The billion-dollar battle over bankrupt freight company Yellow's future has implications for truckers and the economy.

• On Thursday, investors presented a billion-dollar bid to executives of the bankrupt trucking company Yellow, but the offer was rejected, which could have revived a significant portion of the company's network.
• The shutdown of Yellow, a company that has been in operation since the 1920s, left 12,000 trucks, 35,000 trailers, and 30,000 workers idle, providing a potential base for a new business.
• A group of senators from both parties, including Sen. Josh Hawley and Elizabeth Warren, are advocating for a revised investor rescue plan and urging the Treasury Department to modify a $700 million CARES Act loan repayment plan.

A group of investors, led by trucking executive Sarah Riggs Amico, were dealt a setback on Thursday when executives from bankrupt trucking giant Yellow (formerly YRC) turned down a billion-dollar bid that would have salvaged much of what was left. However, the group vowed to continue, hoping that in the end the courts and the Treasury Department will allow them to prevail.

The request to restructure a $700 million CARES Act loan repayment, which helped keep Amico afloat during the pandemic, has been a sticking point. However, the U.S. Department of Treasury claims their hands are tied.

During the previous administration, a loan was issued, and Treasury is among the creditors involved in the bankruptcy proceedings. Ashley Schapitl, Treasury Spokesperson, stated on CNBC that they will continue to work to ensure that taxpayers, impacted workers, and their families are treated fairly.

Treasury officials have stated that the loan for Yellow cannot be modified because the company is in bankruptcy and new Congressional authority is required to issue a new loan since the CARES Act authority has expired. However, Yellow's potential rescuers are challenging Treasury's legal viewpoint.

A group of eight senators, comprising of Sen. Josh Hawley and Elizabeth Warren, have publicly advocated for saving Yellow and its 30,000 jobs by urging Treasury to restructure the loan.

What brought the iconic freight company to the brink

For decades, Yellow, previously known as YRC Worldwide, was a prominent figure on American highways. However, its abrupt closure in July left many questioning its future. Six months later, with a Chapter 11 filing, it is evident that Yellow's situation is complex. Some view its yellow as a symbol of a fading sunset, while others see it as a bright yellow representing a new beginning. Nonetheless, various entities, including the government and creditors, are caught in the middle of this Yellow conundrum.

Yellow's shutdown resulted in 12,000 trucks and 35,000 trailers being left idle, providing a potential basis for a new enterprise. The company's origins can be traced back to a taxi service in Oklahoma called Yellow that was established in the 1920s.

Over the years, Yellow has expanded into a major freight company that has a significant impact on the American economy, ranking among the top 10 freight carriers in the country with a revenue of over $6 billion in 2022.

A series of corporate events, including mismanagement and malfeasance, pushed the company to the brink. When the nation's supply chain was halted due to Covid-19, Yellow received a $700 million lifeline loan through the CARES Act. Despite this, the company still struggled.

Despite the predictions of experts, the dire consequences of Yellow's absence, such as snarled supply chains and higher freight prices, have not yet been realized.

Michael Belzer, a professor of economics at Wayne State University and a former OTR driver, stated that while there are implications for individuals, he doesn't see anything significant for the industry or industry segment.

Belzer stated that in a macro-sense, when one company declines, other companies emerge and assume their freight.

How truckers’ lives have been disrupted

The economy has been negatively impacted by the departure of well-paying union jobs held by Yellow truckers, according to investors seeking to revive the company.

Nathan Skobodas, who worked as an operations manager at a YRC terminal in Grand Rapids for five years, claims that his former coworkers have faced challenges.

Skobodas stated that some coworkers he has remained in contact with have not been able to find comparable employment and have accepted lower salaries.

Many others have had their lives disrupted.

Kenneth Cantley, a resident of Rosemont, Minnesota, worked as a driver for Yellow for nine years until he sustained an injury on the job. As a result, he was forced to resign and began receiving workers' compensation benefits. Unfortunately, the company closed shortly thereafter.

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

For eight weeks, he had no income after his worker's compensation payments stopped coming until the official bankruptcy was filed, at which point the payments resumed.

“I struggled without any weekly income,” Cantley said.

Bradley Maroon, assistant director of Hamrick Truck Driving School in Ohio, stated that Yellow Trucking provided "competitive" pay and a secure, safe job for new truckers. He added that the union jobs at Yellow offered new truckers protection and advocacy.

Maroon stated that Yellow was the only trucking company he knew of that never made their truckers sleep in their trucks, instead always providing them with hotel rooms, which is a significant gesture.

Yellow drivers' overnight trips were rare, making their jobs highly sought after by truckers who preferred not to be away for extended periods.

The importance of the less-than-truckload market

LTL trucking is a specific area of the trucking industry that Yellow Trucking specializes in. Although the profits are minimal, LTL trucking has a significant impact on people's daily lives.

LTL's customer diversity sets it apart; it allows for delivery to homes, hospitals, and barber shops; customers are not the same every day, making each day unique and different from the last, according to Nick Burlingame, school director and certified CDL instructor for Sage Schools in New York.

LTL offers variety and same-day hauls, making it appealing for drivers who do not want to spend days on the road. However, OTR involves spending days on the road. Burlingame stated that LTL requires a specific set of drivers who are comfortable with squeezing their big rigs into tight spaces like urban alleyways or small parking lots.

Since Yellow's closure, high shipping costs have not yet emerged, according to Ken Vieth, president of ACT Research, which tracks the freight market. LTL rates did increase in August and September, jumping 4.4 percent and 0.09 percent respectively, but Vieth believes the increase was mainly due to a 49-cent gallon increase in diesel prices from July to August, followed by a 19-cent rise from August to September. The prices of regular gasoline and diesel have since decreased since October.

The freight recession has led to multiple rounds of layoffs and failures in the trucking space, resulting in bankruptcy for some players.

"Yellow went out of business due to industry overcapacity during a freight cycle," Vieth stated.

The departure of Yellow from the market positively impacted the LTL sector.

The LTL market tightened significantly after Yellow's closure, with the publicly traded carriers achieving their second-best ever profitability quarter in the third quarter.

In November, data from Tank Transport to CNBC revealed that the combination of increasing fuel costs and declining freight rates led to the closure or shift of services to larger fleets by 31,278 trucking companies.

In the third quarter, Georgia-based LTL carrier Saia experienced a 11 percent increase in business due to Yellow's freight.

Burlingame agrees that the market has absorbed Yellow's decline, and despite a driver shortage, drivers moving into non-union jobs still typically have strong protections.

Burlingame states that in the current market with the driver shortage, companies are treating their drivers well with good pay and health benefits in order to retain them.

Sarah Riggs Amico disagrees with the assessment that Yellow is beyond revival, so she and a group of investors are making a last-ditch effort to resurrect the company. If Amico's bid is accepted, the new company will be called Next Century Logistics. Amico is currently the President of Jack Cooper Trucking, which specializes in hauling automobiles.

According to Amico, the Yellow brand may be tarnished, but the business remains unharmed.

Amico believes that the business is fixable and has experience rescuing struggling trucking firms. However, a Treasury official stated that Amico's proposal would only restore half of the lost jobs. Many former Yellow terminals have been sold in auctions as the bankruptcy process continues.

A carrier without terminals cannot exist in the LTL industry, according to Vieth.

Despite failing to win a Georgia Senate seat in 2020, Amico has been collaborating with the Teamsters to negotiate a deal addressing the bankruptcy and government loan problems.

According to Amico, the most crucial aspect is employment.

The Teamsters did not respond to a request for comment.

To succeed with their billion-dollar rescue package, Amico and her investors must overcome a complex web of auctions, regulations, and court and government approval, which remains uncertain. Outstanding questions from Yellow's creditors are still impeding progress. The deal terms mean that private equity and asset managers will end up with the bulk of Yellow's assets, leaving Treasury, employees, and other claimants with little collateral.

As more Yellow assets are acquired in auctions, any revived LTL business will be smaller. Nevertheless, for Amico, some salvaged jobs are better than none.