NASHVILLE, Tenn., June 27, 2023 (GLOBE NEWSWIRE) -- Yellow Corporation (NASDAQ: YELL), the nation’s third largest less than truckload (LTL) carrier and fifth largest transportation company, has filed a complaint in the U.S. District Court for the District of Kansas against the International Brotherhood of Teamsters (IBT) and certain of its affiliates.
The complaint alleges that the defendants breached their binding union contract with Yellow causing more than $137 million in damages by unjustifiably blocking, for over eight months, Yellow’s restructuring plan to modernize its business, which is necessary to compete against non-union carriers that dominate the LTL business today. These modernization efforts, known as One Yellow, are essential to the Company’s survival. Without these crucial reforms, which are standard practice in the industry today, Yellow likely will not survive, 30,000 jobs will be lost, including 22,000 union jobs, and its shareholders, including the federal government, which owns 30.1% of Yellow stock, will be severely damaged. Yellow remains a critical part of the domestic supply chain with hundreds of thousands of customers -- large and small -- relying on the Company to deliver freight coast-to-coast. Driving Yellow out of business will badly damage the supply chain, lessen competition and raise the price of shipped goods in the LTL market and feed inflation.
“We do not take this action lightly, but the Union’s leadership has left us with no choice,” said Yellow Corporation management. “For many months, we have made good faith efforts to meet with the IBT to propose a path forward that works for all parties, but they refuse even to meet, let alone engage in honest talks. We have communicated with all stakeholders in Washington, D.C., including the Biden Administration, to apprise it of the imminent loss of tens of thousands of jobs, the significant anti-competitive effects on the American economy and the devastating impact to the supply chain, and to seek their assistance in persuading the IBT to negotiate a mutually
acceptable agreement. We are fighting for the livelihood of our 30,000 employees who are good hard-working people. We will do all we can to save these American jobs and to protect our shareholders, including the American taxpayer.”
The complaint also alleges that Sean O’Brien, IBT General President, orchestrated these breaches and has prevented Yellow from meeting with IBT leadership. For several years, the IBT had endorsed the company’s modernization effort and, in fact, approved the first of the effort’s three phases before the IBT reversed itself taking, in Mr. O’Brien’s words, a “militant approach” to blocking Yellow’s modernization.
Completion of One Yellow in 2023 is critical to Yellow’s ability to survive, particularly given that Yellow faces, among other things, the imminent need to refinance $1.3 billion in debt—a $567.4 million term loan maturing on June 30, 2024, and a $729.4 million U.S. Treasury loan maturing on September 30, 2024. Nonetheless, as alleged, the Union has blocked Yellow’s completion of One Yellow, triggering grave uncertainty for employees, investors and customers, and has knowingly intended to cause Yellow’s economic ruin.
Moreover, Sean O’Brien has taken up the role of public agitator for the company’s demise, recently tweeting an image of a headstone in a cemetery with “Yellow” on it. He has continued to hide behind numerous false, unconstructive, and irresponsible social media posts maligning the company, while refusing to discuss a path forward with the Company itself. The situation might have been avoided if the Union had participated in meetings months ago or otherwise agreed to sit down and negotiate in good faith. Yellow must now take immediate steps to try to save itself. Yellow is entitled to $137.3 million (and counting) for the injury the Union has caused Yellow, and continues to cause Yellow, and in the event of its demise, at least $1.5 billion for the loss in enterprise value Yellow is sustaining as a result of the Union’s breaches.
Yellow Files $137 Mil Suit Against IBT, Alleg. Breach of Contract
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Yellow running out of options, sues union for $137M
Less-than-truckload carrier Yellow Corp. announced Tuesday that it has filed a $137 million breach of contract lawsuit against the International Brotherhood of Teamsters for blocking proposed changes to modernize how the carrier operates.
Yellow (NASDAQ: YELL) said the union doesn’t have the authority to stop a proposed change of operations, which the company views as the linchpin to its survival. Yellow alleges that union interference has harmed the company to the tune of $137.3 million (“and counting”) in lost adjusted earnings before interest, taxes, depreciation and amortization as well as at least $1.5 billion for a loss in enterprise value that the company “is sustaining and will sustain.”
Yellow’s enterprise value — market capitalization plus net debt — consists mostly of its debt. Yellow’s market cap has plummeted since the end of 2021 as its share price has fallen from more than $14 to roughly $1.
“We do not take this action lightly, but the Union’s leadership has left us with no choice,” Yellow’s management stated in a news release. “For many months, we have made good faith efforts to meet with the IBT to propose a path forward that works for all parties, but they refuse even to meet, let alone engage in honest talks.”
The carrier is seeking to push through a second phase of operational changes as part of a companywide overhaul called “One Yellow.”
The plan includes the consolidation of its four LTL operating companies, closing excess terminals and redefining work rules for some drivers, among other items. The union has rejected the latest proposal after acquiescing to a similar change last year in the western part of Yellow’s network.
The union has been adamant that the latest proposal would require too many utility positions, which require drivers to work freight on the docks at various locations. It says its member employees at Yellow have given billions in the form of wage, benefits and pension concessions in the past and that it will not bail out the company again. It plans to honor the current contract in place, which expires next year.
“The company is misleading our members and the public,” said Fred Zuckerman, Teamsters general secretary-treasurer, in a news release. “We have a contract with Yellow that expires March 31, 2024, and Teamsters are living up to it. … This lawsuit is a desperate, last-ditch attempt to save face.”
But Yellow says the Teamsters have no right to interfere with the changes it seeks.
“Under the NMFA [National Master Freight Agreement], Yellow has the exclusive right to run its business, effect mergers, consolidate operations, open and close terminals, and the Union cannot interfere with those entrepreneurial decisions — its involvement is limited to determining and resolving the seniority of those Union employees affected by the change,” the lawsuit read.
Yellow contends the changes are required to lower its cost structure and allow it to compete with nonunion carriers, which have less cumbersome rules and often combine the roles of driving and freight handling. The lawsuit said recent market share losses — roughly a 33% decline in tonnage over the last two years — are directly associated with the way it is required to operate.
The company asserts that 1,000 road drivers in total would be required to work the docks. Roughly 400 are already performing the dual functions and the remaining 600 utility positions would be filled by employees with the least seniority.
The complaint alleges Sean O’Brien, Teamsters general president, “has prevented Yellow from meeting with IBT leadership.” Yellow contends that the union has been onboard with Yellow’s restructuring plan but it’s O’Brien’s “militant approach” that has stalled the implementation.
“Now, however, the Union has reversed course and without any justification refuses to comply with its contractual obligations to cooperate with and not impede the implementation of the remaining phases of One Yellow,” the lawsuit said.
Yellow accuses O’Brien of assuming “the role of public agitator for the company’s demise,” referring to some of his social media posts, which it describes as “false, unconstructive and irresponsible.”
“Notwithstanding Yellow’s repeated approaches to the Union and Mr. O’Brien to meet and negotiate, and its repeated offers to accommodate the Union’s purported demands, Mr. O’Brien has refused to permit any cooperation or negotiations, choosing instead to direct profanities at Yellow and its executives and even to gloat at Yellow’s impending demise.”
Yellow alleges the union has breached the collective-bargaining agreement by rejecting the proposed changes and not agreeing to schedule a required hearing on the matter. It says union leadership is blocking the request as a means to “extract wage increases” and that it “had no right to require wage increases from Yellow as a condition of approving CHOPS [a change of operations proposal].”
Yellow said it agreed to “serial extra-contractual demands” throughout the negotiating process, including the union’s demand for a vote by membership, which Yellow said was later refused by union leadership. Instead, Yellow claims union officials insisted the NMFA would have to be reopened to proceed with any changes and that Yellow would have to “come up with sufficient financial improvements” in those negotiations.
Yellow Corporation Updated Covenants Tear Sheet (reorg.com)
- The company entered into the UST term loans in July 2020 and amended its Apollo term loan at the same time; under the UST term loans and amended Apollo term loan, the company is in a “covenant adjustment period” until it delivers financial statements showing EBITDA of greater than $200 million for any 12-month period, beginning with the period ending June 30, 2022.
I don’t know exactly what’s going on and the bs between both parties but I do know if yellow goes down many people will be out of a job and on tax payers dime now.Siinman Thanks this.
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