News / 30,000 jobs lost as Yellow succumbs to death spiral of debt and lost clients

Yellow, the third-largest less-than-truckload (LTL) carrier in the US, has ceased operations and is getting ready to submit to bankruptcy.

After 99 years in business, Yellow Corp is at the end of the road, with a $1.5bn debt burden and rapid erosion as customers shifted to other LTL providers.

On Sunday a notice at the company’s terminals read: “Dear valued customers and employees, all company operations have ceased.”

The Teamsters union, which represents the majority of Yellow employees, reported it had received legal notice from the company on Sunday that it was ceasing operations and would be filing for bankruptcy.

According to one report, this was confirmed by two Yellow executives whose tenure was terminated last Friday. It had sent notices to non-unionised employees that their jobs were terminated with immediate effect.

Yellow has been trying to sell its logistics unit to raise cash as it was rapidly running out of money, which had prompted predictions that it would have to file for bankruptcy. The erosion of business in recent weeks, owing to predictions of its imminent demise, accelerated the cash burn that was decimating its last reserves. By one estimate, its cash burn had spiralled to between $9m and $10m a day.

While this death spiral led to the end of operations, Yellow’s decline was a long time in coming. Its stock has plunged 72% this year and is down 94% from its level at the outset of 2022. But the company has been losing market share over the past ten years, and observers have traced the decline to a number of disjointed acquisitions in the early 2000s, including several trucking firms as well as more exotic takeover of Shanghai Jiayu Logistics in 2007.

The failure to integrate trucking acquisitions and a rising debt burden resulted in a brush with bankruptcy in 2009, but Yellow managed to limp on – although the debt problems and resulting lack of investment in modern equipment forced it to focus on low-cost services.

Over the past year, management has blamed the Teamsters’ opposition to its plans to restructure the network in the eastern US as a major reason for Yellow’s predicament. But most observers agree it was poor management decisions that worsened the situation. For its part, the union also blamed management for the problems.

“Today’s news is unfortunate, but not surprising,” said Teamsters president Sean O’Brien ion Sunday. “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. This is a sad day for workers and the American freight industry.”

Yellow’s bankruptcy would reportedly be the largest to date on the US trucking scene, its market share was around the 10% mark. Its closure eliminates 22,000 unionised jobs and some 8,000 non-union positions.

As the LTL market has slowed down in recent months, analysts reckon there is enough capacity available to absorb Yellow’s remaining clients and their business. Apparently, the outlook is already nudging up pricing in the market, according to shipper reports.

For Yellow’s customers, any increase in freight costs is bound to be even steeper. Owing to its tight financial situation, Yellow had failed to invest in improvements and trailed its competitors in performance metrics, which positioned it as a low-cost player in the market.