Trucking giant Yellow: From bailout to bankruptcy in 3 years

In early August, three years after receiving a $700 million federal loan as part of a pandemic relief program, the trucking company Yellow filed for Chapter 11 bankruptcy protection. Yellow claimed it was forced into bankruptcy by the International Brotherhood of Teamsters, as the union prevented it from being able to modernize operations, "literally driving our company out of business," Yellow CEO Darren Hawkins said.

The Teamsters disagreed, placing the blame solely on Yellow's executives. The company's "dysfunctional, greedy C-suite failed to take responsibility for squandering all that cash," Teamsters General President Sean O'Brien said. "They shamelessly pin their corporate incompetence on working people." With Yellow going out of business, 30,000 of its employees are now out of work.

What is Yellow?

Yellow, which previously went by the name YRC Worldwide, is a trucking giant that was founded nearly a century ago. The company said it invented the less-than-truckload method of transportation, meaning it consolidates several smaller freight shipments that otherwise would not take up a full trailer. Yellow accounted for between 10 and 15% of the less-than-truckload market share, moving approximately 50,000 shipments a day, and had more than 300 terminals across the United States.

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What led to its bankruptcy?

Yellow was struggling even before the pandemic, losing more than $100 million in 2019. It took on a lot of debt when it acquired the trucking firms Roadway and USF in 2003 and 2005, and today has more than $1.5 billion in outstanding debt, including the government loan. Analysts said the company also had an aging fleet and a history of mismanagement.

Why is Yellow fighting with the Teamsters?

The Teamsters and Yellow attempted to come to an agreement before the union's contract with the company expired in 2024, but couldn't reach one. The main sticking points were whether Yellow truckers would have to start loading and unloading freight at docks and the possibility of Yellow having more say in where truckers worked. On August 8, Yellow sued the Teamsters, accusing the union of causing more than $137 million in damages by blocking a restructuring plan and trying to "cause Yellow's economic ruin." O'Brien called the lawsuit's accusations "unfounded and without merit."

Will Yellow pay back its federal loan?

The loan comes due in 2024, and so far, Yellow has paid back about $66 million in interest and only $230 of the principal. Executives have said they plan on paying the loan in full, and "their success will depend on proceeds from selling Yellow's properties and roughly 12,000 trucks," bankruptcy experts told Reuters.

Yellow was facing charges of defrauding the federal government when it received the loan in 2020, after Sen. Jerry Moran (R-Kan.) asked then-Treasury Secretary Steven Mnuchin to help the company before it collapsed. The loan was granted on national security grounds, as Yellow shipped protective equipment, meal kits and other supplies to military bases. At the time, Yellow had financial backing from the private equity firm Apollo Global Management, which had close ties to several officials in the Trump administration, The New York Times reported.

The Treasury Department said the approval for the loan, which Yellow said would be used to cover pension and health care costs and to pay for trailers and trucks, was "based on certification by the secretary of defense that YRC is critical to maintaining national security." In July 2023, a congressional investigation into the matter found that both the Defense and Treasury departments "made missteps" when granting the loan, and that Yellow's "precarious financial position at the time of the loan, and continued struggles, expose taxpayers to a significant risk of loss."

Who are some of Yellow's customers?

Home Depot, Walmart, Amazon, and the federal government are among the company's clients. Yellow's bankruptcy will help its rivals, like Forward Air, FedEx Freight, Old Dominion, and ArcBest gain more business, but it's going to come at a steep price — Yellow offered below-market rates, and its customers can expect to see double-digit price increases from its competitors, Stifel analyst Bruce Chan said in a client note on Monday. When it comes to transporting cargo for the Department of Defense and the government's procurement arm, the General Services Administration, Yellow's rivals "have said they have the capacity to handle the shipments, but experts say few may be willing to haul the goods at Yellow's prices," The Wall Street Journal reported.