The Demise of a Trucking Giant
One of the nation’s preeminent trucking companies has shuttered after 99 years in operation. Yellow Corporation employed approximately 30,000 people of which 22,000 were Teamsters members. In terms of size, it is likely the largest collapse in US trucking.
On the heels of its 100th anniversary, Yellow staved off the inevitable for nearly three years. Despite a $700 million Covid rescue loan in 2020, the Nashville, Tennesse firm could not remain afloat. Started in 1924, Yellow had navigated rough waters before 2023 but many point to a merger in 2003 with Roadway as the initial steps that led to the company’s ultimate demise.
Roadway was a fierce competitor of Yellow for decades and the justification around the merger was the hope each would be more competitive, especially with nonunion rivals. While the two companies initially combined their back-office functions, they did not do the same with their networks. As such, cost savings were minimal.
Yellow bought another large competitor two years later and followed the same playbook – back-office functions were combined but networks were not. Once the 2008 recession hit trucking demand plummeted and one of Yellow’s biggest customers, Walmart, decreased business with Yellow by close to 50%. Since 2009 the company operated most years at a loss and the combination of integration failures, prior union concessions, and a burdensome debt load led to a 2021 cost-cutting and integration plan. Despite thinking these measures would improve the business, the union was not asked for concessions and refused to negotiate for nine months.
For most of 2023 declining shipping demand has plagued the larger freight sector. Rates and volumes have buckled and Yellow saw its cash holdings fall from $235 million in December to approximately $100 million by June 2023. Feisty exchanges between the Teamsters and Yellow led to a threatened strike by mid-July. Yellow’s attempt to defer two pension-fund payments was not well received but the Teamsters maintain that Yellow’s mismanagement lies at the root of the company’s troubles.
When Yellow received its $700 million Covid loan management attempted to push sweeping integration. The Teamsters supported the loan as a job-saving measure but the company had already lagged begin its rivals in key metrics. For example, Yellow’s average revenue per shipment was $319, compared to its competitors at $400. A $700 million dollar loan could only slow the bleeding. The Covid rescue made the Treasury the holder of 30% of Yellow’s shares. The share price went from a high of $28 in 2014/15 to 17 cents as of late July.
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