Yellow, one of the largest trucking companies in the United States, has filed for bankruptcy three years after receiving a $700 million federal loan intended to help it navigate the challenges of the pandemic. Despite Yellow’s struggles, analysts believe that most trucking companies are well-positioned to continue operating and that the freight industry is not likely to be significantly disrupted.
Investors are even showing confidence in the industry’s future, as many trucking stocks have seen significant gains in recent weeks. Avery Vise, Vice President of Trucking at FTR, a forecasting firm specializing in the freight industry, downplayed the significance of Yellow’s failure, stating, “I don’t look at Yellow’s failure as much of a canary in the coal mine for the broader market.”
Yellow fell into the less-than-truckload sector, which involves transporting goods from multiple shippers in containers and operating a hub-and-spoke system. This segment of the industry has fared better than the larger truckload segment during the pandemic’s supply chain disruptions. Over the past five years, Yellow accumulated over $200 million in losses, while Old Dominion Freight Line, a similar less-than-truckload company, reported over $4 billion in profit.
Analysts attribute Yellow’s struggles to various factors, including its unionized workforce and its senior executives’ mismanagement. The International Brotherhood of Teamsters, the main union at Yellow, has been accused of obstructing management’s efforts to improve the company’s competitiveness. The Teamsters, however, argue that Yellow’s employees made financial sacrifices to try to save the company.
Saia, a less-than-truckload company near Atlanta, is one of the companies poised to benefit from Yellow’s bankruptcy. Its stock has doubled this year, and its CEO, Frederick Holzgrefe, sees this as an opportunity for Saia to gain market share and improve profitability.
The trucking industry is a critical part of the US economy, transporting nearly three-fourths of all freight tonnage in the country. Despite experiencing boom-and-bust cycles, the industry saw a surge in demand during the pandemic. However, small trucking companies with one to five trucks have faced challenges due to declining revenues and high costs. Many of these operators are shutting down, though some may join larger companies.
While the industry as a whole has been in a recession, less-than-truckload companies have largely maintained stable shipping rates. Truckload companies, on the other hand, have faced more significant challenges. The fate of truck drivers remains uncertain as the industry seeks to find a new balance. Some drivers received raises during the pandemic, but the decline in revenues has put pressure on companies to control costs.
In the coming months, the trucking industry will continue to navigate the aftermath of the pandemic and adjust to changing market conditions.