Employers suffering from South Dakota’s workforce shortage have another 150 candidates available in Sioux Falls as Nashville-based trucking firm Yellow/YRC Freight has shut down operations and is preparing to declare bankruptcy. the 150 laid-off workers in Sioux Falls are just a sliver of the 30,000 Yellow employees now seeking alternative employment opportunities nationwide.
The primary reason for the 99-year-old company’s collapse is obviously their complete failure of branding:
Your company is Yellow. Your logo and trucks are orange. What were you thinking?!
Yellow lost $104 million in 2019, then kept itself afloat with a $700-million CARES Act loan in 2020. To make that pandemic loan happen, the Trump Administration had to stretch the definition of “critical to national security” to apply to Yellow, one of whose big backers had ties to Trump:
Yellow is backed by Apollo Global Management, a large private-equity firm whose founder, Joshua Harris, advised the Trump administration on infrastructure policy in 2017, the New York Times reported. Apollo also lent $184 million to the family real estate company of Jared Kushner, a top White House aide and Trump’s son-in-law.
…Yellow was seen as a controversial recipient because of the size of the loan, its possible connections to the White House via Apollo, and because its services could feasibly be replaced by any number of national logistics companies. If Yellow went belly-up, another trucking company could step in, critics argued.
…The Government Accountability Office, a federal watchdog agency, found several discrepancies in how Yellow was treated by the government compared with other companies applying for aid. Treasury fast tracked the loan to Yellow “due to the urgency of the business’s financial circumstances,” the office found, even though other companies faced similarly dire circumstances. And the loan was negotiated and executed by Treasury staff who were “not otherwise involved in the loan program,” it said.
Yellow has since used the Treasury loan, in part, to pay for capital investments, including new tractors and trailers to upgrade its aging fleet, according to company statements.
This year it also hired Heather Nauert, who was a State Department spokeswoman during the Trump administration. Nauert said in an email that she works “with a range of clients and began advising Yellow in early 2021” [Yeganeh Torbati and Aaron Gregg, “Pandemic Loan to Troubled Trucking Company Had Trump White House Backing, Emails Show,” Washington Post, 2021.10.06].
According to the 2022 report of the House Select Committee on the Coronavirus Crisis, the Pentagon initially opposed the Yellow loan, saying they had plenty of other shippers and noting they’d already been bilked by the firm:
In announcing the $700 million loan, then-U.S. Treasury Secretary Steven Mnuchin described YRC as a “critical vendor” to the Defense Department.
But the subcommittee report said career Defense Department officials doubted whether Yellow Corp. was indeed critical for national security.
The report said that Mnuchin requested an urgent call with then-Defense Department Secretary Mark Esper on June 25, 2020.
That was one day after Defense Department officials told the Treasury Department it would not certify Yellow Corp. to receive the loan. A Defense Department analysis said other trucking companies could replace Yellow’s work for the federal government and they were concerned about a Justice Department lawsuit alleging Yellow had overbilled its services to the Defense Department.
Yellow settled that case last month for $6.8 million without admitting wrongdoing.
The report said after his call with Mnuchin, Esper certified Yellow as critical to national security. On July 1, 2020, Yellow Corp. received the loan [Steve Vockrodt and Dan Margolies, “KC-Area Trucking Company Got $700M Federal Loan over Pentagon Objections, House Report Says,” St. Louis Public Radio, 2022.04.27].
According to the audit published May 11, 2023, by the Special Inspector General for Pandemic Recovery, Yellow was the only trucking company among “Tier 1” borrowers, the rest of whom were seven airlines. Yellow and JetBlue were the last firms to apply in April 2020; Yellow’s loan was approved almost three months before any of the airlines’ loans.
As of March 15, Yellow had paid us $54.8 million in interest but only $230 of the principal, 0.000033% of the $700 million we taxpayers loaned them. Yellow’s total debt in March was $1.5 billion. Yellow reported a 2023 Q1 net loss of $54.6 million. Yellow was supposed to pay back the CARES Act loan by September 2024.
If Uncle Sam can jump ahead of other creditors, we could foreclose on Yellow’s fleet of 13,800 tractors and 43,400 trailers and, at maybe $75K per truck and $4K per trailer, sell them off for over a billion dollars. Or maybe we could just eat the loss and give away the Yellow trucks to the laid-off Yellow employees who say they want to become independent truckers.