What Yellow’s trucker’s billion dollar worth means to the economy

A group of investors hoping to save the yellow-capped mining company (formerly YRC) was make a mistake on Thursday after the bankrupt company’s executives rejected a billion-dollar offer that would have provided most of the remaining assets. But the group of businessmen led by the owner of the truck Sarah Riggs Amico vowed to continue, hoping that the result will be allowed by the court and the Ministry of Finance to win.

One of the important aspects of Amico’s proposal is to reschedule the $700 million CARES Act loan repayment, which helped to save many trucks during the pandemic. The US Department of Treasury says their hands are tied.

“The loan in question was made during the previous Administration, and the Treasury is one of the many debtors participating in the bankruptcy, we will continue to work to reassure taxpayers, and the affected workers and their families are well taken care of.” Ashley Schapitl, the Treasury Secretary, told CNBC.

Other Treasury officials say the loan cannot be renewed because the yellows are in bankruptcy and the new administration of Congress is needed to issue a new loan since the CARES Act has expired. The yellow rescuers are disputing the legal opinion of the Treasury.

A second group of eight senators, including Sen. Josh Hawley, R-Mo, and Elizabeth Warren, D-Ma, have publicly supported efforts to save Yellow and its 30,000 jobs, pressing the Treasury to reschedule the loan.

What brought the brand cargo company to the team

Yellow, formerly YRC Worldwide, was a staple on America’s highways for generations until it suddenly shut down in July. Six months and a Chapter 11 filing later, it’s clear there are plenty of yellow spots. Some see the yellow of a fading sunset, while others see the bright yellow of a new beginning. But, most organizations – such as the government and creditors – are caught in the middle.

When Yellow Yellow was discontinued, 12,000 trucks and 35,000 trailers were left unemployed, which could form the basis for a new business. Yellow finds its roots in an Oklahoma taxi service of the same name that began in the 1920s.

For generations, the yellow color grew in a variety of cargoes that touched almost every corner of the American economy, becoming one of the top 10 cargoes in the country, with more than $6 billion by 2022.

But a series of business events, from mismanagement to inefficiency, took the company to the brink. When Covid-19 shut down the nation’s supply chain, Yellow received a $700 million loan through the CARES Act. However, it was not enough.

Experts say that many of the dire reports of snarled supply chains and high freight rates in the absence of Yellow have not come true.

“There are many effects on individuals, but on the industrial and industrial sector, I don’t see anything significant,” said Michael Belzer, a professor of economics at Wayne State University. Before entering the academy, Belzer spent 12 years as an OTR driver.

“In a technical situation, one company goes down, other companies get up and take their load,” Belzer said.

How it has disrupted the lives of motorists

Businesses hoping to revive Yellow say the market hasn’t recovered and the well-paying union jobs occupied by Yellow drivers Yellow has no economic value.

Nathan Skobodas worked for five years as an operations manager at the YRC terminal in Grand Rapids and said the first employees were difficult.

“Some of the workers I’ve been in contact with haven’t received equal status and have had their wages reduced,” Skobodas said.

Many others have had their lives disrupted.

Kenneth Cantley, of Rosemont, Minnesota, spent nine years driving for Yellow until he was injured on the job, so he had to quit and start collecting workers’ compensation. before the company closed its doors.

“It really messed things up for a while,” Cantley said.

His employer’s paychecks stopped coming, and for eight weeks, he had no income until he officially filed for bankruptcy, at which time payments began again.

“I was struggling without a weekly income,” Cantley said.

Yellow Trucking offered “competitive” pay and a stable, safe job for new drivers, said Bradley Maroon, assistant director of Hamrick Truck Driving School in Ohio. He said the union’s work in Yellow offered protection and new publicity to motorists.

“And Yellow Yellow is the only trucking company I know of where the truckers don’t have to sleep in their trucks; they always put them in a hotel room, the It’s a big deal,” Maroon said.

Night trips, however, were a rarity for Yellow drivers, where truckers who didn’t want to work for days at a time sought their jobs.

The importance of the small-than-truckload market

Yellow Trucking occupied a special segment of the trucking market known as less than truckload (LTL). The margins are small, and LTL trucks touch every aspect of people’s lives, whether they know it or not.

“The variety of customers in LTL is what makes it different; with LTL, you deliver to homes, hospitals, and barbershops; you don’t have the same sales every day; every day it’s a completely different day. than any other,” says Nick Burlingame, director of education and certified CDL instructor for Sage Schools in New York.

While LTL is different and weaves in one day, which makes the driver happy that he doesn’t want to go for several days, OTR includes days on the highway. Burlingame said that LTL needs a special group of drivers who are good at loading their large vehicles into visible areas such as city streets or small parking lots.

High shipping costs in the absence of Yellow has not been realized, said Ken Vieth, president of ACT Research, which monitors the freight market. Vieth said LTL prices have increased since Yellow closed, jumping 4.4 percent month-over-month in August and another .09 percent in September, but Vieth said the increase was mostly related to the 49-cent gallon jump in diesel prices from July to August. followed by an increase of 19 cents from August to September. The average prices of petrol and diesel have retreated since October.

The bankruptcy also came in the midst of a drop in cargo that forced the business model for many players in the truck fleet and caused several cycles of layoffs and failures.

“No one is missing Yellow,” Vieth said. “They went out of business at the bottom of the shipping cycle when there was a lot of business momentum.”

In fact, Samasama’s exit from the market actually helped the LTL sector.

“With Yellow’s decline, the LTL portion of the market went out of whack at the end of the week,” Vieth said. With the weakest operators and about 10% of the LTL market’s capacity closed, LTL carriers (plus a segment) saw their fourth quarter two best in the third quarter.

According to data provided by Tank Transport to CNBC in November, the rise in oil prices and the drop in freight rates caused 31,278 trucking companies to close or replace their services with larger vessels. .

Freightwaves reports that the biggest beneficiary of Yellow’s shipments is Georgia-based LTL carrier Saia, which saw an 11 percent increase in business in the third quarter.

Burlingame admits that the market could use Yellow’s skin. And with a shortage of drivers hurting the industry, Burlingame said even when drivers move to non-union jobs, there are often strong protections.

“In today’s market with a shortage of drivers almost all of these companies are treating these drivers well with good wages and health benefits, they have to do it if they want to keep it,” he said. that of Burlingame.

Sarah Riggs Amico does not agree with that assessment, which is why she and a group of businessmen are trying the last attempt to resurrect Yellow, but even that is not correct. If Amico’s offer is accepted, the new company will be called Next Century Logistics. Amico is currently the President of Jack Cooper Trucking, which specializes in trucking.

The color yellow may be cool, but the business is not, according to Amico.

“The business was very scalable and still is,” Amico said. Amico grew up in a trucking family and rescued struggling trucking companies. Amico said for him, the issue comes down to work. But the Office of the Ministry of Finance said that Amico’s offer was only half of the lost jobs. Many yellow lines were also sold at auction while the bankruptcy was proceeding.

“You can’t have an LTL ship without a network of terminals,” Vieth said.

However, Amico, who ran unsuccessfully for the Georgia Senate seat in 2020, worked with the Teamsters, who attacked the Yellow Bank and government loans, to approve a deal. .

“Honestly, the No. 1 priority is work,” Amico said.

The Teamsters did not respond to a request for comment.

For Amico and its investors to be successful in their billion-dollar rescue package, they must navigate a web of auctions, regulations, and special litigation and government approval, which remains far from certain. . There are still outstanding questions from Yellow’s creditors that hinder the move forward. The terms of the deal mean that the private investor and asset manager will acquire most of Yellow’s assets and leave the Treasury, people workers, and other undocumented claimants.

As more Yellow assets are available at auction, however, any renewed LTL business will be small. For Amico, however, some saved work is better than none.