After avoiding a strike by employees represented by the International Brotherhood of Teamsters over missed pension and benefits payments and updated contract terms, the third-largest carrier in the less-than-truckload sector is preparing to file for bankruptcy.

When Yellow’s bankruptcy filing is complete, it will be the largest trucking bankruptcy in history. Today, we’re talking about how Yellow got to this point and what’s next for the LTL sector.

What happens to the company’s 30,000 employees?

On Friday, the trucking company sent a notice to employees saying it “is shutting down its regular operations on July 28, 2023, closing and/or laying off employees at all of its locations.” According to the Wall Street Journal, members of the sales team, business operations, customer service, and technology departments were among those dismissed. Those not yet affected include unionized drivers and freight handlers and some customer service associates working on logistics to complete deliveries or return shipments to customers.

How did Yellow get here?

The narrative depends on who you’re asking. During the back-and-forth with Teamsters over new contracts, the trucking company said the union “knowingly and intentionally triggered a death spiral for Yellow.”

The Teamsters countered, saying that while they are open to working with Yellow, “Hope, however, is fading. Unfortunately, despite more than a decade of concessions totaling billions of dollars given to the Company by Teamster members as well as a massive government bailout loan in 2020, Yellow may finally be succumbing to its enormous debt burden.”

Yellow’s financial problems span much further than its recent contract negotiations. In 2020, the trucking company accepted a pandemic-era loan from the US Treasury Department, given on grounds of national security. Despite recording $5.2 billion in revenue last year, the $729.2 million owed to the federal government is just a portion of the 99-year-old company’s $1.5 billion debt.

What happens next?

Yellow will likely file for bankruptcy in the coming days. Amid the turmoil, customers turned to other options, decreasing the LTL carrier’s available cash and, ultimately, forcing it to recall its trailers and stop accepting freight.

Bad news for Yellow may be good news for the rest of the industry. CEO of Illinois-based STG Logistics, Paul Svindland, told the Wall Street Journal “There’s no doubt everybody has been hurting for business, so I believe there is ample capacity.” According to Bruce Chan from investment banking firm Stifel, most LTL trucks in the current market operate with 20% spare capacity. Yellow’s exit could decrease that percentage to 10%, benefitting competitors like FedEx Freight, ArcBest, Saia, and Old Dominion.

This crisis didn’t happen overnight. Instead, Chan says this impending bankruptcy filing “is probably two decades in the making.”

Let Yellow be a lesson to all of us to manage finances wisely and hold shipping companies accountable when they fail to uphold their commitments. With ShipRx parcel audits, it’s free to start recouping the money carriers owe. Get in touch today and start saving.

Brittany ShipRx Contributor