Stories of supply chain problems have been making headlines since the start of the pandemic. These issues have caused delays, increased the cost of goods, and led to confrontations between the industry and its labor unions. The recent bankruptcy of a major US freight trucking company, Yellow, highlights the ongoing challenges in the shipping sector.
Yellow, a 99-year-old trucking company based in Nashville, Tennessee, filed for bankruptcy this week. Just a few years ago, it received a $700 million government loan through the pandemic-relief CARES Act under President Trump. The bankruptcy comes amidst heated contract negotiations with the Teamsters, the union representing the majority of Yellow’s workforce. The blame game has begun, with some politicians faulting government bailouts that only postpone the inevitable for struggling companies, while others, including Yellow, point the finger at organized labor.
Yellow’s bankruptcy raises several questions about the future of its 30,000 employees, taxpayers, and consumers who have already experienced price hikes due to supply chain disruptions. Sorting out Yellow’s assets and dealing with undelivered freight will take time, causing further delays. Some supply chain clients have already switched to more expensive competitors, which could lead to additional increases in consumer prices.
While the closure of one industry leader may not immediately result in empty store shelves for the average consumer, Yellow’s bankruptcy is a clear indication that the industry’s problems are far from over. The trucking industry operates in a hyper-competitive landscape with high operational costs, such as expensive fuel and a vast workforce of human drivers. However, the industry has long struggled with a shortage of drivers.
Yellow’s bankruptcy could eventually impact consumer prices for goods and delivery services even more than they have already been affected. The ongoing struggle between freight companies trying to turn a profit and workers demanding fair pay for their labor will continue to play out in the industry.
Yellow’s Freight History
Yellow, previously known as YRC Freight, was one of the largest less-than-load (LTL) transport companies in the US. LTL companies deliver smaller quantities of freight, falling between full-trailer truckloads and individual parcel shipping. Yellow accounted for about 9 percent of the LTL market and was the third-largest LTL company in the nation. It served various industries, including defense, aerospace, automotive, oil and gas, and healthcare.
Yellow’s bankruptcy filing comes as no surprise to those familiar with the logistics industry. The company faced financial difficulties after expensive acquisitions in the early 2000s and struggled to recover from the impact of the 2008 financial crisis. Despite near bankruptcy in subsequent years, Yellow managed to avoid it through employee pay cuts. However, signs of further trouble emerged during recent union contract negotiations, leading to a decline in delivery volume and ultimately the company’s shutdown.
The Controversial Government Loan and Labor Disputes
Much of the public discussion surrounding Yellow’s bankruptcy revolves around the $700 million loan it received from the federal government in 2020. The loan, provided under the CARES Act, intended to support companies vital to US national security interests during the pandemic. However, a congressional committee’s report concluded that other freight trucking companies could have performed the necessary services Yellow provided to military bases.
Labor negotiations between Yellow and the Teamsters grew increasingly tense as the company faced mounting debt and financial strain. Approximately 22,000 of Yellow’s 30,000 employees are union members. Disagreements over pay increases, pension fund payments, and operational changes further complicated the negotiations. Yellow filed a lawsuit against the union, blaming their obstruction for significant financial losses. The Teamsters countered with a lawsuit alleging Yellow’s failure to provide proper notice for mass layoffs.
Yellow’s CEO, Darren Hawkins, joined the blame game by pointing fingers at the Teamsters during the bankruptcy announcement. He emphasized that businesses should take note of their experience. Labor disputes are not uncommon in the logistics industry, but unionized drivers and dock workers have become less prevalent since the deregulation of the trucking industry in the 1980s. Increased competition, often utilizing cheaper, non-union labor, has challenged companies like Yellow that failed to adapt to the changing landscape.
Yellow’s bankruptcy serves as a stark reminder of the ongoing labor tensions and supply chain issues in the trucking industry. As the industry continues to grapple with operational costs and worker demands, consumers may experience further disruptions and price increases in the future.
