By The International Brotherhood of Teamsters has recently issued a strike notice against Yellow Corp. This action was taken after the union expressed concerns over Yellow’s failure to make a “critical” payment to health care and pension funds, which could potentially lead to benefit suspensions.
Teamsters General Secretary-Treasurer, Fred Zuckerman, emphasized that Yellow has a responsibility and obligation to its workers. He stated, “Our members should not suffer because of management’s incompetence and financial irresponsibility.”
Specifically, the union highlighted that two of Yellow’s operating companies, Holland and Yellow Freight, missed a $50 million payment that was due on July 15. This payment was meant for the Central States Health and Welfare Fund and the Central States Pension Fund for June 23. In response to this non-payment, the Central States Board of Trustees has voted to suspend health-care benefits and cease pension accruals for Yellow workers, effective July 23, if the outstanding payment is not resolved.
Yellow recently disclosed that it had over $100 million in cash and cash equivalents as of June 30. Analyst Jason Seidl from TD Cowen observed that this required pension contribution represents a significant portion of the company’s liquidity.
In light of these developments, Yellow’s stock (YELL) experienced a decline of 2.1% on Tuesday, closing at 99 cents. Furthermore, the stock has plummeted by 60.6% year to date.
When approached for comment, Yellow stated that it had informed the Central States Funds about its decision to defer payment for both health and pension contributions due for June (July 15 deadline) and July (August 15 deadline). The reason cited for this deferral was to preserve liquidity while working towards securing meetings with the Teamsters and obtaining additional financing.
These recent events have put Yellow Corp. under scrutiny, prompting the Teamsters to take decisive action and issue a strike notice. The union remains committed to fighting for the rights and welfare of its members, emphasizing the importance of fair treatment and financial responsibility.
Yellow’s Financial Troubles Could Lead to Freight Diversions
Yellow, a major trucking company, is facing significant financial challenges that could potentially have a ripple effect on the industry. The company has deferred two months’ worth of payments to Central States, which amounts to approximately $50 million. However, Yellow has expressed its intention to promptly repay the deferred funds with interest once it secures additional financing. To discuss the terms of this repayment, Yellow has engaged in conversations with the funds.
According to industry expert TD Cowen’s Seidl, if the Teamsters were to go on strike, it could have a substantial impact on Yellow’s operations. Seidl believes that such a strike would lead to a significant diversion of freight to other less-than-truckload (LTL) companies. Given Yellow’s precarious financial situation, recovering from this blow would be extremely challenging.
Seidl has noted that there are already signs of shippers taking preemptive measures by diverting their freight to Yellow’s competitors and developing contingency plans. This indicates a tangible fear that Yellow is on the verge of failure. Among the LTL companies that Seidl believes will benefit from Yellow’s troubles are Old Dominion Freight Line Inc., ArcBest Corp., Saia Inc., and XPO Inc. Additionally, other companies with exposure to LTL operations that stand to gain include Knight-Swift Transportation Holdings Inc. and TFI International Inc.
The challenging financial position of Yellow raises concerns within the industry, as it could lead to a significant shift in the market dynamics and the redistribution of freight among competing transportation companies.
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