Eyebrows Raised as Trucking Industry Looks on at Yellow Corp
“Yellow Corp. has been grappling with issues for some time,” said Shari Lipski, Principal at ECS Financial Services.
The trucking industry was taken by surprise recently with the abrupt closure of that very company, Yellow Corp. Having generated $5.2B in revenue just in 2022 alone, Yellow was so large that chances are if one saw a 500 HP Peterbilt Model 579 truck cruising down a highway or interstate in the last year that it was one of theirs. After nearly a century of moving industrial, commercial, and retail goods throughout the U.S., the company declared bankruptcy on August 6, leaving thousands without jobs.
“It was a shock to me personally, but a bigger shock might come when details come out about what really happened,” said Tamara McCourt, Co-Founder at Huddle Business Capital.
Yellow had been facing recent battles with union workers and had been the recipient of an unusual bailout deal during the pandemic in 2020. At the time, the company received a special $700 million loan from the Treasury Department as pandemic relief and in return the Treasury took a 29.6% ownership stake in the company in the form of common stock, a deal that the Congressional Oversight Committee later argued should not have happened.
While the world waits to see how this will unravel, one immediate effect might be the delay of trucks entering the resale market, McCourt noted. The reduced equipment demand by Yellow could also result in an increase in available inventory and may even drive prices down, she added.
“First, the trucks owned by Yellow might be held up for some time, but they eventually will hit the market for resell,” said McCourt. “The large influx of inventory might impact current prices by lowering them and stimulate buying by existing transportation companies.”
Lipski, of ECS Financial Services, added that the demand for consumer and corporate carriers has not disappeared and that the trucks and drivers themselves still exist. What happens next is not just a matter of what happens to the trucks but about what happens to the drivers.
Meanwhile, the impact of Yellow’s bankruptcy on future lending terms in the transportation industry may be minimal, however. “Right now, we are already experiencing the strictest lending to the transportation industry that I can recall in over 30 years,” said McCourt, when asked about this. “Not sure that this in itself will further restrict lending.”
In the U.S., 8.4 million people work in the trucking industry, of which 3.5 million are truck drivers. Following the recent bankruptcy, 30,000 truck drivers have been laid off and will now be seeking employment.Last modified: August 10, 2023
Anaya Vance is a reporter for deBanked. Connect with me on LinkedIn.