Yellow Corp demise seen boosting rates for rival US truckers

ArcBest

31/07/2023 21:19

By Lisa Baertlein
       LOS ANGELES, July 31 (Reuters) - The operational
shutdown of Yellow Corp  YELL.O , a major U.S. trucking firm,
should help prop up industry rates that tumbled after the cargo
bubble of the early coronavirus pandemic deflated last year,
transportation analysts said. 
    The company, formerly known as YRC, is one of the nation's
largest so-called "less-than-truck load" carriers with customers
that include Walmart  WMT.N  and Home Depot  HD.N . It notified
customers that it stopped operations on Sunday and warned the
Teamsters union, which represents 22,000 of its 30,000
employees, that it plans to file for bankruptcy.
    Yellow's demise underscores the shift in the U.S. trucking
industry from too few trucks and truck drivers during the
pandemic to too many today. 
    Most U.S. trucking companies have about 20% spare capacity
in their networks, Stifel analyst Bruce Chan said in a client
note on Monday. 
    Yellow's exit could remove about 10% of capacity from the
segment, he said, adding that it "should be a universal boon to
remaining carriers."     
    The failure of Yellow, best know for its business that
combines shipments for multiple customers into one truckload,
should benefit rivals including Forward Air  FWRD.O , ArcBest
 ARCB.O , TFI International  TFII.TO , XPO  XPO.N , FedEx
Freight  FDX.N , Saia  SAIA.O  and Old Dominion  ODFL.O , Chan
and other analysts said.
    Yellow struggled for more than a decade after loading up on
debt from acquisitions of rival trucking firms Roadway and USF. 
    It failed to integrate overlapping networks and became known
as a discount carrier due to its below-market rates and service
levels, Stifel's Chan said.
    "The company is deeply distressed, and would require
monumental operational overhaul as a going concern," Chan said. 
    In 2020, then-U.S. President Donald Trump bailed out the
company with a $700 million pandemic relief loan.
    The company has not significantly repaid that federal loan,
which is part of $1.2 billion in debt it is scrambling to
refinance before it comes due next year. Yellow's other lenders
include a group led by Apollo Global Management  APO.N .
    It appealed to the Teamsters to help it cut costs, only to
be rebuffed by the union, whose leader said: "Following years of
worker give backs, federal loans, and other bail outs, this
deadbeat company has only itself to blame."   
    Yellow's failure has a low risk of disrupting U.S. trucking
markets because the industry has time to work out any kinks
before the all-important winter holiday peak season, analysts
said.
    Still, it is not good news for Yellow's customers, which
likely will face double-digit price increases when they turn
that business over to companies, Chan said.
    Many of Yellow's former customers have starting the
time-consuming process of shifting their cargo to different
firms, while some have goods stranded in its network, said Ken
Adamo, chief of analytics at DAT Freight & Analytics.
    "If you weren't prepared for this, it's probably a pretty
tough day for you," Adamo said of Yellow's customers.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Strike at trucking firm Yellow averted after deal    https://www.reuters.com/business/autos-transportation/strike-trucking-firm-yellow-averted-after-deal-2023-07-23/
Analysis: U.S. trucking downturn foreshadows possible economic
gloom    https://www.reuters.com/business/us-trucking-downturn-foreshadows-possible-economic-gloom-2022-04-25/
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 (Reporting by Lisa Baertlein in Los Angeles
Editing by Marguerita Choy)
 ((lisa.baertlein@thomsonreuters.com; +1 310-491-7241; Reuters
Messaging: lisa.baertlein.thomsonreuters.com@reuters.net))