Less-than-truckload carrier Yellow Corp. sent a letter to President Biden on Thursday asking for help negotiating with the Teamsters. The letter said the company is “on the verge of closing its doors due to an ongoing, intractable labor dispute with the International Brotherhood of Teamsters (IBT).”
“Despite support from your Administration, these efforts have proven unsuccessful at getting both sides to the table to discuss a way forward,” the letter pleaded.
Yellow (NASDAQ: YELL) is trying to implement a second phase of operational changes it says are paramount to its survival. The plan includes consolidating its LTL operating companies, closing redundant terminals and redefining work rules for some drivers, among other items. The carrier was successful installing a first phase of changes in the West, however, a second phase covering 70% of its network has been shot down by the union.
Seemingly out of options, the company filed a $137 million breach of contract lawsuit against the IBT on Tuesday.
“As a result of union intransigence, Yellow’s business plan has been frozen,” the letter continued. “The company has lost market share and has been unable to secure additional lending for day-to-day business operations.”
Yellow has $1.5 billion in debt and lease financing obligations, $1.3 million of which comes due next year. Of that, $700 million came from the U.S. Treasury in the form of a controversial COVID-relief loan. In addition to collateral for the loan, the government received a 30% equity stake in Yellow, which the letter warns would be “wiped out” if the company goes under.
However, a precipitous decline in YELL shares given its inability to reach a deal with Teamsters has made that equity worth less than $11 million, a far cry from the $729 million loan balance it has with the government (loan balance includes capitalized interest).
The letter said 30,000 jobs (22,000 Teamster jobs) are at risk and that its $5.2 billion in annual revenue supports another 57,000 jobs.
The two parties have reached a stalemate in recent weeks.
Throughout the process, the union has maintained it has given enough. Since 2009, it estimates it has conceded billions in wages, benefits and pension concessions. Most recently, the union said it will honor its current collective-bargaining agreement, which expires March 31.
Yellow asserts the Teamsters don’t have the right to reject the change of operations and says it will be out of money by mid-July if its plan isn’t implemented. The company recently asked health and pension funds to defer contributions for the months of July and August.
“We continue to see less potential for another government bailout, given a recent congressional report saying the Treasury Department erred in giving a loan to YELL as part of a 2020 rescue package,” Deutsche Bank (NYSE: DB) analyst Amit Mehrotra told clients Friday morning.
Analysts have been sizing up the carrier’s failure and the fallout it would have on the industry. Mehrotra said other carrier’s “have the extra capacity to take on additional freight.” He thinks the event will raise LTL rates industrywide.
“Knowing of your strong commitment to union jobs, we are formally requesting your assistance in getting Yellow and the Teamsters to the table,” the letter concluded.
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