“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.
“I decided to go to truck driving school on a dare really and I ended up here driving,” said Brenda Echols, a female truck driver. “I’ve been driving since 2012. It was frightening at first but I actually found that I enjoyed it. I enjoyed the freedom of being out, not being behind locked doors in a building, being able to go where I wanted. And it’s been fun, it’s been real fun.”
Echols is among the 6.75% of women that make up driver/sales workers and truck drivers, a small but growing segment in an industry often perceived as being male-only. That’s all changing. In fact, the number of women in this field has almost doubled since the year 2000. J.K.C. Trucking, the company Echols drives for, is based in Chicago and specializes in climate controlled and dry freight loads.
Before entering the industry, Echols believed truck driving was a dangerous profession with no female drivers, but that in itself was not a deterrent for her. Her career background of working on a shipyard and in law enforcement had prepared her for a work environment with a highly unbalanced ratio of males-to-females. When she first got started, the compact process of truck driving school, something drivers have to go through, felt rushed to her, but little did she know it would be the job of a lifetime. Unlike your typical 9 to 5, truck driving is 24/7, 365 days a year. Despite weather conditions or traffic, it’s always an adventure.
Mike Kucharski, a VP at J.K.C., said that lately he noticed more women set foot in the trucking business, switching over from other jobs, and that the company has made it an initiative to hire more of them to drive its trucks.
“We do this by ‘number one: education, marketing, and explaining benefits,’” Kucharski said. “We start with explaining that it’s not a man’s job, especially to all the women that lost their job due to the pandemic, they could do this job. The workload is manageable, the manual labor is not what you think, you can do it.”
Kucharski went on to give an example that women are less likely to get into accidents and that they’re more patient and less aggressive drivers than men, which makes them just as valuable to the industry.
“Just to give an example, women are 20% to 27% less likely to get in an accident,” he argued. “This study shows when women start out driving their cars, when they get a driver’s license, they are more cautious and safer compared to let’s say, me when I was 16, which is a long time ago. But it just shows this safety crosses over into truck driving.”
Echols enjoys the work atmosphere as well. “[J.K.C. is] a large enough company that there’s a lot of trucks, but it’s also a small family-like business,” she said. “It’s very personable. You are not a number working at JKC. They know everybody’s name. They know everybody’s personality by voice when you call them.”
There’s also the compensation incentives of being in this field, which according to Kucharski women are paid equal to the men for the work.
“One of the big things I see why more women are coming into this is because it’s equal pay for the women,” Kucharski said. “You have all this talk about jobs that men get paid more than women. That’s not the case in truck driving, you get paid per mile and per experience.”
“If you don’t have the marketplace of lenders, yes, it can be problematic,” said Cheryl Tibbs, Owner/CEO at Equipment Lease Co about providing capital to the trucking industry. “If you don’t understand the trucking industry, it can be very problematic.”
In the last year, there has been an increasing interest in equipment financing. It was the primary topic of a panel discussion at Broker Fair and the subject of several sidebar conversations throughout the day and thereafter. For Tibbs, who lives and breathes equipment finance and trucking, she said she doesn’t see funding in that space slowing down.
“Every business that’s in business needs some type of equipment to operate,” said Tibbs. “Whether it’s a cell phone, a POS system, a car or truck, excavator, whatever it is, every business has some type of equipment. So I don’t see the industry slowing down at all.”
Tibbs, for her part, says that some companies in her lender network can provide a uniquely beneficial solution, a funding bundle that is part equipment finance and part working capital.
“Some of those customers may need that working capital for a down payment or if you’re buying a truck, for instance,” Tibbs said. “And this working capital comes in handy because if you know anything about trucking, the insurance on those things can be– I’ve seen it go as high as 60,000 a year, almost half the cost of a truck. So that working capital comes in handy.”
And the costs of trucks is in a state of flux. Jonathan Nelson, General Counsel at Dedicated Financial GBC, said the costs of used trucks is rapidly shifting.
“This month, you could get $20,000 for this particular used truck on the East Coast and next month, if you were to sell it on the West Coast, you might get $40,000,” said Nelson. “It’s very volatile at the moment.”
Evan Sowa, Senior Finance Manager at Everlasting Capital, echoed same.
“Depending on the geographical market, prices on the same truck can vary substantially,” he said. “Market prices are as high as I have ever seen them, up to 80% higher than similar units 4 years ago.”
Sowa continued by explaining that demand and prices in the used truck market have been booming but that they’re finally starting to cool off.
David Lee, CEO at North Mill Equipment Finance, said there are some issues in the wider trucking market right now.
“The trucking industry is facing a lot of challenges currently,” Lee said. “In addition to supply disruptions, and an inflation in used asset values and unavailability of newly manufactured equipment combined with significant increases in diesel fuel costs, a number of operators have felt tremendous margin pressure, with load rates having decreased, the cost of the equipment being higher, and the cost of operating the equipment via fuel being higher.”
A lot of those costs have not been able to be passed on to shippers, Lee added, and he said that they’re seeing a material increase in delinquencies and defaults amongst trucking operators.
Nelson at Dedicated, speaking on a much broader level of equipment finance, said that in general the industry has been able to escape the wave of defaults happening in other industries.
“We are a part of the National Equipment Finance Association and the Equipment Leasing and Finance Association to make sure that we understand issues and different trends that are happening in the equipment finance industry, because that’s where most of our clients are,” he said.
Tibbs, who’s a super broker, explained that she has seen lenders and funders tighten up their guidelines post covid.
“It’s not as easy to get plugged in with certain lenders,” she said. “It’s not as easy to get certain deals approved that we probably could have gotten approved pre-pandemic.”
Because of her experience and relationships, however, Tibbs is optimistic about the kind of deals she can get done, especially over newcomers who are at a disadvantage, explaining that she can finance pretty much anybody.
Evan Sowa at Everlasting summed up the state of things as such.
“Still funding trucks every day but the market is crazy right now,” he said.