As Freight Company Yellow Rejects Bid to Restart, Investors Continue Efforts For Its Revival

Executives of the bankrupt trucking company Yellow (formerly YRC) turned down a billion-dollar bid from a group of investors working towards its revival. Led by trucking executive Sarah Riggs Amico, the group has vowed to continue its efforts in hopes of establishing a new entity and salvaging the lost jobs of the company. The battle between the company and investors has a far-reaching impact on the industry with even the US Treasury being involved.

History of Yellow

The trucking company had an iconic presence for generations before it suddenly shut down in July this year.

Yellow grew into a giant freight company that touched every aspect of the American economy. It became one of the top 10 freight carriers in the country, grossing over $6 billion in 2022, as per a CNBC report.

However, a string of corporate events, from mismanagement to malfeasance, brought the company to the brink of collapse. During the COVID-19 pandemic, the nation’s supply chain in the U.S. came to a grinding halt, hindering Yellow’s operations. At the time, the company received the $700 million lifeline loan through the CARES Act, but even that couldn’t save it from spiraling.

Further, this loan involved the U.S. treasury as one of the many creditors in the company’s bankruptcy process. When Yellow ceased operations and filed for Chapter 11, about 12,000 trucks and 35,000 trailers were left idle. This created a potential foundation for a new business to be set up, something that the group led by Amico is after.

Rescue of Yellow

Amico, who is the executive chairwoman of the auto-hauling trucking company Jack Cooper, which specializes in hauling automobiles, proposed taking over and reviving Yellow. Her plan is backed by the International Brotherhood of Teamsters, the union that represented most of Yellow’s employees, whom she intends to hire back while streamlining the company’s operations.

Amico’s plan envisions employing about 15,000 people, about half of the staff of Yellow. However, her last-minute plan to acquire the company requires the Treasury Department to allow the company to restructure its rescue loan or postpone the payment. As per The New York Times, several members of Congress had urged the Treasury to consider the plan, saying it could save jobs. The new company that Amico intends to form will be called Next Century Logistics.

What’s Next for Yellow Trucking?

As the company rejected Amico’s proposal, Yellow’s management intends to complete its bankruptcy plan, as per the New York Times. The plan involves selling off the company’s assets to different buyers and till now, the company has conducted auctions in which the winning bidders have committed to spend nearly $1.9 billion on Yellow’s 128 terminals.

The company now plans to seek approval for the sales from a federal bankruptcy judge in Delaware. As per the Times report, Amico had presented a new, much smaller bid to buy Yellow’s assets, the remaining terminals, and its trucks that weren’t sold in the auction. With this, the new company could have at least 12,000 employees.

Impact of Yellow’s bankruptcy on the economy

Yellow trucking worked in the niche segment called less-than-truckload (LTL). In this, margins are small, but the customer base is largely diversified as truckers deliver to homes, shops, hospitals, and more.

Thus, with the absence of Yellow, an impact on shipping costs is yet to materialize, Ken Vieth, president of ACT Research, said in the CNBC report. Vieth says LTL rates did increase since Yellow’s closing, but it was mostly likely related to a jump in diesel prices.

However, the greatest impact of Yellow’s closure will be on the truckers who have lost their jobs. Investors who made the bid claimed that the well-paying union jobs that Yellow truckers lost have left a void in the economy.

Further, the bankruptcy of the company came amid a freight recession which has led to multiple rounds of layoffs and failures.