Yellow, the Freight-Trucking Company, Declares Bankruptcy

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Three years after receiving a $700 million lifeline from the federal government during the pandemic, freight trucking company Yellow is filing for bankruptcy. Following failed negotiations between Yellow’s management and the Teamsters union, the company ceased operations and announced its intention to seek bankruptcy protection. Yellow’s CEO, Darren Hawkins, expressed disappointment at the closure of the company, which has been in operation for nearly a century. Yellow has filed a Chapter 11 petition in federal bankruptcy court in Delaware.

The bankruptcy of Yellow will result in the loss of 30,000 jobs and is expected to have implications for the nation’s supply chains. This situation highlights the risks associated with government bailouts provided during times of economic crisis.

Yellow, previously known as YRC Worldwide, received a $700 million loan in 2020 as the pandemic was causing economic paralysis. The loan was granted as part of the $2.2 trillion pandemic-relief legislation passed by Congress that year. Yellow was deemed critical to national security due to its delivery of supplies to military bases. The company subsequently underwent a restructuring plan and consolidated its regional trucking services under one brand. As of March, Yellow’s outstanding debt amounted to $1.5 billion, including $730 million owed to the federal government. Yellow has paid $66 million in interest on the loan but has only repaid $230 of the principal, which is due next year.

The fate of the loan remains uncertain. In exchange for the loan, the federal government acquired a 30 percent equity stake in Yellow. It may decide to assume or sell off a significant portion of the company’s fleet of trucks and terminals.

Yellow is the third-largest small-freight-trucking company in the “less than truckload” shipping sector. The industry has faced challenges due to rising interest rates and increased fuel costs, resulting in customer resistance.

Yellow’s financial struggles were compounded by a labor dispute with the Teamsters union over wages and benefits. Talks between the two sides broke down, leading union officials to announce the company’s closure.

The bankruptcy could cause temporary disruptions for businesses relying on Yellow’s services and may lead to further consolidation within the industry. It could also temporarily raise prices as companies seek alternative carriers for their freight. However, it is expected that prices will normalize within a few months.

Financial analyst Jack Atkins attributes Yellow’s troubles to a history of unsuccessful acquisitions and an inability to reinvest in the company due to debt repayment obligations. Competitors have capitalized on this situation and become more profitable.

Yellow’s financial difficulties have raised concerns about the previous administration’s decision to rescue the company. In 2019, Yellow incurred losses exceeding $100 million and faced a lawsuit from the Justice Department over allegations of defrauding the federal government. The company settled the lawsuit by paying $6.85 million. Watchdogs and congressional oversight committees have scrutinized Yellow’s connections with the Trump administration, as the company had backing from Apollo Global Management, a private equity firm closely tied to Trump officials.

Representatives from the Democratic Party have criticized the Trump administration for awarding Yellow the bailout money against objections from Defense Department officials. They noted that Yellow had close communication with Trump administration officials during the loan process and discussed its employment of Teamsters drivers.

Former Treasury Secretary Steven T. Mnuchin defended the loan, arguing that the closure of Yellow would have jeopardized thousands of jobs and disrupted the military’s supply chain. He expressed confidence that the federal government would eventually profit from the deal.

Republican Representative French Hill criticized the loan, stating that Yellow’s financial mismanagement resulted in the loss of jobs for hardworking individuals. He remarked that Yellow was not essential to national security and should not have received a $700 million taxpayer bailout from the Treasury Department.

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