in cash and stock.
It appeared to be a good move for the company.
A year later,
its share price had surged by more than 50% at the time,
the companies were operating near full capacity.
So executives didn't fully combine their operations.
That's a high cost way of doing business,
that debt that they picked up early on has really sat on their balance sheet for a long
time.
In 2005,
Yellow bought another large competitor USF for $1.37
billion.
Once again,
executives decided not to integrate the two companies.
Yellow's continued to grow.
Then in 2008,
the housing market collapsed,
created one financial crisis after another and trucking demand plummeted.
They were heavily exposed and they really couldn't recover well to avoid bankruptcy.
Executives negotiated with creditors and the Teamsters Union which represents the majority
of drivers and dock workers at the company.
By 2010,
they reached a deal that saved yellow but largely wiped out shareholders and required the
union to agree to cuts in benefits and pay.
That created a lot of tension over the years because the Teamsters Union felt like it was giving a lot of
concessions and helping the company stay alive over time and not really seeing the
benefits from that still debt from the mergers continued to haunt.
The company bankruptcy loomed again in 2014.
This is a company that's been taking in $5 billion a year.
Um Over several years,
they rarely make as much as $25 million in profit on on that $5
billion in revenue,
which is is just too little to keep an operation going.
Spokeswoman for Yellow said the company's debt load,
past failures to integrate operations and prior union concessions were the
results of actions taken long before the current board or management was in place
when the pandemic hit in 2020.
Yellow suffered another blow to its balance sheet.
The problem was that yellow didn't realize the kind of gains that a lot of its competitors did.
They're a low cost carrier.
They didn't have the capacity and the equipment to handle all that business.
That's when the federal government threw the struggling business.
A lifeline with a $700 million COVID relief loan.
It was based on their,
their role as a provider to the Department of Defense.
They're a huge mover of goods for the Pentagon.
The problem is the lifeline over over the last couple of years became a little bit of an albatross.
They started to really struggle to meet those financial obligations that were behind the
loan as of late March.
Yellow had an outstanding debt of about $1.5 billion
according to its most recent quarterly filing of that,
it owed more than 708 million to the federal government.
Yellow's financial woes escalated in 2023 as shifting consumer habits
weighed on the freight industry.
At the same time,
tensions were rising between the company and the Teamsters Union in a Teamsters call in
April National freight director,
John A Murphy said bottom line members we have given and given and
given and this company has not demonstrated that it can do a good job managing
itself.
Pressures came to a head in June when the union refused to approve the company's
restructuring plan.
Yellow has a plan called One Yellow that they've been trying to implement over over several
years and it goes to the heart of a lot of the acquisitions of the past that hadn't been integrated.
Well,
it required work rule changes,
changes in the way drivers did their jobs on the docks.
The teamsters wanted to have a,
have a bigger say in how that was implemented.
A spokesperson for Yellow said the company didn't ask the union for concessions in its
recent restructuring.
She said Yellow offered to pay its employees more but the union refused to
negotiate for nine months in late June,
Sean o'brien.
The teamster's general president tweeted an image of a headstone with the company's name.
Days later,
Yellow sued the union.
The suit accused the teamsters of blocking the company's changes and costing the trucker
business while union leaders come and go.
Yellow has been around a century.
In a statement,
the teamsters said they categorically denied the baseless allegations of Yellow's lawsuit.
They also said they diligently adhered to the terms of their collective bargaining agreement.
That same month,
Yellow sought to delay pension fund payments,
putting them $50 million behind in contributions.
These rising tensions combined with statements revealing Yellow's financial struggles
led more and more customers to jump ship.
This is a company that had 50,000 shipments a day earlier this year
and by the second week of July,
they had something like 10,000 shipments in their system.
At the end of July.
Yellow sent out notices to customers and employees saying it was ceasing all
operations on August 6th.
The company filed for bankruptcy.
Yellow employs about 30,000 people.
The loss of those jobs is going to have a big impact on the economy.
It's the biggest collapse in terms of revenue and jobs for the US trucking industry
operating as the low cost operator in this very tough competitive
business is just a tough road to take.
Doesn't provide you much room much cushion for hard times
as for the company's debt,
whether lenders like the federal government will recover their money depends on how much yellow
raises by selling real estate and other assets.
But some lawmakers and analysts say taxpayers could lose money.