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The International Brotherhood of Teamsters issued a strike notice Tuesday, after the union said Yellow Corp.’s failure to make a “critical” payment to health care and pension funds could lead to benefit suspensions.
“Yellow has a responsibility and obligation to workers,” said Teamsters General Secretary-Treasurer Fred Zuckerman. “Our members should not suffer because of management’s incompetence and financial irresponsibility.”
The union said two of Yellow’s operating companies, Holland and Yellow Freight, missed a $50 million payment due July 15 to the Central States Health and Welfare Fund and the Central States Pension Fund for June 23. As a result, the Central States Board of Trustees voted to suspend health-care benefits and cease pension accruals for Yellow workers, effective July 23, if the payment isn’t made.
Yellow disclosed last week that as of June 30, it had cash and cash equivalents of more than $100 million. TD Cowen analyst Jason Seidl noted that means the required pension contribution “is a sizable portion of the company’s liquidity.”
Yellow’s stock
YELL,
fell 2.1% to close Tuesday at 99 cents, and has plummeted 60.6% year to date.
Yellow responded to a MarketWatch request for comment, saying it advised Central States Funds that it would defer payment of health and pension contributions due for June, due July 15, and for July, due Aug. 15, “to preserve liquidity” as it worked to obtain meetings with the Teamsters and to secure additional financing.
“Two months’ of deferrals to Central States would represent approximately $50 million. Only the first of those two month payments has been deferred to date,” a company spokesperson said in an emailed response to MarketWatch. “The company intends to repay the funds with interest immediately upon securing additional financing and has asked the funds to discuss acceptable terms.”
TD Cowen’s Seidl said a strike by the Teamsters would “significantly accelerate” freight diversions to other less-than-truckload (LTL) companies, and would make it “extremely difficult” for Yellow to recover given its “precarious” financial status.
“Recent discussions with industry contracts indicate that shippers are preemptively moving some freight to Yellow’s competitors in addition to formulating contingency plans, indicating tangible fears that Yellow is on the brink of failure,” Seidl wrote in a note to clients.
Among the LTL companies that Seidl expects will benefit from Yellow labor and financial troubles are Old Dominion Freight Line Inc.
ODFL,
ArcBest Corp.
ARCB,
Saia Inc.
SAIA,
and XPO Inc.
XPO,
Other companies with exposure to LTL operations that stand to benefit include Knight-Swift Transportation Holdings Inc.
KNX,
and TFI International Inc.
TFII,
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