NEW YORK CITY, NEW YORK: US trucking firm Yellow has fired several employees as the company reels under financial crisis and is reportedly filing for bankruptcy, Daily Mail reports. The popular trucking company which received a $700 million pandemic loan from the federal government informed its employees on Friday, July 28, that it is "shutting down regular operations" and laying off non-union employees" at all of its locations."
Almost 8,000 members of the company's sales force, business operations and technology departments can be immediately impacted due to the company's layoff. Besides, another 22,000 unionized drivers and freight handlers can be without jobs if the company fails to operate.
Who owns Yellow transport company?
The owner of Yellow transport company is Yellow Roadway Corporation which changed its name to YRC Worldwide in 2006. The company also has made its presence known in the international market, particularly China as it extended beyond its existing Canadian operations through Reimer. Yellow Roadway purchased half of Chinese freight-forwarding company JHJ International Transportation Co. Ltd in September 2005 and bought a 65 percent share of Chinese Shanghai Jiayu Logistics Co in August 2008.
However, the company incurred losses of $974 million and $622 million in 2008 and 2009 respectively. Towards the end of 2009, Yellow Roadway narrowly prevented bankruptcy by successfully persuading its bondholders to exchange their $470 million in bond notes for roughly 94% of the company's shares. Yellow Transportation and Roadway formally merged to create YRC Inc in March 2009 and Yellow Canada's operations were merged into Reimer Express to become YRC Reimer. YRC Worldwide once again changed its name on February 4, 2021, this time returning to the name Yellow Corporation.
Originally, Yellow Transit Freight Lines was formed in 1924 in Oklahoma City by brothers Cleve and A J Harrell. It was affiliated with the Yellow Cab Co which Cleve Harrell had started in 1906 for a few years.
Yellow Company's ridiculous amount of debt
Yellow is under the burden of some $1.5 billion in debt as of late March, which includes $729.2 million owed to the federal government for a controversial pandemic-era loan the Treasury Department extended on national security grounds in 2020. Yellow, which had $5.2 billion in revenue last year, just avoided a driver strike by Teamster union members earlier this week after failing to make a $50 million payment for employee benefits.
Yellow is keeping some customer service workers in place for now as the company still has freight in transit that it is trying to get to destinations or back to customers. John Murphy, the Teamsters National Freight director, advised in a memo to the union employees to collect any personal belongings from all offices and terminals if the company shuts down and becomes inaccessible.
According to a copy of the memo published by FreightWaves, he wrote that "the likelihood that Yellow will survive is increasingly bleak." "Yellow continues to clear its system, and it appears to be laying off personnel and closing entire terminals across the country", wrote Murphy.
Yellow handled an average of 49,000 shipments per day last year according to Satish Jindel, president of transportation and logistics firm SJ Consulting. He estimates that the number is between 10,000 and 15,000 daily shipments as of this week.
Why is Yellow Company in such a dire state?
Yellow's current finances and prospect of bankruptcy "is probably two decades in the making", Bruce Chan, a research director at investment banking firm Stifel said blaming 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."
Yellow reported a loss of $54.6 million, a decline of $1.06 per share, for its first quarter of 2023 in May. Operating revenue was about $1.16 billion in the period. It is estimated that Yellow could be burning between $9 million and $10 million each day as per investors note from financial service firm Stephens.
