Struggling trucking operators Pandemic Era $700 Million Loans Federal companies could be forced to file for bankruptcy protection this summer amid disputes with unions, leaving U.S. taxpayers stranded from failed companies.
Yellow, formerly known as YRC Worldwide, has been in financial trouble for years. The company lost more than $100 million in 2019 and has more than $1.5 billion in debt, including government loans. In 2022, the YRC, which transports meal kits, protective equipment and other supplies to military bases, will: pay $6.85 million solve federal litigation He accused the Department of Defense of deceiving him.
In 2020, the Trump administration, which has ties to the company and its executives, agreed to give the company a pandemic relief loan in exchange for the federal government taking a 30% stake in the company.
Three years later, Yellow Corporation is on the brink of bankruptcy.
Since taking the loan, the company has changed its name, restructured its business, and its stock price has plummeted. As of the end of March, Yellow Corporation had outstanding debt of $1.5 billion, including approximately $730 million to the federal government.Yellow paid about $66 million in interest on a loan, but has just repaid it. $230 of the loan principalwill be due next year.
Yellow sued the International Teamsters Brotherhood on Tuesday for thwarting the company’s restructuring plans, accusing the union of causing more than $137 million in damages. It said the company was “taking immediate steps to save itself” and that the union was “trying to cause Yellow’s economic ruin.”
The company’s financial woes are the latest example of how some of the trillions of dollars that quickly drained during the pandemic were misdirected, mismanaged or illicitly obtained. Federal regulators and government agencies have warned of signs of fraud and failed loans.
The Office of the Special Inspector General for Pandemic Recovery, an independent body within the Treasury Department that scrutinizes some of the relief money, warned last month that “we are seeing an alarming rate of default by borrowers who don’t even pay interest.” . about the loan. The agency warned that defaults on pandemic loans could rise over the next two years as payment deadlines approach.
The inspector general of the US Small Business Administration, which has disbursed nearly $1.2 trillion in pandemic loans, said Tuesday: said in the report More than $200 billion, or 17% of the money, was spent on “potential fraudsters.”
Yellow’s financing kept the company afloat for a while and allowed it to start a turnaround plan. However, economic headwinds and a dispute with the Teamsters union over the terms of the new contract have left Yellow in financial turmoil.
In May, the company reported: First quarter loss of $54.6 million and Moody’s downgraded credit rating Concerned about disputes with trade unions. Yellow’s stock has fallen more than 70% over the past year to $0.99 a share.
The company warned union officials that the conflict was jeopardizing Yellow’s fate. Union officials say the company is poorly run and the concessions it seeks are unfair.
Sean O’Brien, chairman of the International Brotherhood of Teamsters, said in a video: “Yellow has not been able to run effectively for a long time. Now the company is running out of cash by August. He said he would.” Broadcast a message on Facebook This month is a yellow union member. “These executives have no idea what they’re doing. They’ve knocked this company to the ground.”
In a statement on Tuesday, Mr. O’Brien said the allegations in the Yellow Corp. lawsuit were “baseless and without merit,” and said the company’s management failed to meet the terms of the contract and disappointed its employees.
The union’s current contract expires next year. The main points of contention are whether the hundreds of yellow truckers must start loading and unloading cargo at the piers and the proposal to give the company more power over where the truckers must work. Yellow is seeking unions to agree to the next phase of its restructuring plan so it can seek additional loans and pay off its debt.
The company said it was willing to repay government loans, negotiated in good faith and sought to protect the jobs of its 30,000 employees.
Darren Hawkins, CEO of Yellow, said: “Yellow is working with all stakeholders in Washington and remains committed to negotiating a deal with IBT that works for our employees, customers and shareholders. There are,” he said of the union. “Protecting the 30,000 jobs is Yellow’s top priority.
In the lawsuit, Yellow Corp said it had sought the Biden administration’s help in brokering a deal to save the company, but the White House’s efforts were rejected by unions. According to the complaint, Yellow contacted Senator Bernie Sanders of Vermont for help, and Sanders’ office said it was unwilling to help because Yellow received loans from the Trump administration. claimed to be.
The White House confirmed it had consulted with Yellow and the unions, but declined to discuss the issue further.
“The administration is in contact with both parties, but does not intend to comment on the legal dispute,” White House spokesman Michael Kikukawa said. “The loan in question was provided by the Trump administration.”
Sanders’ office did not respond to a request for comment. A Treasury Department spokesman said the Treasury Department continued to monitor loans made through the Pandemic Recovery Program during the previous administration.
The Treasury Department also owns nearly 30% of Yellow’s common stock, and the loans are collateralized by the company’s assets. If Yellow had to declare bankruptcy and liquidate, the U.S. government would take over most of the company’s trucking fleet and real estate holdings.
Yellow’s loan, which was part of the $2.2 trillion Pandemic Relief Act passed by Congress in 2020, raised questions of nepotism from the start.
A report last year by the Democratic staff of the House Selective Subcommittee on the Coronavirus Crisis found that the money came over the opposition of career officials at the Pentagon, securing Mr. Yellow special funding. implied that Trump administration officials intervened to provide Receiving treatment despite concerns about eligibility for relief funds. In addition to its deep ties to the Trump administration, the company has faced legal and financial troubles over the years and has been a strong lobbyist in Washington.
Whether Yellow is important to national security is questionable, but the company is one of the largest freight trucking companies in the United States, and its failure would have ripple effects throughout the domestic supply chain.
Also UPS and ABF Freight During negotiations Relationships with teamsters have soured over contracts, adding to uncertainty across the sector.
Chris SpearThe CEO of the American Trucking Association has urged unions and Yellow to work with federal mediators to strike new deals to keep the company out of bankruptcy.
“It will have a severe impact on the economy and supply chains,” Spear said. “Capacity is already tight.”
Bruce Chan, a transportation analyst at investment bank Stifel, said the closure of Yellow would lead to a significant rise in shipping costs within the United States, forcing businesses to look for other carriers to transport the “homeless” shipments. said it would be. He noted that vulnerable trucking companies are struggling under the pressure of shifting consumer demand (shifting from goods to services).
While Mr. Yellow has found ways to weather financial troubles in the past, Mr. Chan likens the current union dispute to “squeezing the blood out of a stone.”
“It seems pretty tough for them,” he said.
