Some Yellow freight customers face post-bankruptcy sticker shock -analysts

Yellow

11/08/2023 21:03

By Lisa Baertlein
       Aug 11 (Reuters) - Former customers of bankrupt trucking
firm Yellow  YELL.O  can expect to see rates rise at least
10%-20% from the rock-bottom levels that helped usher in the
demise of that nearly 100-year-old firm, industry analysts and
executives said on Friday.
    Yellow, formerly known as YRC, was one of the largest U.S.
trucking firms and a leader in the "less-than-truckload" (LTL)
market that combines shipments from multiple customers on a
single truck. Rivals who are picking up Yellow's business say
they are not dropping their own prices do so.  
        Two long-time industry executives told Reuters that
Yellow's rates were roughly 10% to 20% below those of rivals.
Loads in the so-called LTL market do not trade on the spot
market and they vary based on the type and size of shipments,
they said. 
    "Yellow was way below" market rates, said Ken Adamo, chief
of analytics at DAT Freight and Analytics, which operates one of
North America's largest truck freight marketplaces.
    Former Yellow customers should expect to see rates rise at
least that much to reach market parity, said Chris Pickett, an
analyst and chief operating officer at Flock Freight, which
matches shippers to fill up individual trucks.  
    That, however, may not be the end of the increases, Pickett
said. Unlike the highly fragmented trucking market, LTL is
dominated by about a dozen players. Those companies have more
pricing power, and with Yellow gone there is less competition
for the freight they handle. 
    Some providers are already raising rates, which could send
LTL rates up 10% to 15% from current levels, Pickett said.
"That's going to create some sticker shock."
    Large companies like Walmart  WMT.N , Amazon.com  AMZN.O 
and Home Depot  HD.N  will likely see the smallest rate
increases as they shift cargo from Yellow. 
    Savvy customers like those likely locked up new carriers
prior to Yellow's bankruptcy on Aug. 7, Adamo said.
    Yellow has blamed the International Brotherhood of Teamsters
union for its failure. But the union and analysts blamed
mismanagement, saying the debt-laden company's sub-market rates
made it difficult to offset the high cost of running the
companies it bought as separate entities. 
    Now rival trucking firms like Forward Air  FWRD.O  are
benefiting from Yellow's failure.
    Forward Air picked up some of Yellow's business, CEO Thomas
Schmitt said on the company's Aug. 3 earnings call. 
    "Yellow leaving the market will further accentuate pricing
discipline ... I do believe the bottom is behind us," Schmitt
said of the sector's current "freight recession."   

 (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))