Trucker Yellow Is Losing Customers as Teamsters Strike Looms
The diversions and threatened labor action add new peril to a debt-saddled company that is burning cash Yellow, which counts major retailers and manufacturers as its customers, is one of the country’s largest less-than-truckload operators. Photo: YELLOW By Paul Berger Updated July 20, 2023 7:19 pm ET Debt-laden trucking company Yellow, one of the nation’s largest freight carriers, is trying to stave off a labor action that is sending shipping customers rushing to rival operators, adding to financial woes that are threatening the company’s survival. Some of the U.S.’s largest freight brokers are diverting business from Yellow to other carriers amid fears that goods could get stuck as Yellow unionized workers prepare to strike next week in actions that could push the com
Yellow, which counts major retailers and manufacturers as its customers, is one of the country’s largest less-than-truckload operators.
Photo: YELLOW
Debt-laden trucking company Yellow, one of the nation’s largest freight carriers, is trying to stave off a labor action that is sending shipping customers rushing to rival operators, adding to financial woes that are threatening the company’s survival.
Some of the U.S.’s largest freight brokers are diverting business from Yellow to other carriers amid fears that goods could get stuck as Yellow unionized workers prepare to strike next week in actions that could push the company toward bankruptcy.
“We are really hoping they can resolve this and if they do we will bring [freight] back,” said Lior Ron, CEO of Uber’s freight unit, which decided Tuesday night to stop sending shipments to Yellow. “Until that point we need to do what’s in the best interest we think of our shippers and protect against any future disruptions.”
The Teamsters union on Tuesday warned it could strike as soon as Monday after Yellow missed a healthcare and pension payment deadline that threatened to cut off benefits for some of its 22,000 unionized workers.
Yellow CEO Darren Hawkins said it is natural that some customers would pull business following the threat of a strike. “It’s not unexpected that some freight in the Yellow system would be diverted,” he said.
The company filed a request this week in federal court for a temporary restraining order to prevent workers from striking. A hearing is scheduled for Friday.
Yellow, which counts major retailers and manufacturers as its customers, is the third-largest operator in the less-than-truckload business, in which carriers haul cargo from multiple customers in the same trailer. The company employs 30,000 workers and is trying to streamline its operations and refinance $1.3 billion of debt that comes due next year, including a $700 million federal Covid relief loan.
Tensions between the union and Yellow are intensifying as the trucker burns through cash.
Yellow says its operational restructuring, which in part could consolidate operations now divided between its main national carrier and three regional subsidiaries, is a matter of survival in a highly competitive trucking market. But the Teamsters union says the plan violates their existing labor contract. The union wants Yellow to increase pay for its members and open negotiations on a new master agreement for the streamlining to proceed.
Yellow CEO Hawkins said the company made offers of wage increases to the Teamsters over several months but said the union refused to bring the offers to workers or to discuss Yellow’s streamlining plans with the company.
The union said the pay-increase offers were made just days before Yellow sought to defer pension and benefits payments due July 15 and August 15 totaling $50 million. “We are not going to agree to informal offers for new wages in the hopes of getting a fair contract next year when [Yellow subsidiaries] can’t even figure out how to pay their bills right now,” Teamsters General President Sean O’Brien said Wednesday.
Yellow had more than $100 million in cash holdings at the end of June, down from about $235 million at the end of 2022. The trucker lost $54.6 million in the first quarter, nearly double the net loss the year before. Earlier this month, the company secured a waiver from lenders to allow its finances to drop below predetermined levels tied to its loans.
“We believe the exit of large customers could bring Yellow even closer to the brink of bankruptcy given the company’s precarious cash position,” Jason Seidl, a TD Cowen analyst, said in a report Thursday.
A spokesman at
Macy’s said the department-store chain is prepared for supply-chain disruptions. “In the event of a strike, we have contingency plans in place to mitigate any impact to our customers,” he said.Truck operators are well positioned to pick up slack from a Yellow failure, according to industry experts, a sharp contrast from recent years when a pandemic-driven surge in freight demand sent many shippers scrambling to secure space.
“In times like this, when a business is under stress, you just stay away, you keep your freight away from their network,” said Jeff Tucker,
chief executive of Tucker Co. Worldwide, a Haddonfield N.J.-based freight broker. “When an LTL company is having trouble, you have to protect yourself at all costs. Shippers have to ask themselves, ‘Do I want to get stuck in a company’s system if they fail?’ Most shippers aren’t willing to take that risk.”A Yellow official said the company plans to continue operating in parts of the country not affected by the potential strike.
— Soma Biswas contributed to this article.
Write to Paul Berger at [email protected]
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