Future of freight in question after trucking company Yellow files for bankruptcy

Amna Nawaz:

One of the nation's largest freight and trucking companies, Yellow, announced it is shutting down, leading to one of the largest mass layoffs in recent history and potential shipping cost increases ahead.

As Lisa Desjardins reports, the company is in bankruptcy just three years after getting a $700 million loan from taxpayers.

Lisa Desjardins:

Amna, the Yellow Corporation was a major player in a critical form of trucking, carrying goods between factories to distribution centers, including for Amazon, and to retail stores.

It survived the pandemic thanks to that massive taxpayer loan approved by the Trump administration. Now taxpayers are left with stock in a bankrupt company and some 30,000 workers are suddenly out of a job.

To understand more, I'm joined by Rachel Premack, editorial director at FreightWaves, where she has been covering this.

Rachel, what does this mean for Americans outside the trucking industry?

Rachel Premack, FreightWaves:

Yes, so one big result of this is that we are seeing — we are anticipating that freight rates will actually increase over these next few months, because Yellow was actually a provider of very low-cost freight transportation.

They were the third largest player in the sector of the trucking industry called less-than-truckload, where retailers and manufacturers combine various loads into one single trailer. So we are — as a result of Yellows bankruptcy and closure, it's likely that the average rate for customers in the less-than-truckload space, those rates will increase, and those costs will — those increased rates will likely be passed down to consumers.

Lisa Desjardins:

Both of my big brothers were truck drivers. One of them, it was his lifelong career. So I know this is not an easy job.

Can you help us understand the scale of the layoffs involved here? And could these workers easily find other jobs?

Rachel Premack:

Yes, so, in total, Yellow employed around 30,000 employees, 22,000 of which were Teamsters members, and many of those Teamsters members were, in fact, truck drivers.

Now, the trucking industry has actually seen a recession or a slowdown in the past year, year-and-a-half. So it will be more challenging for these drivers to not only find other trucking jobs, but certainly find other non-union truck — or certainly find other union trucking jobs.

There are now only two large union less-than-truckload players left in the space. And for those truck drivers to find other jobs where they can have the same sort of pension and health care benefits, it may be challenging.

Lisa Desjardins:

No surprise trucking is part of the lifeblood of this country. So there are a lot of layers here, but one of them involves that huge government loan to this company.

Now, we know, again, it was $700 million in COVID relief loans, specifically national security-related. This company got 95 percent of all of the national security-related COVID money given out. Now, Congress found in a report that Yellow actually did not meet the national security criteria, but the loan came to them because the Trump administration made a separate recommendation.

Can you help us understand that? If it wasn't really critical national security, how did this company gets such a massive loan?

Rachel Premack:

This is something that's been very confusing to many folks who do study these sorts of loans and these sort of government assistance programs.

It's really unclear why exactly Yellow got this loan. But what is clear is that it was massive, and it's something that — in that recent congressional report, it's something that the federal government does appear to regret actually giving out this loan.

What this means for taxpayers, what's interesting is that the U.S. Treasury is actually third in line for this larger bankruptcy program. They come after the banks that lended to Yellow, and they also come after Apollo Global, the hedge fund that also supported Yellow.

So, this is something that the U.S. Treasury and U.S. taxpayers actually probably won't see much of the money that they invested into this trucking company returned.

Lisa Desjardins:

I know I saw in that report also that lobbying money increased from this company during the time it was up for these loans.

Help us big picture here. What led to this collapse of this company? They had rocky times before. But what was the problem now?

Rachel Premack:

Yes, so Yellow has been really on the brink of financial crisis for the past decade-and-a-half. They nearly filed bankruptcy four times going from the Great Recession all the way up to 2020.

What sort of began this downfall, you could say, was several costly acquisitions that Yellow made in the early 2000s of other trucking companies. They failed to integrate those trucking companies fully into their network. And, by 2008, the financial crisis, of course, hit trucking particularly hard.

And Yellow was saddled with hundreds of millions of dollars in debt and these various trucking networks that weren't fully integrated. And we didn't actually see Yellow attempt to integrate those networks until the late 2010s, early 2020s. By that point, it was too late. This company was just simply — many folks watching the trucking industry would describe Yellow as mismanaged.

And they just simply weren't able to pull out of this. Now, they would say the real cause of the collapse, the company is certainly blaming Teamsters, which refused to negotiate with Yellow on certain work rules and certain changes made to their networks throughout the past year. Teamsters would say, well, this company has been mismanaged. That's the key reason why it went bankrupt.

So we're kind of seeing right now these two big parties blame the other one for the loss of these 30,000 jobs.

Lisa Desjardins:

In just our final 30 seconds here, you mentioned a recession in the industry overall. Is this an isolated case? Or should we be worried about other trucking companies?

Rachel Premack:

So, we have seen many small trucking companies actually collapse and file for bankruptcy in the past year, especially these companies that were actually established during COVID, when we did see so much more goods as demand throughout the country.

Many of those companies are now closing down. Some of those drivers are joining larger fleets, but others are actually looking for other types of work outside of the trucking industry altogether.

Lisa Desjardins:

Rachel Premack, covering a critical industry in this country, thank you.

Rachel Premack:

Thank you.