Yellow Reduces Ops Following Strike Threat

Yellow, a major freight company, is facing significant disruptions in its pickup operations according to a leaked memo and anonymous sources who spoke to FreightWaves. The memo, which was sent to all Yellow employees, reveals that the company is “limiting” pickup operations across all terminals nationwide.

The situation was triggered by the threat of a strike on July 17, which resulted in a sharp decline in shipments as customers sought assurance that their deliveries would not be affected. As a consequence of these events and their impact on the network, Yellow has made the decision to scale back pickup operations temporarily.

The uncertainty surrounding the situation has left employees and clients alike in a state of concern. Account executives in the Northeast were initially informed by Yellow’s Chief Commercial Officer, Jason Bergman, that the company would continue to service freight as usual, only to be later instructed to go home, suspending pickups for the rest of the day. This abrupt change has left everyone anxious about the future.

An employee disclosed an email from Yellow management, bearing the signature “Company Communication,” and addressed to “All Yellow Employees.”

“The threat of a strike on Monday, July 17, led to catastrophic shipment declines last week as customers needed to ensure their shipments could be serviced without interruption and not caught up in a strike of undetermined length,” said the email. “As a result of these unfortunate circumstances and the impact on the network, we are limiting pick-up operations in all terminals. Over the coming days, the Company is focused on delivering existing shipments in the network to its valued customers and communicating with our employees on new developments while we continue working an accelerated process with union discussions.”

Yellow’s financial struggles, dating back to the Great Recession, have further complicated matters. Recently, Central States Pension and Health Funds revealed that Yellow had missed its June contribution and would withhold its July contribution, putting the company at risk of a strike by Teamsters employees.

In response to the uncertainty, many customers have decided to move their freight from Yellow to other trucking companies. A Morgan Stanley survey found that 97% of shippers who worked with Yellow had either already shifted or were considering shifting their shipments to alternative providers.

Yellow strike

The news comes after Yellow has successfully averted a potentially crippling strike by its 22,000 Teamsters-represented workers. The strike was called off after Yellow agreed to pay over $50 million in worker benefits and pension accruals, a move welcomed by the Teamsters union.

The agreement, brokered with the intervention of the Teamsters, grants Yellow a 30-day window to settle its dues, with assurances that the payment will be made within the next two weeks.

Yellow’s significance in the industry is underscored by its clientele, which includes major retailers such as Walmart and Home Depot, manufacturers, and Uber Freight. However, some of these clients had temporarily paused cargo shipments to Yellow out of concerns that their goods could be at risk if the trucking company were to go bankrupt.

With Yellow facing financial challenges and a significant drop in freight volume, competitors are expected to seize the opportunity to gain the company’s customers. Industry experts and analysts predict that rivals will cherry-pick Yellow’s clientele.

The situation became more complicated in 2020 when then-U.S. President Donald Trump granted Yellow a $700 million pandemic relief loan, resulting in the federal government owning a 30% stake in the company. Regrettably, the loan has not been significantly repaid, adding to Yellow’s existing debt of $1.2 billion, which the company is currently scrambling to refinance before it becomes due next year. Apollo Global Management leads a group of lenders supporting Yellow in these efforts.

Facing a dire cash shortage, Yellow’s executives sought assistance from the International Brotherhood of Teamsters to reduce expenses. However, their request was met with rejection from the newly-appointed Teamsters General President, Sean O’Brien. O’Brien cited previous worker concessions, federal loans, and bailouts, holding the company itself accountable for its precarious financial situation.

Despite Yellow’s efforts to halt a potential strike through legal means, a federal judge in Kansas declined the request to prevent the Teamsters from striking over the unpaid benefit payments.

Yellow layoffs

Prior to the threat of workers’ strike, approximately 30 employees in South Bend are reeling from recent layoffs at the shipping company.

One of the affected employees, Bart Sanford, who had been working at Yellow for nearly seven years, received the disheartening news of his termination last Friday. The layoffs were the result of Yellow’s decision not to make the said payment for its employees’ pensions.

For Sanford and his wife, Melissa Sanford, the situation is even more distressing, as they now face a severe reduction in income and the lack of insurance coverage to address their medical needs. Melissa, who suffers from medical issues requiring regular medication, expressed her worry over the absence of insurance, saying, “Not having insurance affects us greatly because we can’t afford the necessary medications without it.”

Despite the prospect of losing their jobs, Bart is not considering returning to work for Yellow Corporation. He believes that the company has more underlying problems beyond the payment disputes concerning pensions and benefits. His concerns extend to how the company handled the $700 million bailout it received three years ago.

According to Sanford, the planned strike could prove detrimental to Yellow’s operations, potentially bringing them to a grinding halt. He fears that if the strike prolongs, coupled with Yellow’s financial struggles and apparent inability to meet benefit payment obligations, the company’s future may be in jeopardy.

Information for this briefing was found via Freight Waves, Reuters, WSBT, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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