Yellow Corp. shut its doors on Sunday, could file for bankruptcy today
Third-largest LTL carrier had struggled with cash flow, Teamsters strike threat, freight recession.
The nation’s third largest less than truckload (LTL) freight carrier shut down for good on Sunday, as embattled Yellow Corp. succumbed to a combination of cash flow problems, a Teamsters union strike threat, and a cyclical freight recession.
Market analysts said they expect the 99-year-old company to officially file for bankruptcy today, following a tumultuous weekend. “According to numerous news reports Yellow officially ceased operation yesterday at noon. This followed news of mass layoffs of its non-union work force on Friday,” Matt Elkott, an analyst with TD Cowen, wrote in a note to investors. “The Kansas based carrier's demise has been widely anticipated by investors since June and has been the main topic on LTL earnings calls.”
As recently as last Thursday, the company was trying to raise emergency funds by selling off its third party logistics (3PL) arm. Yellow had failed to make its contractually obligated healthcare benefit payments earlier in July, incensing its truck driver employees represented by the Teamsters Union. The company had also defaulted on a federal loan that kept it solvent during the pandemic.
That last-ditch move to sell Yellow Logistics was apparently unsuccessful, and Yellow served legal notice on Sunday to the Teamsters Union that it was ceasing operations and filing for bankruptcy. “Today’s news is unfortunate but not surprising. Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry,” Teamsters General President Sean M. O’Brien said in a release.
In response, Teamsters officials said they are currently “putting infrastructure in place to help affected members get the assistance they need to find good union jobs throughout freight and other industries.”
The impact on supply chains of the sudden loss of freight trucking capacity is likely to be muted, since Yellow’s collapse had long been expected. According to the TD Cowen report, “most of Yellow's freight was already in the hands of other LTL carriers by Wednesday of last week as news of the carrier refusing pick-ups circulated.”
That aligned with another analysis from Baird Equity Research, which said the disruption would directly benefit Yellow’s LTL competitors, naming Old Dominion Freight Line (ODFL), FedEx Corp., Forward Air Corp., and Knight-Swift Transportation Holdings. Additional players standing to absorb Yellow’s freight business include Saia Inc., XPO Logistics, ArcBest Corp., and TFI International.
Altogether, those companies stand to capture Yellow’s estimated annual $5 billion in revenue and 49,000 shipments per day, according to Baird Senior Research Analyst Garrett Holland.