Troubled trucking line Yellow Corp. is trying to sell off its third party logistics (3PL) arm to raise cash and could declare bankruptcy as early as Monday, according to published reports.
Compounding the Nashville-based company’s problems, it also continues to lose freight revenue from nervous shippers who are diverting their volumes elsewhere as they track a threatened labor strike by Yellow truck drivers represented by the Teamsters union.
The Teamsters had been inching toward a strike, saying their members were in danger of losing health care benefits after Yellow failed to make its contractually obligated benefit payments of $50 million to The Central States Health and Welfare Fund on July 15. However, the fund agreed on July 23 to extend health care benefits for workers at Yellow Corp. operating companies YRC Freight and Holland, averting the immediate strike threat, the union said.
Despite that respite, financial analysts said Yellow might not stay in business long enough to recover, since the agreement gives Yellow just 30 days to make its delinquent payment at a time when its shipper customers are pulling business from Yellow at an accelerating pace. “While this evening’s announcement averting an imminent Teamsters strike at [Yellow] buys some time, [Yellow’s] demise still seems highly likely, in our view,” Garrett Holland, a senior research analyst with Baird Equity Research said in a July 23 note.
Likewise, market analyst Jason Seidl with TD Cowen reached a similar conclusion in a July 25 posting. “Our channel checks indicate shipments continue to be pulled from Yellow. This confirms our prior view that Yellow is in trouble despite some short-term relief from Central States, which we discussed on Sunday. Other articles have confirmed material shipment declines at Yellow. We continue to believe a bankruptcy may be likely,” Seidl wrote.
The recent business woes are just the latest problem for the company, which has also failed to repay a $700 million federal loan it borrowed during the pandemic, even after paying a $6.85 million fine to settle charges it had defrauded the U.S. government by overcharging for services.