After years of financial struggles, reports of Yellow preparing for bankruptcy emerged last week — as the
In an announcement early Monday, the
“Today’s news is unfortunate but not surprising. 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,”
The Associated Press reached out to Yellow for comment on Monday. No bankruptcy filings had gone live as of the early morning.
The bankruptcy reports have renewed attention around Yellow’s ongoing negotiations with unionized workers, a
Here’s what you need to know.
WHAT WOULD BANKRUPTCY MEAN FOR YELLOW?
According to
With customers leaving — as well reports of Yellow stopping freight pickups last week — bankruptcy would “be the end of Yellow,” Jindel told The Associated Press, noting increased risk for liquidation.
“The likelihood of them surviving and remaining solvent diminishes really by the day,” added
Yellow declined to comment when contacted by The Associated Press on Friday. In a Wednesday statement to The Journal, the company said it was continuing “to prepare for a range of contingencies.” On Thursday, Yellow said it was in talks with multiple parties about selling its third-party logistics organization.
Even if Yellow was able to sell its logistics firm, it would “not generate a sufficient amount of cash to keep them operational on any sort of permanent basis,” Chan said. “Without a major equity injection, it would be very difficult for them to survive.”
HOW MUCH DEBT DOES
As of late March, Yellow had an outstanding debt of about
In 2020, under the Trump administration, the
The government loan is due in
Yellow’s current finances and prospect of bankruptcy “is probably two decades in the making,” Chan said, pointing to poor management and strategic decisions dating back to the early 2000s. “At this point, after each party has bailed them out so many times, there is a limited appetite to do that anymore.”
In May, Yellow reported a loss of
A Wednesday investors note from financial service firm Stephens estimated that Yellow could be burning between
“It is reasonable to believe that the Company could breach its
DID THE COMPANY JUST AVERT A STRIKE?
Last week's reports of bankruptcy preparations arrived just days after a strike from the
A series of heated exchanges have built up between the
On
“The financial struggles of Yellow are not related to the union and the contracts,” Jindel said, pointing to management’s responsibility around its services and prices. He added the union wages from Yellow are “lower than any competitor.”
WHAT WOULD HAPPEN IF YELLOW WENT UNDER?
As Yellow customers take their shipments to other carriers, like FedEx or ABF Freight, prices will go up.
Yellow’s prices have historically been the cheapest compared to other carriers, Jindel said. “That’s why they obviously were not making money,” he added. “And while there is capacity with the other LTL carriers to handle the diversions from Yellow, it will come at a high price for (current shippers and customers) of Yellow.”
Chan adds that we’re in an interesting time for the LTL marketplace — noting that, if Yellow liquidates, “the freight would find a home” with other carriers, which may not have been true in recent years.
“It may take time, but there’s room for it to be absorbed,” he said.
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