Yellow Corp. Turns Red: Trucking Giant Declares Chapter 11 Bankruptcy

The trucking company Yellow Corp. has declared a Chapter 11 bankruptcy and cessation of operations following years of financial struggles and growing debt. Yellow's announcement marks a significant shift for the US transportation industry and shippers nationwide.

The company filed its Chapter 11 bankruptcy Sunday (August 6), three years after it received $729.2 million in pandemic-era loans from the US government under the Trump administration. While a Chapter 11 filing is used to restructure debt while operations continue, Yellow would liquidate and the federal government would join other creditors who would unlikely recover the funds they extended to the company, totaling to $1.5 billion.

A congressional probe recently concluded the Treasury and Defense departments "made missteps" in the decision and noted Yellow's "precarious financial position at the time of the loan, and continued struggles, expose taxpayers to a significant risk of loss," the Associated Press reported.

Plagued for a Long Time

Yellow reportedly fell into severe financial stress after a long stretch of poor management and poor decades-long strategic decisions.

Other companies, like Celadon and New England Motor Freight, also filed for bankruptcy protection and were liquidated in 2019.

With the Nashville-based Yellow going bankrupt, experts say former Yellow customers and shippers would have to face higher prices by taking their businesses to its competitors, such as FedEx or ABF Freight, noting the company's historically affordable price points in the industry.

"It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business," Yellow CEO Darren Hawkins said in a news release late Sunday. "For generations, Yellow provided hundreds of thousands of Americans with solid, good-paying jobs and fulfilling careers."

As of June 30, Yellow said it has already paid $67 million in cash interest on the loan, which was due in 2024.

Yellow's Union: Bankruptcy a Long Time Coming

Meanwhile, the Teamsters, which represented over two-thirds of Yellow's 30,000 workers, said last week the company told them of their legal notice for a bankruptcy filing and shutting down of their operations in late July, following layoffs of hundreds of non-union employees.

Both the Wall Street Journal and FreightWaves reported in late July that bankruptcy was imminent, as customers like Walmart, Home Depot, and Uber Freight have already started to leave the carrier in large numbers in the lead-up to the filing, as well as because the company has ceased freight pickups.

Teamsters general president Sean O'Brien called the news "unfortunate but not surprising" in a July 31 statement, reflecting the financial chaos Yellow-faced over the years. "This is a sad day for workers and the American freight industry," he added.

The reports arrived after Yellow averted a strike from the Teamsters due to heated contract negotiations. A pension fund agreed to extend health benefits for workers at two Yellow Corp. operating companies, avoiding a planned walkout, as well as giving Yellow "30 days to pay its bills," notably a total of $50 million owed to the Central States Health and Welfare Fund.

Previously, a Yellow spokesperson said the company previously requested a short-term deferral of the pension contributions plus interest, but the funds denied that request. Yellow blamed the nine-month talks for the demise of the company, saying it was unable to institute a new business plan to modernize operations and make it more competitive during that time.

The company has also asked the US Bankruptcy Court in Delaware for permission to make payments, including for employee wages and benefits, taxes, and certain vendors essential to its businesses.

On the other hand, Stifel research director Bruce Chan said ahead of the filing late last month Yellow's financial chaos was "probably two decades in the making," 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," Chan added.

Brokerage firm TD Cowen noted Yellow was one of the largest US trucking companies prior to its demise, holding roughly 8% to 10% of the market share.