Yellow is shutting down after 99 years. Here's what happened.
Yellow Corp., a beleaguered trucking company that was once one of the U.S.' largest transporters of goods, has ceased operations and is planning to file for bankruptcy, the Teamsters Union said in a statement on Monday.
The company had been in operation for nearly 100 years, but its financial challenges snowballed, leading it to accumulate more than $1 billion in debt.
"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," said Teamsters General President Sean M. O'Brien in the statement. "This is a sad day for workers and the American freight industry."
The company received a $700 million government loan during the pandemic, as part of the COVID-19 relief program in 2020.
Here's what you need to know about Yellow shutdown:
Why is Yellow closing?
The shutdown comes after Yellow failed to reorganize and refinance the roughly $1.5 billion dollars it had, as of March, in outstanding debt, a large portion of which came from the $700 million pandemic-era government loan. At the time of the loan, the company was facing charges of defrauding the government by overbilling on shipments for the U.S. military. It ultimately settled the lawsuit and agreed to pay the Defense Department nearly $7 million.
The $729.2 million it now owes the federal government is due in September 2024. Yellow has repaid just $230 million of the principal it owed, in addition to $54.8 million in interest payments, government documents show.
The shutdown also comes amid its ongoing, and costly, conflicts with its employees. Last week, the company declined to contribute to its employees' pension and health insurance plans, nearly prompting a strike.
How many employees will be affected?
Yellow employed roughly 30,000 people as of the end of 2020, a company filing shows. That figure is likely smaller now after "a large number" of Yellow employees received layoff notices on Friday, the Wall Street Journal reported. Workers who remain at the company could be at risk of losing their jobs as the company moves through the bankruptcy process.
What will happen to Yellow's customers?
Some of its largest clients, including retailers Walmart and Home Depot, and logistics platform Uber Freight have already halted shipments to the failing carrier company to prevent goods from being lost or abandoned in the event of bankruptcy, Reuters reported.
As Yellow customers take their shipments to other carriers, like FedEx or ABF Freight, prices will go up for those who remain.
Yellow's prices have historically been the cheapest compared to other carriers, Satish Jindel, president of transportation and logistics firm SJ Consulting, told the Associated Press. "That's why they obviously were not making money," he added.
"While there is capacity with the other LTL carriers to handle the diversions from Yellow, it will come at a high price for (current shippers and customers) of Yellow," Jindel said.
— The Associated Press contributed reporting.