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I 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 bei
by nickff 3y ago
I 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.
- jl6 3y agoYeah, I guess, it just seems crazy that all 30,000 people losing their jobs could be a tolerable outcome for the employees.
- nickff 3y agoI don't think it is a tolerable outcome for the employees; perhaps they were hoping for another bailout? We should also remember that unions suffer the principal agent problem just as badly (and perhaps worse) than corporations and governments.
- zdragnar 3y agoThey shut down because they lost customers after the union threatened to strike. The hit to their stock price, even after the union withdrew the threat, meant they couldn't get more funds to continue operations. Perhaps they could have raised prices earlier and gone out of business faster, but it's pretty clear that the writing was on the wall for Yellow for quite awhile.
- dehrmann 3y agoI don't know their specific numbers, so this might not be true in their case, but raising prices will drive away customers. Depending on where you're at on the curve, this can reduce your revenue because the adding higher price didn't make up for the lower volume.
- dehrmann 3y agoThey also claimed that the union wouldn't meet them at the bargaining table. I guess if you're contractually obligated to burn through money, you do that until you're insolvent and go to bankruptcy court to sort it out.