For almost a century, the highways and byways of America were graced by trucks bearing the iconic Yellow Corporation insignia. As one of the nation’s most prominent trucking companies, Yellow’s sudden shutdown sent shockwaves throughout the industry and the broader economy. The question now reverberating through the corridors: Is Yellow’s demise indicative of a more significant economic downturn on the horizon?
Every taxpayer, knowingly or unknowingly, held a stake in Yellow’s journey. Thanks to the Coronavirus, Aid, Relief, and Economic Security (CARES) Act, Yellow Corporation secured a hefty $700 million from the $735.9 million reserve earmarked for national security loans. For context, that’s almost 30% ownership by the government.
The loan split into two parts or “tranches”. Tranche A, $300 million which was focused on addressing union-related liabilities, leases, and interest. And tranche B, which was allocated for equipment – primarily tractors and trailers. The loan’s terms, heavily tied to the LIBOR plus additional rates, required government equity, a safeguard to ensure repayment.
But was Yellow truly integral to national security? This became a point of contention. The Defense Department initially believed other trucking entities could fill Yellow’s void. Yet, as Congressional Oversight Commission findings reveal, a single conversation between Treasury secretary Steven Mnuchin and defense secretary Esper shifted this perspective. Within a day of this dialogue, Yellow was sanctioned as “critical” to national security, expediting the loan.
While some view this as regular governmental procedure, others raise eyebrows at Yellow’s sudden increase in lobbying expenses in 2020. Notably, there was no such expenditure the year prior. Ties to the White House were evident, as were discussions on Yellow’s vast employee roster under the Teamsters union.
It’s hard to overlook the Teamsters’ involvement. With the influential Teamsters president Jimmy Hoffa reaching out to the Trump administration, lobbying for Yellow’s loan, the union’s interests are clear. Post-loan approval, Yellow’s stock surged, benefiting both its executives and the Teamsters, who’ve had representation on Yellow’s board since 2011.
However, the union disavows any fault in Yellow’s undoing. While they assert their contributions in keeping the company solvent, they pin the blame squarely on Yellow’s management.
The intertwined tales of Yellow, the CARES Act, and the Teamsters present a complex web of interests, policies, and market dynamics. Mnuchin stands by the decision to support Yellow, highlighting the employment benefits.
Yet, the abrupt cessation of a company that survived for nearly a century, despite significant governmental support, inevitably sparks concerns. As we bid farewell to a historic entity in the trucking world, the nation watches closely, hoping that Yellow’s end is not a forewarning of broader economic challenges to come.