A letter obtained by FreightWaves shows less-than-truckload carrier Yellow Corp. is searching for to defer health and welfare in addition to pension contribution payments for the following two months.
A Friday letter penned by Yellow Chief Financial Officer Dan Olivier is asking for a deferral for plan contributions for the months of July and August. The corporate said it might repay the delayed contributions with interest once it’s capable of refinance its outstanding debt.
“As a consequence of the Company’s inability to proceed with One Yellow, combined with the difficult business conditions confronting the complete LTL industry, the Company has been operating at a loss and rapidly exhausting its liquidity,” the letter read.
A spokesperson from Yellow told FreightWaves that the corporate has taken other actions to preserve liquidity and that the deferral it’s searching for wouldn’t interrupt worker advantages.
“Our request to Central States should have no effect on the pension advantages of our union employees. We’re asking the pension funds that there be no interruption in payments or coverage for our employees. Our beneficiaries should see no impact to the contributions employees receive from the Pension Fund or the Health and Welfare Fund,” a press release read.
In an intraquarter update issued on June 9, Yellow (NASDAQ: YELL) reported that tonnage declined 16% yr over yr (y/y) in April and May. Over the past two years the carrier has seen its tonnage fall by roughly one-third, partly as a consequence of yield improvement initiatives but largely as a consequence of a broader network overhaul called One Yellow.
As a part of the plan, the corporate is within the technique of consolidating its 4 LTL operating firms and shutting terminals deemed redundant. Nonetheless, a second phase of the operational changes has been rejected by the International Brotherhood of Teamsters, which says the changes would violate the present collective-bargaining agreement.
The 2 parties had agreed to reopen their five-year labor deal early to hash out requests to change work rules and increase using purchased transportation while at the identical time establishing latest worker pay and advantages rates. Nonetheless, talks appear to have broken down because the union is adamant it’s going to not entertain one other bailout of the corporate on the expense of its members.
Teamsters officials have said wages, advantages and work rules concessions have cost its members billions prior to now.
Yellow repaid $66 million of contribution deferral agreement notes in early 2023. The sum represented deferred contributions and interest payments to multiemployer pension funds dating back greater than a decade.
Just prior to receiving a controversial $700 million COVID-relief loan in the summertime of 2020, Yellow received a grace period for contributions to health and welfare and pension funds. The extension was intended to present the carrier time to compensate for delinquent payments related to a pointy falloff in volumes tied to pandemic-related lockdowns.
On the time, the Central States Health Fund, generally known as TeamCare, estimated a three-month delinquency would total roughly $75 million. With no concrete repayment terms established, this system slid into suspension status with eight weeks of “layoff coverage” being enacted to cover member medical claims. As layoff coverage was set to run out, the corporate received the relief loan. A primary tranche of $300 million was used to repay contractual obligations, which included medical health insurance and pension commitments amongst other items like lease payments for real estate and equipment and interest on debt.
Yellow recently said that its bankers will only log off on a debt refinancing and a proposal for worker pay increases if the second phase of the One Yellow overhaul is approved by the union briefly order. The corporate has advised it’s going to “be out of cash by August” if the plan isn’t approved.
Yellow reported total liquidity of $168 million at the tip of the primary quarter, which was down $109 million y/y. Nonetheless, the change included a $98 million reduction in debt. Money flow from operations was $13 million within the period.
The corporate continues to record net losses and booked a 100.8% operating ratio (operating expenses expressed as a percentage of revenue) within the quarter, meaning it incurred barely greater than a dollar in operating expenses to generate each dollar of revenue.
“The Company has been experiencing a major deterioration in business conditions, which began in Q3 of 2022 and has continued throughout 2023,” the letter said. “Unfortunately, Yellow’s ability to answer those conditions has been materially impaired by the Teamsters’ continued resistance to implementation of the Company’s One Yellow network modernization.”
The Yellow spokesperson said the corporate remains to be hopeful it’s going to have the option to have interaction with the union on the bargaining table.
“We’re doing all the things possible to fulfill with the IBT to debate the long run of One Yellow and the importance of our 22,000 union jobs. We’ve got been clear with the IBT that meeting to debate Yellow’s common sense, company-wide modernization effort is important to preserving jobs and strengthening the long run of Yellow. We stand ready to fulfill anytime and anyplace.”
The Teamsters see it in another way, in line with a notice to members last week.
“Yellow has been unable to effectively manage itself for a very long time,” Sean O’Brien, Teamsters general president, told members. “It just isn’t left for the Teamsters to save lots of this company; now we have given enough. What happens next is out of our control.”
Shares of YELL were off 8.7% at 10:17 a.m. on Wednesday in comparison with the S&P 500, which was down 0.6%. The stock was down 16.7% on Tuesday.
Rejection rates, freight volumes inflect barely in June
Way forward for Supply Chain
JUNE 21-22, 2023 • CLEVELAND, OH • IN-PERSON EVENT
The best minds within the transportation, logistics and provide chain industries will share insights, predict future trends and showcase emerging technology the FreightWaves way–with engaging discussions, rapid-fire demos, interactive sponsor kiosks and more.