IBT MEMORANDUM RE: Yellow Corp. – July 27, 2023


To: Local Unions Representing Teamsters Working at YRC Freight, Holland, New Penn and Reddaway

From: John A. Murphy, Co-Chair, TNFINC

Date: July 27, 2023

Re: Yellow Update

As we have previously explained, TNFINC met with Yellow representatives starting on the evening of Sunday, July 23, and worked nearly around the clock to try to find a solution for Yellow. Yellow started the Sunday meeting telling TNFINC that it could not guarantee the $11.00/hour increases that it has been promising to the members as late at last week and into the past weekend. Yellow also informed TNFINC that it envisioned the discussions would continue for up to two days, after which the parties would either have a deal or they would not. Yellow also stated that its immediate purpose for securing an agreement was to use the agreement to shop for financing. TNFINC agreed to proceed along the path Yellow had described. TNFINC also noted that while the objective was to reach an agreement with Yellow, any agreement ultimately had to be ratified by the membership. Yellow accepted that whatever agreement could be reached would be subject to membership ratification. Ratification, however, would be a futile exercise if Yellow could not first obtain financing based on the terms of the agreement. Yellow therefore insisted that the implementation of any agreement between the parties would be dependent on Yellow first obtaining financing. TNFINC agreed. This meant that any agreement that the parties would secure would be submitted for membership ratification only if Yellow obtained financing. Furthermore, TNFINC told Yellow that it would approach the discussions/negotiations from a perspective of seeking “must-have” items, not “wish-list” items, and asked that Yellow approach the negotiations from the same perspective, namely that it would seek only “must-have” items needed to secure lender financing. Yellow agreed.

As they moved into the substantive discussions on Sunday night, TNFINC told Yellow that it was willing to enter into either a short term or long-term agreement. Yellow responded by stating it wanted a long-term agreement (5 years). Yellow said a long-term agreement would help it obtain lender financing because a potential lender would take comfort knowing that Yellow had secured a long-term agreement with the Teamsters. TNFINC responded by telling Yellow it would therefore negotiate for a long-term (5) year agreement.

Much of the two-days of the parties’ negotiations centered on work rules that Yellow insisted it needed to move forward with its “One Yellow” plan of consolidating its operating companies’ operations without actually merging the companies. The parties ultimately agreed that the YRC Freight contractual work rules and local practices would apply to all operating companies. TNFINC also agreed to allow the merger of seniority lists between Yellow’s operating companies’ terminals located within close geographic areas within a Local Union, as well as to allow all workers in those locations to work across operating companies. TNFINC also agreed to expedite a Phase II Change of Operations that the Company agreed would be “contractual” in that it would not force road drivers up on the dock, but instead establish six new velocity centers and use utility employees. The Union also offered to harmonize the rail/PT language across all operating companies. For its part, Yellow insisted on additional work rule changes that were not necessary for it to obtain lender financing, including work rules dealing with drops and hooks. TNFINC rejected those proposals.

On Monday evening, the parties turned their attention to wages and benefits. TNFINC proposed the same basic dollars (namely $11.00 per hour spread out evenly over 5 years, retroactive to July 1, 2023) that Yellow had “put on the table” earlier this month and was still circulating to our members only days before. On Monday night, Yellow objected to the effective date of wage and benefit contribution increases and insisted that the upcoming current contractual wage and benefit increases (50 cents to contributions, effective August 1, 2023, and 40 cents to wages, effective October 1) would not be paid. Yellow insisted that those existing contractual wages had to be “baked into” the $11.00 per hour proposed increase, which might not take place for weeks or months, if at all, if financing was not secured.

Later that Monday evening just before midnight, after having provided Yellow with a first comprehensive proposal earlier that day, TNFNC provided a proposed term sheet containing its bottom-line requirements needed to reach an agreement for Yellow to use to obtain lender financing with active support from the Union. TNFINC previously had offered to meet with Yellow’s lenders and invited the lenders to meet with TNFINC. TNFINC also reiterated that it was willing to go arm in arm with Yellow to lenders if Yellow wanted it to do so, provided that Yellow agreed to TNFINC’s bottom-line term sheet.

Yellow did not accept TNFINC’s term sheet, and the meeting ended after 1:00 a.m. on Tuesday morning. Later Tuesday morning, near lunch time, Yellow provided TNFINC with a new proposal. That proposal, like the one it had given TNFNC the night before, was unacceptable because it still did not contain the wages and contributions that Yellow had been telling the members would be available. Yellow also continued to demand unrelated work rule changes. TNFINC informed Yellow that its latest proposal was unacceptable and that TNFINC’s offer remained open and on the table. Yellow did not respond for the rest of Tuesday.

On Wednesday morning, Yellow still would not agree to TNFINC’s bottom-line term sheet offer. Despite not having an agreement, the IBT contacted the White House and the U.S. Department of Labor, informing them of the status of the last two days’ negotiations between TNFINC and Yellow. Even though Yellow had not reached an agreement with TNFINC, the IBT also informed the White House and the Department of Labor that it would support any steps taken by the Government that would save the Yellow employees’ jobs.

Yellow has sought to blame the Local Unions’ 72-hour strike notice as the cause of its financial problems. Yellow’s blame is misdirected. Yellow easily could have cured the delinquency that it created simply by paying the delinquent contributions it was contractually obligated to pay in the first place. As we pointed out during last Friday’s injunction hearing, at a July 7 meeting of the Yellow’s Board of Directors, the Directors voted not to make health and welfare contributions to six (6) health and pension funds. At that time, Yellow was reporting to the public that it had in excess of $100 million in cash. Yellow’s Board of Directors deliberately chose not to make contribution payments for the benefit of its employees so that it could “conserve” Yellow’s cash and assets for its shareholders and stakeholders other than its employees and their benefit funds. Their decision caused the Central States Funds to issue a delinquency notice and, among other things, terminate health care coverage for more than 11,000 Teamster families at YRC Freight and Holland as of Sunday July 23. The Local Unions could not let their members work without health care coverage and sent “72-hour” notices in accordance with the NMFA seeking to have the delinquent operating companies cure the delinquency. The Company chose not to do so and instead went to court to get an injunction that would have required more than 11,000 employees to work without benefits. Yellow’s legal maneuvering failed but made enough headlines that many of its customers have run away from it and are not shipping their freight with it. It is not certain why Yellow did not anticipate such an obvious reaction to the bad press that it was making. In short, the financial mess that Yellow finds itself in is entirely of its own making.

At this point, Yellow has stopped making pick-ups. Unofficial Yellow internal sources have also leaked conflicting information to the media about whether it is going into bankruptcy or continuing to look for financing. TNFINC has NOT been advised by Yellow that it is filing for bankruptcy at this time. However, it does appear that time is close to expiring for Yellow to obtain financing, and it is becoming increasingly likely that Yellow either will shut down or file bankruptcy. We have been informed by Yellow that no matter what, Yellow has set aside enough cash to make payroll for this week and for all days worked. We are not certain whether that includes paying contributions to the health and welfare funds.

In the meantime, TNFINC and the IBT continue to try to work with the Government to determine whether there is a way to protect the Teamster families at Yellow. TNFINC and the IBT remain willing to work with Yellow and its lenders or potential lenders. Hope, however, is fading. Unfortunately, despite more than a decade of concessions totaling billions of dollars given to the Company by Teamster members as well as a massive government bailout loan in 2020, Yellow may finally be succumbing to its enormous debt burden.

We will provide additional updates as we obtain information.

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