Yellow Corp, one of the largest trucking companies in the U.S., has recently faced a collapse that has sent shockwaves through the industry. The company’s downfall has been marked by bankruptcy, union clashes, and a series of financial struggles that have left a significant impact on the freight market.
This article explores the factors that led to Yellow’s collapse and the potential repercussions on the U.S. trucking industry and to Amazon sellers.
Factors Leading to Yellow’s Collapse
Debt and Financial Struggles: Yellow’s downfall began with several costly acquisitions in the early 2000s. The company failed to integrate these acquisitions fully, leading to hundreds of millions of dollars in debt. The financial crisis of 2008 hit the trucking industry hard, and Yellow’s existing debt burden exacerbated the situation.
Union Clashes: Yellow’s relationship with its union, the Teamsters, has been fraught with tension. The Teamsters threatened to strike over a missed employee benefits payment, and the failure of negotiations with 22,000 Teamsters members contributed to the company’s collapse.
Government Loan Controversy: In 2020, Yellow received a $700 million loan from the U.S. Department of Treasury to bail out the company during the pandemic. A recent congressional report found that Yellow did not meet the national security criteria for the loan, leading to questions about the Trump administration’s recommendation. The U.S. Treasury is now unlikely to see much of the money returned.
Market Dynamics: While the U.S. freight market’s decline contributed to Yellow’s problems, analysts believe that the company’s issues were more related to preexisting problems rather than industry dynamics.
Freight Business Up for Grabs: Yellow’s collapse leaves billions of dollars in business up for grabs. Companies like FedEx Corp. and Old Dominion Freight Line Inc. are competing to absorb the freight, potentially allowing carriers to raise prices.
Impact on Employment: Yellow’s collapse jeopardizes a labor force of 30,000 employees, including 22,000 union workers. Finding new union trucking jobs with similar pension and healthcare benefits may be challenging for these workers.
Potential Increase in Freight Rates: Yellow was a provider of low-cost freight transportation, and its bankruptcy may lead to an increase in freight rates. These increased rates may be passed down to consumers, affecting the overall cost of goods.
Effects on Competitors: The shutdown of Yellow’s operations creates opportunities for competitors like Old Dominion and XPO Inc. to pick up some of Yellow’s shipments. However, the sudden availability of Yellow’s cargo terminals and the potential bankruptcy auction could also impact the real estate market within the industry.
Conclusion and Effect on Amazon FBA and door-to-door deliveries
The collapse of Yellow is a significant event in the U.S. trucking industry, marked by a complex interplay of financial struggles, union tensions, and government involvement. The repercussions of this collapse are likely to be felt across the industry, affecting employment, freight rates, and market dynamics. As the situation continues to unfold, the full impact of Yellow’s downfall on the U.S. trucking industry remains to be seen.
We anticipate a significant increase in prices of trucking within the United States until the end of the year at least. We area already noticing a 50% increase in trucking costs within the country, and this could increase until the trucking industry stabilizes again. To mitigate these risks, it is best to plan for less frequent shipments at higher volume when possible (pallets instead of cartons). There is a strong possibility UPS rates with also increase.