World

After $700 Million U.S. Bailout, Trucking Firm Is Shutting Down

Yellow, the beleaguered trucking company that received a $700 million pandemic loan from the federal government, notified staff on Friday that it is shutting down and laying off employees at all of its locations.

The move comes ahead of an expected bankruptcy filing by Yellow in the coming days. The closure of the company would mean the loss of approximately 30,000 jobs and mark the end of a business that just three years ago was deemed so critical to the nation’s supply chains that it warranted a federal bailout.

“The company is shutting down its regular operations on July 28, 2023, closing and/or laying off employees at all of its locations, including yours,” the company said in a memo to staff that was reviewed by The New York Times.

Yellow has been locked in protracted labor negotiations with International Brotherhood of Teamsters over a new contract that the company has said is essential to its ability to move forward with a restructuring plan.

As of the end of March, Yellow’s outstanding debt was $1.5 billion, including about $730 million that is owed to the federal government. Yellow has paid approximately $66 million in interest on the loan, but it has repaid just $230 of the principal owed on the loan, which comes due next year.

Yellow is one of the largest freight trucking companies in the United States, and its downfall could have a ripple effect across the nation’s supply chain. Its impending bankruptcy comes days after United Parcel Service reached an agreement with the union representing more than 325,000 of its U.S. workers, averting a strike.

Yellow’s management and union negotiators have been trying to reach an agreement over wages and other benefits but failed to clinch a deal.

The fate of Yellow’s assets is not yet clear. In 2020, the Trump administration, which had ties to the company and its executives, agreed to give the firm a pandemic relief loan in exchange for the federal government assuming a 30 percent equity stake in the company.

Yellow said last month that it sought the assistance of the Biden administration in brokering a deal with the union. The White House had no comment this week on the situation.

A company official said on Thursday that Yellow was preparing for “a range of contingencies” but that talks with the union were continuing. On Friday, a spokeswoman for the company declined to comment on the firm’s future.

The Teamsters warned on Friday in a letter to local unions representing Yellow workers that the likelihood of the company’s survival was “increasingly bleak.”

“We recommend that all Yellow employees who have personal belongings and tools at the terminals should take them home today,” wrote John A. Murphy, a co-chair of the Teamsters freight industry negotiating committee.

As Yellow’s bankruptcy became more likely this week, shippers were diverting freight away from its network and its stock price plunged.

Analysts at the financial services firm Stephens estimated that the company could be burning through as much as $10 million in cash per day. In a note to clients, the analysts said that the lost business and the threat of a strike had left the trucking company “mortally wounded” and that the firm could reach the “end of the road.”

Financial woes at Yellow, which previously went by the name YRC Worldwide, have been building for years.

In July 2020, the Treasury Department announced it was giving a $700 million loan to the trucking company, helping it to stay afloat. But the loan immediately raised questions, in part because the firm was struggling financially and was being sued by the Justice Department over claims that it had defrauded the federal government for a seven-year period. The company ultimately agreed to pay $6.85 million to resolve those allegations.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button