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Trucking giant Yellow’s recent bankruptcy filing means the loss of 30,000 jobs, 22,000 of them belonging to union members.
When the trucking giant Yellow officially filed for bankruptcy protection Sunday night, most of the headlines understandably revolved around the 30,000 jobs that would evaporate, 22,000 of them belonging to union members. But few managed to read the bankruptcy filing itself, which was even more unusual than Yellow’s chaotic decision to liquidate rather than maintain a business that dates back to 1924.
The filing, penned by a former conservative Republican congressional candidate who has been on the Yellow board for over a decade, spins a wild tale about a plucky little company that was ritually executed by a power-mad union boss. According to these allegations, International Brotherhood of Teamsters President Sean O’Brien “knowingly and intentionally triggered a death spiral for Yellow” to teach a lesson to his more powerful rivals, namely United Parcel Service, with which the Teamsters president spent most of the summer embroiled in negotiations.
“Against the backdrop of the Union’s then on-going negotiations with UPS, where Mr. O’Brien was taking a hard and self-described ‘militant’ line, he used Yellow as a sacrificial lamb in an apparent attempt to gain leverage,” writes Matthew Doheny, Yellow’s handpicked chief restructuring officer (CRO). “Mr. O’Brien’s messaging was clear: he would rather see Yellow destroyed than be perceived as weak in negotiations, even if that meant the sacrifice of more than 22,000 of his own rank-and-file members’ jobs.”
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The bankruptcy filing will determine which creditors will receive liquidated assets. The thunderous statement out of the gate seems potentially designed to block rank-and-file unionized workers from receiving severance or other benefits to which they’re entitled, even though much of that is obligated under federal laws like the WARN Act, which requires 60 days’ notice before a mass layoff.
Yellow had already taken preemptive moves to qualify the company for exceptions to the WARN Act. A letter from the company to employees on July 30 cited that the closure was a result of “unforeseeable business circumstances,” “faltering company,” and “liquidating fiduciary,” thus exempting itself from the WARN Act. Still, Yellow is facing a class action lawsuit filed by a Teamster in California alleging that the company violated the WARN Act.
The bankruptcy and distressed-investing Substack PETITION pointed out how Yellow notably did not “specify the magnitude of the potential [General Unsecured Claims] pool.” The GUC creditors are typically the lowest priority in a bankruptcy. “Receiving no payment is highly plausible due to being a bottom-tier unsecured claim,” the online training platform Wall Street Prep says.
In Yellow’s case, the GUC creditors include BNSF Railway, Amazon, Home Depot, and the union’s related benefits. With the accounts payable for the GUC floating around $176 million, Yellow would need to acquire a “generous amount in a liquidation scenario” to make those debts whole. Even then, the GUC pool could be whittled down to nothing as Apollo and other priority creditors skim fees through the bankruptcy process.
The Teamsters have denied the allegations in the filing. “Teamster families sacrificed billions of dollars in wages, benefits, and retirement security to rescue Yellow,” O’Brien said in a Monday statement. “The company blew through a $700 million government bailout. But Yellow’s dysfunctional, greedy C-suite failed to take responsibility for squandering all that cash.”
AS THE PROSPECT PREVIOUSLY REPORTED, Yellow’s finances over the last two decades presaged its eventual bankruptcy. Acquisitions, collapsing revenues from the financial crisis, and debt refinancing efforts all pushed the company into accepting an expensive $600 million loan led by the private equity giant Apollo Global Management.
In its string of acquisitions through the 2000s, Yellow inadvertently pitched subsidiaries it owned to compete with one another. These acquisitions were fueled by additional debt that then needed to be refinanced, increasing the pressure to cut costs, which would be borne on the backs of its mostly Teamsters-represented workforce.
The struggle to stay afloat would result in Apollo successfully lobbying to secure a $700 million loan from the Trump administration’s Treasury Department, which overrode the Pentagon’s recommendations in making Yellow eligible for a pandemic-era program for firms deemed “critical to national security.”
Loaded with debt, the company embarked on a consolidation program in 2019 called One Yellow, to reduce redundancies in its carrier network. In Yellow’s bankruptcy filing, Doheny, the chief restructuring officer, blamed the failure of One Yellow’s implementation on O’Brien.
He claimed that O’Brien deliberately prevented the company from adopting the second phase of One Yellow, which covered approximately 70 percent of Yellow’s network. There were seniority issues that arose from the consolidation, and Yellow claims that instead of complying with them, O’Brien and the Teamsters made “extra-contractual demands.” Yellow, in the company’s telling, tried to accommodate the union. But they allege that the Teamsters both asked for more and refused to negotiate, while “Mr. O’Brien engaged in a very public dressing down of Yellow, via social media and other public communications.”
Yellow’s bankruptcy filing spins a wild tale about a plucky little company that was ritually executed by a power-mad union boss.
By stalling phase two, Doheny alleges that O’Brien “intended to weaken Yellow, scare off Yellow’s customers, inhibit Yellow’s ability to refinance its debt, and to generally erode market confidence in Yellow’s ability to continue,” all in service of gaining leverage as the Teamsters negotiations with UPS unfold. The filing even adds that O’Brien had “pre-ordered Yellow’s tombstone and publicly gloated about it,” referring to a poorly photoshopped tombstone with Yellow’s logo that O’Brien posted on X (formerly Twitter).
Left out of this narrative is the fact that phase two of One Yellow likely would have translated to job losses. Nor does it try to explain why any union leader would deliberately vaporize 22,000 jobs from their own membership for any reason.
As a percentage of revenue, labor costs dropped for Yellow, according to the company’s latest 10-K form. In the five years through 2022, as Yellow’s competitor Old Dominion Freight Line made $4 billion in profit, Yellow suffered more than $200 million in losses, The New York Times reported (Old Dominion is a non-union shop). Still, Satish Jindel, president of a transportation and logistics consulting group, told the Times that another Teamsters-represented competitor stayed afloat, reiterating that Yellow suffered “largely because of mismanagement.”
“Doheny clearly does not understand how union contracts and negotiations work. He asserts that the Union somehow understood and supported his [One Yellow] scheme which was purported to save the company,” Chris Townsend, a longtime union organizer, told the Prospect. “This is a personal attempt by Doheny to absolve himself for a mess that he joined mid-mess and could not manage.”
Teamsters General Secretary-Treasurer Fred Zuckerman had similar sentiments in a statement on Monday. “When mismanaged companies like Yellow cry about needing more flexibility to modernize, they’re telling you they want to take advantage of workers,” he said. “They want to pay workers less, kill their pensions, and stop paying their benefits. They want to force workers to perform labor they weren’t hired to do. All things Yellow is outright guilty of.”
The Teamsters’ conduct, the filing claims, “forced” Yellow to sue the Teamsters for $137 million for breach of contract, and to defer contractually obligated payments to the Teamsters’ pension fund. Stiffing the pension fund, which Doheny insists the Teamsters should have accepted, led instead to the Teamsters threatening a strike. Yellow attempted to get an injunction to prevent the strike, which got thrown out of court. While the strike was averted, Yellow shut down operations within days.
DOHENY’S OWN HISTORY IS UNIQUE among corporate bankruptcies. He has been affiliated with Yellow since 2011 as a member of the company’s board of directors. By 2019, he moved to serve as its chairman. Doheny is also not a trucking or logistics professional. In the filing, he touts his experience at disassembling companies—getting under the hood and siphoning assets. Or as he puts it, “I have approximately 25 years of experience in board advisory assignments, alternative investments, and operational turnarounds.”
The company boards he’s affiliated with include the bankrupted MDC Energy LLC, the Texas gas company that illegally burned reserves of natural gas that buyers wouldn’t purchase. And he was also tapped to lead FTX’s trading after the cryptocurrency firm’s collapse.
Doheny is also a failed New York Republican congressional candidate from the early 2010s, whose top contributors came from the finance sector. His top outside spenders included Americans for Tax Reform, the U.S. Chamber of Commerce, and the Center for Individual Freedom, an organization which in recent years has taken aim at some of the largest unions in the country. The Center for Individual Freedom gave Doheny over $371,000 in his 2012 House campaign.
It is unusual for a company facing bankruptcy to name a chief restructuring officer with such a deep history with the company. And it’s even more surprising that Yellow would allow an ex-politician who received significant support from an anti-union organization to make such a severe statement against the Teamsters in its bankruptcy filing.
The bankruptcy filing contains new information on the debtor-in-possession (DIP) financing Apollo is extending to Yellow during the liquidation. The financing, which rolls up all of Apollo’s current term loan, carries a 17 percent interest rate and as much as a $32 million closing fee, providing Apollo with a substantial payday at the expense of other creditors.
So far, the response from the Teamsters has been muted, compared to the claims that O’Brien is some hybrid kleptomaniac-mafioso who schemed to destroy Yellow. After its Monday statement denying the allegations and urging that Yellow’s now-unemployed workers be “first in line for real relief as bankruptcy moves forward,” the union pivoted to calling for the federal government to take up reforming corporate bankruptcy laws.
“Despite its extraordinary debt, Yellow owes more to the workers who kept it running than to anyone else. Yet existing bankruptcy rules encourage corporate vultures to pick apart workers’ bones, shred union contracts, and kill off companies,” O’Brien said in the Teamsters’ Tuesday statement.
