News / Missed pension and benefit payments pushes Yellow closer to the edge

Struggling Yellow Corp moved closer to a strike after reports that the company had failed to make contributions for pension, welfare and health insurance benefits for its employees in June – and will do so again this month.

According to the Teamsters, this opens the door to a strike which could come as early as 24 July.

A work stoppage could seal the fate of the struggling LTL carrier.

Insurance provider Central States has issued a delinquency notice about the missing contributions and warned that the trucking firm’s participation in the pension plan would be terminated by the coming Sunday if no payment has been received by then.

In addition, health care claims by Yellow employees incurred after Saturday would not be paid unless workers chose to remit self-payments.

The outstanding contributions for June and July amount to over $50m. According to the notice, Yellow was withholding contributions “to avoid running out of cash”.

The company’s latest 8-K filing shows its liquidity is north of $100 million. Management was recently thrown a lifeline by lenders waiving loan requirements in return for increased oversight.

The company is in the red and has debt of $1.2bn, including a $700m government loan through a Covid relief package.

A letter from a member of the Teamsters negotiating committee to local unions has raised the possibility of a strike. It points to the collective bargaining agreement, which states that “in the event an employer is delinquent in its health and welfare or pension payments in the manner required by the applicable supplemental agreement, the local union shall have the right to take whatever action it deems necessary until such delinquent payments are made”.

The union and Yellow management are at loggerheads in their contract negotiations as well as over management’s restructuring plan which it deems necessary to overcome the firm’s predicament.

The latest problem has pushed Yellow closer to the brink. In an e-mail to clients Amit Mehrotra, an analyst with Deutsche Bank, wrote that “this is perhaps the most tangible example of why we think it’s more likely than not YELL will go out of business”.

Satish Jindel, president of SJ Consulting, agreed that a strike would sound the death knell for the struggling trucking firm. “There would be no customers left,” he said. “You’re putting a dagger in a dead body.”

He agreed with Teamsters president Sean O’Brien, who has accused Yellow management of frittering away money during years of mismanagement.

Rather than kill the company with a strike, the Teamsters are in a position to effect change to secure its survival, he argued.

Speaking about Mr O’Brien, he said: “You are grossly overlooking an opportunity that no union leader has ever had. You’ve got two board seats on Yellow out of 10. You have practically veto power at the board,” he said.

The union should use its leverage on the board to force a change of direction that rallies Yellow’s 22,000 unionised workers and subsequently rewards them adequately, while cutting bonuses for management and board members.

Mr Jindel described this course of action as “the last opportunity to save this company”.

He invoked principles of FedEx founder Fred Smith which centred on a triangle of people, service and profit, respectively targeting employees, customers and investors.

“The order of these is important. If you take care of your people, their work will bring in customers, which will satisfy investors. It should not be profit, then service, then people,” he said.