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30,000 employees leave Yellow, a 99-year-old company, as it declares bankruptcy.

Despite having employed 30,000 people over its 99-year history, the once-dominant US trucking corporation Yellow Corp. has filed for bankruptcy.

A bankruptcy petition under Chapter 11 had been submitted to the US Bankruptcy Court for the District of Delaware by the Nashville-based logistics business on Sunday.

After nearly a century in business, Yellow’s CEO Darren Hawkins expressed his “profound disappointment” in a statement.

Quite a few Yellow employees put in their full 20s, 30s, and even 40s at the company. Yellow has been a reliable source of employment for hundreds of thousands of Americans over many decades.

After reaching an arrangement with its creditors, Yellow announced it will be able to fulfil some of its obligations to employees, vendors, and suppliers, pending court approval.

In its court petition, the company named a vast list of creditors, including 30 of the largest unsecured creditors like Amazon (AMZN), Home Depot (HD), and Goodyear Tyre & Rubber Company (GT).

More than a week after the trucking company suspended operations, throwing 30,000 workers out of work, the company has filed for bankruptcy. It announced last month in a lawsuit that it might not have enough cash to stay in business.

It had been fighting the Teamsters union, which represented 22,000 of its 30,000 employees (including its drivers and most of its dock workers) for a long time as business slowed and debt became unmanageable as it waited for a capital infusion that never came.

Once a pillar of the industry,

Established in 1924, Yellow Corp. was originally known as Yellow Freight.

The trucking industry’s “less-than-truckload” (LTL) market, in which palletized goods is transported, was dominated by the corporation. Yellow, along with unionised LTL competitors Roadway and Consolidated Freight, formed what was often referred to as “the Big Three.”

The Big Three and other unionised LTL carriers experienced increased competition from nonunion carriers after trucking deregulation in 1984. In 2002, Consolidated filed for bankruptcy.

The Teamsters union made repeated concessions that helped close much of the cost gap between the unionised and nonunion LTL carriers. The nationwide driver scarcity also contributed to salary increases among nonunion transport companies.

Yellow, however, had other issues. It began taking on debt in 2004 to finance the purchase of several of its unionised competitors, most notably Roadway for roughly $1 billion.

In the most recent financial report, the firm’s long-term debt totaled close to $1.5 billion. The US government provided nearly half of the debt in the form of a pandemic relief loan in 2020 in exchange for a 30% ownership part in the company. The value of those stocks has plummeted almost entirely since then.

Even in its final year, Yellow remained a formidable opponent. According to transportation consultant Satish Jindel, the company only handled roughly 7% of the 720,000 daily LTL shipments in the United States in 2022.

Growing difficulty

While the US economy has held steady, consumers have stopped investing in the products they bought at the start of the pandemic.

In recent years, however, people have shifted their attention away from goods and towards services like travel and attending live events like concerts, sporting games, and restaurant dining. As consumer spending decreased, so did the demand for haulage.

According to Tom Nightingale, CEO of AFS Logistics, a third-party logistics provider, LTL shipments dropped 17% between 2021 and 2022 and another 5% in the first quarter of 2023 compared to the same period a year earlier.

Nightingale said that Yellow could have turned a profit during peak transportation demand, but failed due to the decline in freight and subsequent decrease in trucking prices.

Concerned shippers began switching to other carriers, and Yellow saw a 13% drop in first-quarter shipments compared to the same period a year earlier, as reported in the company’s financial report.

As of last month, Yellow has failed to make contributions to union pension and health insurance funds, prompting the Teamsters to threaten a walkout for July 24. Yellow asked for more time to pay, and the union granted it at the last minute.

However, clients were beginning to defect to competing services. Within a matter of days, Yellow halted pickups at customer locations and began delivering only pre-existing shipments. They informed staff and the union on July 30 that operations had ceased.

Last week, Yellow’s management and the union both pointed fingers at each other for the company’s shutdown.

To consolidate its many trucking businesses and driver seniority lists, the corporation recently lobbied the Teamsters for a new contract. The union objected to the change because it could result in the loss of jobs for some of its 22,000 members.

When it came to protecting and preserving jobs, the corporation did everything in its power. Thirty thousand jobs were in jeopardy because the International Brotherhood of Teamsters refused to bargain with Yellow for nine months. The IBT “made its intentions clear: destroy Yellow,” the business stated in a recent statement, rather than cooperate with Yellow to negotiate a new contract.

Yellow said that it had proposed to raise Teamsters’ wages as part of the deal, but the union denied this.

Sunday’s statement from Yellow was another in which the almost 100-year-old company blamed the Teamsters for putting it “out of business.”

The union claimed it had done everything possible in recent years to keep Yellow operating, and instead placed the responsibility on the company’s mismanagement.

Yellow’s closure “is unfortunate but not surprising,” Teamsters President Sean O’Brien stated in a statement the day after the announcement.

Despite billions in worker concessions and hundreds of millions in governmental bailout funds, Yellow has repeatedly shown that it cannot manage itself. O’Brien expressed his sadness for the American workforce and the goods business.

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