100-year-old Yellow shuts down and files for bankruptcy

The end of the line has apparently arrived for nearly 100-year-old Yellow Corp., which calls itself "the original less-than-truckload carrier."

The union for about 22,000 employees of Yellow has been served a legal notice that the company—which also is the third largest LTL in the U.S. and is No. 6 on the 2023 for-hire FleetOwner 500—is ceasing all operations and filing for bankruptcy, according to a July 31 statement from the union, the International Brotherhood of Teamsters. That bankruptcy filing could come soon for a company that traces its roots back to 1924.

“Today’s news is unfortunate but not surprising,” Teamsters General President Sean M. O’Brien said in the statement.

“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,” O’Brien added in the statement. “This is a sad day for workers and the American freight industry.”

A bankruptcy by Yellow would be the largest in the history of the U.S. trucking industry.

The company posted signs on locked gates at its terminals by noon on Sunday, July 30, saying it was ceasing all operations, according to one report. Other reports from local media outlets all over the U.S. said the company had shut down operations at those locations. Yellow has not issued a public statement on its fate, but the jobs of its roughly 30,000 employees, including those who aren't union members, hang on the LTL's decision.

Of its members, “the Teamsters are committed to ensuring members are protected and notified with all the latest information,” the union’s July 31 statement reads, which also said it is “putting infrastructure in place to help affected members get the assistance they need to find good union jobs throughout freight and other industries.”

Yellow and Teamsters leadership exchanged blows almost up until what looks like the end for the company, which showed signs for weeks that it wouldn’t be able to survive. The company was hemorrhaging money, customers sensing the end were fleeing, and Yellow announced just last week that it was offering for sale its promising third-party logistics arm, Yellow Logistics, in an apparent bid to raise cash and to stave off the worst possible outcome: liquidation.

Reports started surfacing on July 28 that Yellow had begun laying off much of its non-union workforce (about 8,000 workers apart from the Teamsters) and ramping down operations at its more than 300 terminals nationwide. The company operated more than 14,000 tractors and over 43,000 trailers, according to the for-hire FleetOwner 500.

Yellow's customers include some of the largest retailers like Walmart and Home Depot, manufacturers, and Uber Freight, some of which paused cargo shipments to the company for fear those goods could be lost or stranded if the carrier went bankrupt, according to Reuters.

Yellow has been rocked through much of its long history and especially lately by disputes with its union, which threatened to strike on July 24 after the company missed pension and health care payments for July and said it would miss them for August, but the Teamsters later agreed to call off the walkout after their health care and pension fund, Central States, agreed to an extension. Yellow had blamed the union for interfering in its third financial restructuring in 15 years, called One Yellow, and even sued the Teamsters for $137 million in U.S. District Court in Kansas in late June over the union’s alleged interference in the restructuring effort.

After word got out that Yellow would miss the benefits payments, O’Brien in a statement called Yellow a “deadbeat company” and said it “has only itself to blame for being in this embarrassing position” after years of worker givebacks, federal loans, and other bailouts. The company received a $700 million government loan from the Trump administration during the COVID-19 pandemic in exchange for a 30% stake in the Nashville, Tennessee-based company. Yellow hasn’t repaid that government loan—and won't if it goes belly-up.

Analysts see Chapter 7, 'messy' Q3, higher LTL prices

Yellow’s slow burn has given analysts time to assess how the LTL market would react if the company ceased operations.

While LTL rates might spike, other carriers (many also on the for-hire FleetOwner 500) such as Old Dominion (No. 10), XPO (No. 12), Estes Express (No. 11), Saia (No. 21), and ABF Freight System (No. 29) stand to benefit from the business left on the table in the aftermath of a Yellow exit.

“That freight will find a home. It’ll be messy for less than a quarter. What this will do, there will be an inflationary effect on LTL rates,” Kevin Day, president of LTL at AFS Logistics, said in an interview with FleetOwner on July 28.

In another July 31 interview, Day said: “People shouldn’t overlook the magnitude of [Yellow’s departure]. There are only eight or nine truly national carriers left—Yellow was one of them—because of consolidation.”

He added that the tendency for some stakeholders might be to focus on publicly traded national carriers to take up Yellow’s business, but he advised that privately held carriers (such as for-hire FleetOwner 500 No. 5 R+L Carriers or No. 11 Estes Express) also would be candidates.

“Any carrier that has capacity and willingness to take on new business stands to benefit,” Day said, adding that regional operators (No. 56 Pitt Ohio, for example) and super-regional carriers (No. 3 Knight-Swift with its LTL subsidiary Midwest Motor Express) stand to benefit from Yellow’s demise.

“Capacity exists in the industry to absorb Yellow's market share … but existing Yellow customers likely face double-digit price increases; the volume uplift and pressure on the pricing environment should be a universal boon to remaining carriers in the LTL space,” added a July 31 analysis emailed to FleetOwner from transportation market observers at Stifel, which along with AFS has been monitoring the situation at Yellow closely.

The July 31 Stifel analysis added: “Over 40,000 bills [of lading] per day, on average, will be redistributed in the industry, with most going to other LTL carriers—both public and private—though some may find their way into short haul, regional or multistop truckload networks, and some may move into parcel networks.”

A July 26 Stifel breakdown had said on the subject of Yellow: “For the rest of the industry, there is spare capacity to absorb a Yellow demise at this point in the freight cycle; such an event would be a major tailwind for remaining players, with immediate benefits to volume and density, as well as yield. The potential loss of 30,000 jobs is a somber topic, but we think the [Teamsters] have a point when they say they've sacrificed a lot and are unwilling to accept more concessions."

In the guidance released on Monday, Stifel analysts surmised that Chapter 7 liquidation is Yellow’s most likely fate, as the value of the LTL’s assets is likely near their peak right now. “Industrial real estate values are historically high, and rolling stock depreciates with time, so there is incentive for senior lenders to liquidate,” the analysts said, ruling out any potential that there would be a buyer to rescue the company at the 11th hour.

“Yellow carries a lot of baggage, including union labor influence and cost structure, which could spread to other parts of a non-union workforce. We believe the company is deeply distressed and would require monumental operational overhaul to continue as a going concern, which likely places its value as a going concern below the asset liquidation value.”

The transportation analysts also reviewed history of the company from years ago that they believe sealed its fate in 2023. “The company has been struggling for over a decade after a poorly conceived and executed merger between two of the country’s largest [LTL] carriers (Yellow and Roadway, the No. 1 LTL at the time) almost exactly 20 years ago. But those struggles came to a head this summer … with cash reserves depleted and the Teamsters unwilling to grant further concessions and approval of the company's controversial change of operations, which sought to significantly consolidate the company's footprint and cost structure.”

“In a deadlock with [the Teamsters]," the analysts added, “Yellow is unable to refinance nearly $1.5 billion in debt, with significant maturities next year, and absent a major equity injection, we see a bankruptcy liquidation filing—not a reorganization—as imminent.”

Yellow's stock takes a curious turn ... upward

Shares in Yellow started to head south on Monday in pre-market activity on news the company had shut down and was headed to liquidation, though the shares headed much higher later in the morning, up almost 125% an hour after markets opened until they moderated toward midday before rising almost 150% by the end of the day.

In addition to the federal government, another large shareholder has emerged in recent days and could play a key role in any reorganization or liquidation of Yellow: Boston-based investment firm MFN Partners Management early on Monday filed papers with the U.S. Securities and Exchange Commission saying it spent $6.8 million Thursday and Friday buying Yellow shares, moves that boosted its stake in the company to 24.6%.

MFN focuses on value stocks, which are shares of companies that have been beaten up and often are worth less than the business’ assets, which would be the case with Yellow. In its most recent quarterly report to regulators, the firm’s principals said they were managing about $2.2 billion for their investors this spring. Worth noting in the context of Yellow: At the time of that filing, MFN’s largest holding was fellow trucking titan XPO, another FleetOwner 500 carrier. The firm owns about 11% of XPO, whose shares have more than doubled year to date, making it the company’s largest investor.

The MFN team has built all of its Yellow holdings since July 10 and has spent nearly $10.8 million (including commissions) to do so. Based on the big jump in Yellow shares Monday morning, that stake is now worth nearly $19 million.

A call Monday to the firm for details about its plans and goals for Yellow was not immediately returned.

Senior Editor Geert De Lombaerde contributed portions of this story. FleetOwner will have more details as they develop.