A devastating blow has struck the U.S. transportation industry and its workforce as the 99-year-old Yellow Corp., a once-dominant trucking giant headquartered in Nashville, Tennessee, finally declared bankruptcy after years of financial struggles and mounting debt, resulting in 30,000 employees losing their jobs.
Yellow, formerly YRC Worldwide Inc., stood as one of the US’s largest less-than-truckload carriers with a sprawling workforce of 30,000 employees nationwide.
According to industry analysts, poor management and strategic decisions during the early 2000s played a significant role in the current crisis.
Tom Nightingale, CEO of AFS Logistics, a third-party logistics firm that places about $11 billion worth of freight annually with different trucking companies on behalf of shippers said the company began taking on significant amount of debt 20 years ago in order to acquire other trucking companies.
“Now their debt service is just enormous,” Nightingale said, indicating to $1.5 billion in debt on its books.
Meanwhile, the Teamsters’ union claims that the company’s inability to manage itself effectively, despite previous financial assistance, ultimately led to its demise.
“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. This is a sad day for workers and the American freight industry,” said Teamsters President Sean O’Brien in a statement.
As it is said, the company’s substantial debt of $1.5 billion and its inability to adapt and modernize operations contributed to its demise. Likewise, the federal government’s $700 million loan during the pandemic resulted in taxpayers owning 30% of the company’s outstanding stock, further adding to the public’s burden.
In 2020, the company received a $700 million federal government loan, leaving taxpayers with 30% ownership of its outstanding stock. As per the latest quarterly report, the company’s debt to the Treasury department exceeded $700 million, accounting for almost half of its long-term debt.
Despite being a national company with widespread terminals and employees, Yellow’s financial troubles outweighed its cost of union contracts, leading to its downfall.
The company’s stock plummeted by 82% following reports of the bankruptcy plans, closing at a mere 57 cents a share, effectively rendering it a penny stock. Although it saw a minor uptick of 14 cents a share on Friday, the overall situation remained bleak.
In the long-served company’s recent past, the company’s financial mismanagement and lack of adaptability are central to the company’s tragic failure. Throughout the past two decades, a series of poor decisions and acquisitions incurred enormous debt, hindering the company’s ability to stay competitive in a rapidly changing market. The failure to handle its financial obligations to workers and the federal government further intensified the crisis, leading to the extremely distressing loss of nearly 30,000 jobs.
Not only the loss of 30,000 jobs will ripple through various sectors, affecting families and communities nationwide, Yellow Corp.‘s bankruptcy has further potential to have far-reaching consequences for the US economy. With former Yellow customers shifting their business to competitors, the industry may see price hikes, impacting consumer goods and inflation. In addition, the burden on taxpayers, owning a significant portion of the company’s stock and debt, will further strain the government’s financial resources.
Yellow Corp.‘s bankruptcy serves as a stark reminder of recent bank failures, and also the importance of sound financial management and adaptability in a dynamic business environment.