9 ms·
99-year old trucking company Yellow shuts down, putting 30k out of work
- sizzzzlerz 3y agoSo 30000 people lose their job and the US taxpayer is out more than $700 million in loan guarantees. The only question remaining is how much money do the owners of the company walk away with?
- jklinger410 3y agoThey walk away with the profit because that's how this country works. Business owners have little to no risk when the company gets large enough. Edit: YELLOW is publicly traded and is going into bankruptcy. They posted positive earnings and their CEO got his bonuses last year. I'll let you all guess whether their leadership team gets their full comp for 2023 or not, while all the employees are told to pound sand.
- justrealist 3y agoThey walk away with $0 in equity.
- jklinger410 3y agoThey have filed for bankruptcy, so leadership will still likely get their compensation packages. I'm not going to waste time doing the research, but I would assume leadership had been receiving all of their usual comp and bonuses right up until the end as well. The workers will get $0.
- justrealist 3y agoThose aren't the owners. And since the bonuses are in stock, those aren't going to be worth anything. > I'm not going to waste time doing the research Yeah that's pretty clear.
- boeingUH60 3y agoYellow is a publicly-traded company. Shareholders are wiped out…such is the risk of investing
- Aurornis 3y agoThe stock is actually up today: https://www.google.com/finance/quote/YELL:NASDAQ https://www.google.com/finance/quote/YELL:NASDAQ That's how broken their financial situation was. Shutting down might allow the shareholders to collect something. Maybe. Note that US Taxpayers are effective owners of about 1/3 of the company due to past loans.
- code_runner 3y agoI believe they are referencing executives not stock owners. I imagine a company like this going out of business is pretty profitable for execs... but thats just me guessing. Its entirely possible that this company was run by the few executives with souls and a sense of actual responsibility
- deleted 3y ago[deleted]
- ineedasername 3y agoSeems it gets worse than that: "In April 2022, Democrats on the Congressional Select Subcommittee on the Coronavirus released a report claiming the loan violated the terms of the CARES Act, and that it resulted from lobbying and close connections with former US president Donald Trump. YRC reportedly got the loan on national security grounds, over the objections of the Defense Department that the company's services could be replaced by better providers, and that the company was in the middle of a False Claims Act in which it was accused of overbilling the government and making false statements." https://en.wikipedia.org/wiki/Yellow_Corporation https://en.wikipedia.org/wiki/Yellow_Corporation
- throwawaysleep 3y agoThey went to zero. https://www.google.com/search?q=yellow+trucking+stock&rlz=1C1GCEA_enCA983CA983&oq=yellow+trucking+stock&aqs=chrome..69i57j0i512j0i22i30l8.2979j1j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=yellow+trucking+stock&rlz=1C...
- tibbon 3y agoAre there likely Golden Parachutes in this scenario?
- LazyMans 3y agoNot defending how our stuff is set up, but it would be interesting to know how much taxes Yellow paid over it's lifetime. Excluding taxes paid by employees.
- riffic 3y agocourtesy note, but the apostrophe in it's will usually expand to "it is".
- bryanlarsen 3y agoMnemonic hint: "his" doesn't have an apostrophe and "he's" does, and the parts of speech match.
- SoftTalker 3y agoI would presume they paid the least they were legally obligated to pay, as any normal person or company would do. Trucks also pay a lot of road use taxes. Some would say not enough, but trucking is not a low-taxed line of business.
- LazyMans 3y agoIt would be interesting to see the net benefit a company had. Obviously putting money in employee pockets is a net benefit, but it stops being so great if tax dollars are just subsidizing bad business leading to a net drain on tax payers
- SoftTalker 3y ago"tax dollars are just subsidizing bad business" is the definition of most bailouts.
- breakingrules 3y ago[dead]
- koolba 3y agoThe owner’s equity would be wiped out to zero. And 29.6% of the company is owned by the USA as part of that Covid era loan. The real story here is the non union shops eating Yellow and the other union shops lunch. Government loans just kept it alive to die a slower death.
- SoftTalker 3y agoYes, government bailouts of private companies really need to stop. It just prolongs the problem and doesn't allow the market to properly respond to risks and rewards.
- nickff 3y agoThis bailout was not for the shareholders, it was for the union (as is often the case). Bailouts usually benefit creditors, not the equity holders. edited for clarity
- SoftTalker 3y agoWhy should creditors get bailed out? If they do, they'll keep making risky credit decisions. If they get burned, they'll be more careful next time.
- nickff 3y agoI don't think they should get bailed out, but to be clear, being 'burned' means being laid off, with an end to wage payments, and no severance.
- djbusby 3y agoCEO was making close to $1M/yr for a few years.
- audibahnbacks 3y agoTotal comp was over $2m/yr for the past several years, and the C-suite execs were each earning $1m-$6m the past several years, even the CTO. It’s another case of public losses, private profits.
- ApolloFortyNine 3y agoIf that's it thats honestly on the low end for a company of that size.
- jl6 3y agoI’m not making any statement on whether that CEO did a good job or not, but I’d like to point out that if you had a failing company, it might make a lot of sense to hire an expensive hotshot CEO to turn it around (and to get the best you would also offer benefits like golden parachutes). So it’s not necessarily a case of “the CEO is getting paid exorbitantly to do a bad job”.
- enjoylife 3y agoI hope there will be a HBR or some other case study done on Yellow, because the interplay between bad loans + union demands + poor management seems like something US businesses need to be more prepared for.
- no_wizard 3y agoFrom the sounds of it, its mostly the bad loans + poor management part that killed Yellow. Management of the company have been asleep at the wheel for some time now, union demands are not likely the precipitating factor here. EDIT: All I'm pointing out here is that I don't think this can land squarely on union demands, which is what I think some of the press are making it out to be. The actual financial mismanagement of the company precedes anything the union was asking for (which in part, was for Yellow to live up to their previously agreed obligations)
- atourgates 3y agoIt doesn't seem like the "union demands" killed the company narrative tracks here, since the union demands were things like "You should actually make the contributions to our retirement accounts that you're obligated to make."
- zdragnar 3y agoThe threat of a strike was the final blow, causing them to lose customers and dropped their stock price such that they didn't have anything to borrow with. All of the bad decisions they'd previously made out them in this position, but the union threatening to strike was the straw that broke their back- despite the union withdrawing the threat. That last tidbit probably tells you all you need to know about how little chance the company had at surviving.
- cstejerean 3y agoThe company entered into questionable acquisitions though largely to try to become more competitive in the LTL market with their non-unionized competitors. Now they executed the mergers poorly and failed to integrate for too long, but even some of those integration challenges were due to union considerations. So yes management was incompetent but I think being unionized did play a large role in their demise as well.
- paxys 3y ago> The company received a $700 million loan from the federal government in 2020, a loan that resulted in taxpayers holding 30% of its outstanding stock. And the company still owed the Treasury department more than $700 million according to its most recently quarterly report, nearly half of the long-term debt on its books. Let's see what people who routinely rant about government bailouts have to say about this. I predict silence, because the dollars went to the right kind of people.
- cobrabyte 3y ago> taxpayers holding 30% of its outstanding stock. It's always amusing that they frame this as the lowly taxpayer holding stock in a company after the government bails a company out. I've never received the stock certificates, and I certainly don't see any dividends or have the ability to sell my commensurate portion of the stock holdings. The taxpayer pays for the bailouts but does not see any benefit for doing so.
- boeingUH60 3y agoNot a fan of government bailouts or funding any company at all nor an American, but this framing is weird. Citizens don’t get dividends from government property. They get their tax benefits from government services, e.g, infrastructure, healthcare, police, etc.
- sidewndr46 3y agoNot only are you not an American, you have no idea how our government works apparently. States can pay out financial benefits to citizens in the form of checks to residents, for example see Alaska. During my life time there have been multiple instances of the federal government refunding taxes collected for one reason or another.
- boeingUH60 3y agoOh, then I stand corrected :)
- dymk 3y agoThe company was an unmitigated shitshow for a long time, and didn't perform its basic duties as a shipper. I've had LTL shipments lost for weeks at a time with nothing but a shrug and an "It'll (maybe) get there when it gets there". So it doesn't surprise me at all that they couldn't reach an agreement with their labor.
- sidewndr46 3y agoSounds like Schroedinger's shipment. If we don't know where it is, can it really be lost?
- lo_zamoyski 3y agoIsn't that the definition of something being lost, i.e., not knowing where it is?
- i_am_jl 3y agoCan you lose something if you never knew where it was to begin with?
- horsawlarway 3y agoNo. Not really. Where it is may be where it's supposed to be. Not knowing that doesn't make it lost. Ex: If I send a ship to sea before we had radio/telegraph, I may not know where it is at any given point, but it's not lost and I don't need to go find it. It's lost when it misses a check-in, and what constitutes a check-in is really company/org dependent.
- dkulchenko 3y agoThis mirrors my experience. Not once did I have a Yellow LTL shipment arrive on time, and typical delays ranged from 2 days to 2 weeks or longer. Shipments would get lost in a terminal, down to staff insisting it never arrived on the trailer, and then spontaneously reappear after a loss claim was filed. I would've loved to avoid them but vendors would often choose them due to their cost.
- Aurornis 3y agoYellow is a publicly traded company. Their stock is up on the news of the shutdown, which should give you an idea of how broken the situation was: https://www.google.com/finance/quote/YELL:NASDAQ https://www.google.com/finance/quote/YELL:NASDAQ US Taxpayers own 30% of the outstanding stock in exchange for a $700 million pandemic loan in 2020.
- EMM_386 3y ago"The closing is bad news not only for its employees and its customers, who generally used Yellow because it offered some of the cheapest rates in the trucking sector." Perhaps they shouldn't have offered the cheapest rates in the trucking sector while failing their obligations. Taxpayers ended up holding 30% of this company's stock and they still couldn't figure out how to become profitable after a $700 million infusion? This race-to-the-bottom stuff is not the answer. The answer is to charge what it costs you to deliver plus a profit. If you can't compete directly on price make up for it in service and reputation. People will blame unions because the company had to fund pensions and health insurance. It likely will come back as a private company with lower pay, worse benefits, and maybe if people are lucky a 401k.
- ajsnigrutin 3y agoThis works in a vacuum, but in many industries you get undercharging and living off investments, be it Uber or a gajillion startups, many of them mentioned here on HN.
- rob74 3y agoOk, in the case of Uber it's undercharging and living off investments (from investors who hopefully know what they're doing), in the case of this 99-year old company it's undercharging and living off federal bailout packages (paid by the taxpayer). I would say that's a bit different...
- davidw 3y agoFair enough, but...trucking? Isn't that kind of an established market?
- candiodari 3y agoThat's why we have "financial innovation". Which in this case boiled down to using investment money to buy up competitors, with the benefit of scale (and monopoly pricing) to come later. And then the benefit doesn't come ...
- 3y ago
- swarnie 3y agoYellow up 103% currently.....
- nonethewiser 3y agoThe union was planning a strike but canceled and gave some leeway on late pension payments due to Yellow's financial hardships. I often hear that it's good for companies to fail if they can't meet a minimum threshold of compensation. If that's the case the unions should have gone on strike.
- jl6 3y ago> Higher prices will hit Yellow customers, Jindel said. > “The reason they were using Yellow was because they were cheap,” he said. “They’re finding out that price was below the cost of supporting a good operation.” What happened that made them decide to shut the company down instead of raising their prices?
- nickff 3y agoI would presume it was because the union contract did not allow them to lay-off or furlough any workers, and they'd lose less money by being 'cheap' than by being more expensive and having workers sitting around. Put another way, their labor was probably their largest cost center, and a fixed cost, which means that their marginal cost to provide the service was actually low, but the company was unprofitable due to their fixed costs.
- jl6 3y agoBut even if their labor cost was fixed and high, why not attempt to recover that cost by raising prices?
- nickff 3y agoThe market for truckload and LTL shipping is currently very thin, and they'd likely lose more revenue than they'd make.
- jl6 3y agoMaybe, but at least a couple of quarters of demonstrable uncompetitiveness would be solid evidence to take to the negotiating table with the unions to get the labor cost down (if that really was the primary cost problem).
- nickff 3y agoLabor unions which have members at multiple companies in one sector are often reluctant to make concessions at any one company, lest it erode their bargaining positions at the others.
- annacappa 3y agoFunny how this is being framed by the article writer in terms in unionization. Are they suggesting that the workers should just give up their pensions and wages so that a clearly broken and mismanaged company should just lurch onwards? Why is it when a company succeeds everyone praises the management and heaps huge bonuses on the C suite but when they fail they try and blame the workers.
- marcelluspye 3y agoPrivatize the gains, socialize the losses. Even in the news.
- HenryBemis 3y ago"Socializing the losses". It will happen anyway. Perhaps not in the USA, but in Europe, the 30,000 unemployed would get an unemployment benefit for X amount of months, their formetly-private-provided healthcare wouldn't be paid for (thus covered by the state), and so on. So, doing the math.. does it make sense to 'inject $€ X million to keep the company afloat, get the 30,000 and their families fed, the money would come back to the state via taxes, in the hope that the company will go back to the green? If one (not me) can crunch the numbers, it could (or not?) point to the direction that it was money well spent - and net-net it wasn't "$€ X million" wasted but a fraction of that(?)
- deleted 3y ago[deleted]
- GoofballJones 3y agoThough the article did hit the nail on the head with this statement from the Teamster's head: “Today’s news is unfortunate but not surprising. Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government." The workers conceded quite a bit over the years, but despite that and the bailout, the management of Yellow still couldn't make it work.
- 3y ago
- DoubleDerper 3y agoLet's take a second to recognize the ironic branding of Yellow corporation. It's orange. Nothing yellow about it. Some person or group of people made that decision.
- gottorf 3y agoI could see myself calling that color a dark yellow. Doesn't look red enough for it to really be orange; but of course color is in the eye of the beholder. ;-)
- SoftTalker 3y agoAt some point in the past, Yellow Freight acquired or merged with Roadway Express, which was orange.
- fargle 3y agowhy are yellow trucks orange: https://www.myyellow.com/us/en/about-us/extra-mile-blog/why-are-yellow-trucks-orange https://www.myyellow.com/us/en/about-us/extra-mile-blog/why-...
- strictnein 3y ago"Swamp Holly Orange" is a great name for a color.
- mikeyouse 3y agoRelated -- just abject corruption: https://www.nytimes.com/2022/04/27/us/politics/trump-pandemic-loan-yrc.html https://www.nytimes.com/2022/04/27/us/politics/trump-pandemi... > The $2.2 trillion pandemic relief package that Congress passed in 2020 included a $17 billion pot of money set up by Congress and controlled by the Treasury Department to assist companies that were considered critical to national security. In July 2020, the Treasury Department announced it was giving a $700 million loan to the trucking company YRC Worldwide, which has since changed its name to Yellow. ... > The loan raised immediate questions from watchdog groups because of the company’s close ties to the Trump administration and because it had faced years of financial and legal turmoil. The firm had lost more than $100 million in 2019 and was being sued by the Justice Department over claims that it had defrauded the federal government for a seven-year period. It recently agreed to pay $6.85 million to resolve allegations “that they knowingly presented false claims to the U.S. Department of Defense by systematically overcharging for freight carrier services and making false statements to hide their misconduct.” > To qualify for a national security loan, a company needed certification by the Defense Department. > According to the report, defense officials had recommended against certification because of the accusations that the company had overcharged the government. They also noted that the work that the company had been doing for the federal government — which included shipping meal kits, protective equipment and other supplies to military bases — could be replaced by other trucking firms. .. > Yellow had many connections to the Trump administration. The company had financial backing from Apollo Global Management, a private equity firm with close ties to administration officials. Mr. Trump had selected the company’s chief executive, Darren D. Hawkins, to serve on a coronavirus economic task force. And he had nominated the company’s former chief executive, William D. Zollars, to the U.S. Postal Service’s board of governors. .. > A law firm representing Yellow sent a letter to Mr. Clyburn before the release of the report defending the company’s actions and describing many of the allegations as “baseless.” The company stood by the trucking services data that it provided when applying for the loan and said that Yellow has paid more than $25 million in interest on the loan. The letter also noted that company had settled its dispute with the government last month. > The letter, which was written by Marc E. Kasowitz, who was previously Mr. Trump’s personal lawyer, was provided to The New York Times by Heather Nauert, an adviser to Yellow who was previously a spokeswoman for Mike Pompeo, Mr. Trump’s secretary of state.
- PaywallBuster 3y agobig corporation = big regulation + big unions (add more items) = no flexibility Looks like all big enterprises have no option but to end up in bankruptcy court, given that they're too big to make drastic changes, have to deal with strong arming unions and only when it's too late things have to be decided in court (same for other industries like Auto)
- pierat 3y agoAnd this is a perfect time to talk about worker owned corporations. The employees should be able to buy the company. Not only that, but they should also be given first rights to do that. And if government was serious about keeping businesses in operation through bankruptices, they would also issue a loan to the employees to complete this. That would keep the company running, under employee control, and save a whole pile of jobs.
- boeingUH60 3y agoThe problem with Yellow is that it was a terribly-run company on its way to doom…some companies should just be let to die and should have never received a government loan to postpone the death. Let’s assume employees take over operations, whom among them will step up to run the company? How are you sure they’ll turn it around successfully? Running a company is hard enough with the typical model. It’s much harder if you try to run it as a democracy where clueless people get to vote on management decisions..
- antisthenes 3y agoWorker owned corporations don't work for the same reason communism doesn't work. "Bad" actors (in this case people who are bad with money) will simply sell their share of the company for short term household needs, which will begin the process of consolidating company ownership in the hands of more frugal/savvy owners. Then in the end you simply end up with the same ownership distribution as it exists today.
- washedup 3y agoMore socialized loses for Americans. Socialism for corporations continues to run strong.
- digdugdirk 3y agoWhat would be the legality of using stock shorts to fund a labour strike? I'd imagine having all workers walk out would be pretty effective in tanking the stock price, and letting those workers know that they'd be fully funded for any time on the picket line would be huge for solidarity. One could imagine that timing a strike around predetermined stock based compensation executive payouts might provide a bit more incentive to get to the negotiation table.
- sokka_h2otribe 3y agoYou are describing insider trading, I'm pretty sure. Either the strike is announced before you make the shorts, and public knowledge, or it's not, and it's information you only know by connection to insider information. -note, am not remotely a lawyer
- jimt1234 3y agoMy dad worked for Yellow on the loading docks from the day he returned from Vietnam to the late-90s. He earned a good wage for a guy who only graduated high school; provided a solid middle-class life for his family. And it was all because of the union. The Teamsters was like religion to my dad. I always respected the union for what it provided for my dad and his family. I can't stress that enough. However, I can't forget the stories he would tell about new guys who got beat up because they did too much work (made the veteran guys look bad) or didn't follow the unwritten rules (drivers used to carry cash to bribe the dock workers to unload their trucks. without the bribes your truck would just sit there, untouched. however, sometimes a rookie would unload a truck that hadn't made a payment, and that earned him a beatdown). And the stories about pallets that would go missing and end up in my house. One year, for Christmas, everyone got brand new color TVs (a big deal back then); they were all the exact same make/model. My dad must've given away a dozen of them to friends/family. This happened all the time. So yeah, while I respect the union and what it provided, I have a difficult time overlooking the corruption and inefficiencies.
- sosodev 3y agoPlenty of companies have corrupt, inefficient groups of employees without unions though.
- gotoeleven 3y agoBut only the union ones can't be fired.
- annacappa 3y ago100%, lots of people steal from their employers and lots of corporations are super corrupt. In fact there are lots of corrupt cops, plenty of openly corrupt politicians (who take money from corporations and interest group to support their causes - against the interests of their constituents). Why is it that "unions are corrupt" is basically the only thing people say about unions in the USA. That's some next level propaganda.
- 3y ago
- antisthenes 3y agoJust another reminder that capital's eventual state is consolidation in the hands of monopolies. When companies of this size fail, the consolidation happens at breakneck pace that the legal system of the US obviously cannot keep up with, and we all end up losing, because of reduced competition and worse service as a result.