Yellow Corporation, one of the largest trucking companies in the United States, announced on Sunday night that it was filing for Chapter 11 bankruptcy and would “wind down” its business operations and lay off its 30,000 employees.
Yellow was done in by union problems, incompetent management, and a government that was eager to throw pandemic relief money at it because, well, it was there.
Quite literally, the only reason to give Yellow a loan was because the Secretary of the Treasury at the time controlled a $17 billion slush fund that he could disburse to companies that were deemed necessary to “national security.” At the time, the Treasury Department explained that “Yellow was ‘the leading transportation provider to the Department of Homeland Security and U.S. Customs and Border Protection.'” I guess that was enough to justify the “national security” moniker.
Out the door went $700 million.
Pandemic aid programs were intended to help otherwise profitable companies survive an unforeseeable economic disruption. Yellow, on the other hand, had gone from a net income of $20.2 million in 2018 to a net loss of $104 million in 2019. By the time the loan was approved in July 2020, the company’s stock price had fallen 85 percent over the previous five years, including a 27 percent drop since the beginning of 2020. At the time, Yellow’s value was $70 million, meaning the federal government had given the company a loan worth 10 times its value. (Author’s emphasis)
Is this a great country, or what?
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The finger-pointing regarding who is to blame for this economic catastrophe is actually somewhat amusing. Even a cursory read of what happened to Yellow would leave just about anyone having a hard time trying to find a white hat in this evil mess.
So it’s extremely difficult to take sides when incompetent management points the finger at the greedy, corrupt union. The Teamsters are well-known knuckle-draggers, but management at Yellow has a history of chiseling workers. And in the midst of a trucking boom when other companies were making billions of dollars, Yellow lost $200 million — a clear sign that something was dreadfully wrong.
“A company has the right to manage its own operations,” Darren Hawkins, the company’s chief executive, said in a news release, “but as we have experienced, I.B.T. leadership was able to halt our business plan, literally driving our company out of business, despite every effort to work with them.” I question whether it has the “right” to drive a company off a cliff.
“They shamelessly pin their corporate incompetence on working people,” Sean O’Brien, the Teamsters’ general president, said in a news release.
Workers took wage cuts in 2011 and 2012, and then Yellow stiffed them on “contractually obligated payments” to health, welfare, and pension funds. I’d take a second look at who exactly is to blame for driving Yellow out of business.
With Yellow’s bankruptcy, it will likely default on the entire loan amount and then some. An audit earlier this year by the Office of the Special Inspector General for Pandemic Recovery found that Yellow had not even kept up with the interest on the $700 million loan: As of March 15, “Yellow had an outstanding loan balance of $729.2 million, made $54.8 million in interest payments, and repaid $230 in principal.” In late July, a company spokesperson told Reason that the company had since paid $59.6 million in “cash interest payments.”
The fact that Yellow failed to give 60 days’ notice to the Teamsters’ 30,000 employees means that it’s in even more trouble. The union is filing a complaint in bankruptcy court under the Worker Adjustment and Retraining Notification (WARN) Act. Yellow claims it’s entitled to an exemption; that may or may not prove to be truthful.
