The Fallout From Yellow Corp – 4 Observations
In Early August of 2023, Yellow Corp. officially declared bankruptcy sending ripples throughout the Logistics and Transportation industry. What’s next for Yellow Corp’s employees? On top of that, shippers still need to move their products via LTL, so where is that going to go?
Let’s find out!
1. A Flood of Job-Seekers
Many prominent Logistics firms have experienced massive layoffs this year like DHL, C.H. Robinson, Nolan Transportation, Coyote, and GXO. The most recent brokerage that was affected Uber’s freight arm “Uber Freight” which let go of close to 50 employees (source: FreightWaves). This flew mostly under the radar due to the Supernova collapse that was Yellow Corp. which has now left close to 30,000 people looking for another job.
Many Recruiting firms, including ours, are touching base with many of the talented executives that are scrambling to find their next job. As many have found out from each round of layoffs in the 3PL world, those who are not “revenue producing” are having a harder time landing on their feet. We have several clients who are open to talking to those who were in sales, but Customer Service, Dispatch, Analysts, IT, and more are having a tougher time finding a spot at another brokerage.
2. Where is the LTL freight going now?
So now that Yellow isn’t covering that LTL freight that it was covering just a few months ago, where do all their customers go…the competition! Companies like Saia are already noticing a sizeable benefit to the massive re-distribution of LTL freight. Last quarter, they were down 4% YOY, and through the first two weeks of August, they are already up 13% on shipments per day YOY (Source: FreightWaves). With how large Saia is it’s natural that some of the freight is migrating over to them and you see that in their increase of tonnage by 6% in August. You also saw improvements from the likes of TForce and ArcBest. Most carriers are benefiting from this collapse in general but LTL ones more so than others.
3. How did Yellow Corp Fail?
For 2018, Yellow reported earnings of $20 Million, not bad for any company to report that kind of margin.
For 2019 though, they reported a MASSIVE loss of $100 Million+, what a 180!
In the middle of COVID, the U.S. government detailed that since Yellow was hauling 68% of the Department of Defense’s LTL freight, they were deemed in the nation’s “best interest” to survive. Shortly thereafter, The U.S. Treasury loaned Yellow $700 Million at 29.6% interest to remain steady. It’s important to note that this was not one of those forgivable PPP loans that most businesses got during the pandemic. This would need to be paid back.
By the summer of 2023, they had paid back $230 Million to the principal, had $50 Million-ish in interest, and a total of $700 Million in total STILL left to pay back (Source: Reason.Com). That’s a tough hill for any company to climb back from.
The second straw for Yellow was a last-minute back out from one of its major investors, Apollo.
The third major straw for Yellow’s downfall was the failed negotiations between corporate and the Teamster’s Union regarding wages and benefits for employees. Amongst Yellow, there are a handful of other large companies that are all unionized under the Teamsters like UPS, ABF, and DHL. Not too long ago, the Teamsters successfully prevented a strike and majorly upped the wages and benefits for their UPS employees. Coming off of that major “victory”, Yellow had to make the decision on following that precedent or not with the debt monster right behind them.
As a result, Yellow decided to close its doors (Source: FreightWaves).
4. What Now?
The fallout from the bankruptcy of Yellow Corp. has left a profound impact on the Logistics and Transportation industry. Yellow will prompt critical conversations between management and employees, while the distribution of LTL freight will be interesting to watch over the next year. Also, the surge of job-seekers in the wake of layoffs has created a competitive job market, particularly for revenue-producing roles.
As freight brokers and carriers navigate the aftermath of Yellow Corp.’s collapse, it serves as a stark reminder of the importance of financial prudence, effective negotiation strategies, and a positive work environment in the freight brokerage world. One thing I do know in this game is that things never stay the same. Prepare when you can and adapt as things happen. I’m very curious in general what the Logistics landscape will look like this time next year, especially in the LTL world with Yellow in the distance.
What do you think will happen?
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