What Yellow’s Collapse Means for LTL Shippers

Just shy of its 100-year anniversary, Yellow Corp. has officially closed up shop. The LTL shipping giant suspended all operations and abruptly filed for bankruptcy last week following widespread reports detailing the company’s financial turmoil.

Once the third-largest LTL shipper in the nation, Yellow’s closure leaves 30,000 of its former employees jobless and many of its former shipping partners scrambling for LTL alternatives. Today we’ll take a closer look at what happened to Yellow, plus how the industry is poised to respond as businesses rethink their LTL shipping strategies:

Why is Yellow Shutting Down?

Put simply, the company’s debt became unmanageable.

Yellow has faced significant financial struggles for more than a decade, punctuated by the mass supply chain confusion sparked by 2020’s COVID-19 pandemic. As a result, the company accepted $700 million in loans from the federal government as part of the COVID-19 rescue package in exchange for granting the Treasury Department ownership of 30% of its shares.

Despite the relief loan, Yellow’s debt continued to drain the company’s resources in the coming years, resulting in missed payments to lenders and rising tensions with the Teamsters Union. Notable events during this period include:

• A lawsuit and nearly $7 million settlement with the Department of Defense, which accused Yellow of fraudulent billing.
• A months-long battle with Teamsters about proposed changes in operations that Yellow claimed were essential to the company’s ability to refinance its loan debt coming due in the fall of 2024.
• Missed payments to Central States Funds which manages Yellow’s health, welfare, and pension benefits for employees.
• A strike notice from the Teamsters as a result of the missed benefit payments to Central States Funds.
• Yellow’s attempts to sue the Teamsters for $137 million over alleged breach of contract.

Months of finger-pointing and heated exchanges between Yellow and the Teamsters combined with $1.3 billion in loan debt effectively weakened public confidence in Yellow’s stability, leading to a huge drop in freight volumes as customers and brokers pulled freight from Yellow’s network fearing the company would be forced to close.

What Will the Market Look Like Without Yellow?

As Yellow accounted for a sizable portion of the country’s LTL shipping, its bankruptcy is likewise expected to send aftershocks across the shipping industry for several months. This likely encompasses the following changes to every business’ day-to-day logistics management:

1. Increased pressure on a strained industry. Yellow’s former clientele will be forced to seek out other LTL carriers to move their freight. This sudden load increase will put additional pressure on carriers who may struggle to absorb Yellow’s volume.
2. Inflated LTL rates. As the need for more LTL carriers rises, you can expect to see the prices for LTL shipping also rise in response as demand outpaces the current supply.
3. Higher costs for everyday consumer goods. Higher shipping costs are ultimately paid for by the consumer. With Yellow out of the picture, businesses will pivot to alternative carriers with higher prices, which will result in the price of consumer goods rising.
4. Market fluctuations and instability. Yellow’s bankruptcy creates a certain unease within the marketplace — experts expect more volatile ups and downs in LTL rates to become the norm.

What Alternative LTL Options are Available?

Now time for some good news: there are plenty of alternative LTL options for Yellow’s previous customers to choose from — and the smart ones will be offering competitive rates to encourage new relationships with Yellow’s former partners.

At First Call, we offer LTL shipping services with the added benefits of fully implemented tracking tech, warehousing management systems and a thoroughly established network of carriers throughout the country to streamline our partners’ supply chain operations. We also include premium service solutions for high-priority items that require special handling.

Interested in partnering with First Call Logistics to simplify your LTL shipping? Chat with a freight specialist today!