Two Large Transportation Companies, Yellow And Surge, File Bankruptcy And Layoff Tens Of Thousands Of Jobs

As economic conditions continue to worsen in the United States two large transportation companies have filed for bankruptcy, laying off tens of thousands of employees countrywide, which most likely will create more shortages and longer delays throughout the U.S.

Surge

Jacksonville, Florida-based Surge Transportation, a digital freight brokerage, announced that they filed Chapter 11 Bankruptcy on July 28th, Freight Waves reported.

In the first half of 2022, demand for excess motor carrier capacity dramatically contracted. In an effort to maintain volume, [Surge] cut its rates. While lower rates resulted in more brokered jobs, they also reduced [Surge’s] profit margins and its previous robust financial situation quickly began to erode.

According to court filings.

Omar Singh, founder and president of Surge Transportation, told Freight Waves in a statement that U.S. Bankruptcy Judge Jacob A. Brown approved the brokerage’s restructuring plan.

The U.S. Bankruptcy Court (MDFL) has approved Triumph as the debtor in possession (DIP) factor for Surge on an interim basis. Triumph and Surge are committed to working together with customers, carriers and factors to make prompt payment of all post-petition accounts. To accomplish that goal on terms most favorable to carriers hauling freight, payments on accounts purchased by Triumph will be paid to carriers or their factor within three days of purchase by Triumph at no charge to the carrier or factor.

Singh said

Freight Waves provided some additional insights into how the company landed itself in this position:

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Before filing for Chapter 11, Surge Transportation had scaled up to 200 employees working in Jacksonville, with satellite offices in Chicago and Ashburn, Virginia.  The digital freight brokerage was slated to open an office in Dallas before experiencing an abrupt decline in online ordering in April 2022 as consumers returned to brick-and-mortar stores once COVID-19 restrictions were lifted.

Prior to the rise in inflation and the war in Ukraine, Surge had experienced record year-over-year sales growth of 260% in 2021 and 240% in 2020, court filings state.

According to the freight brokerage’s financial statements, which are based on a trailing 12-month basis as of March for the past two years, Surge posted gross revenues of around $135 million in 2023, a substantial drop of approximately $65 million from $200 million in 2022.

By the time Surge determined that its strategy of cutting rates to maintain volume was a mistake, “it lacked the financial resources to pivot to a different business model focusing on higher rates, higher profit margins and lower overall overhead,” according to court filings.

Around this time, Surge said it hired Chicago-based Logisyn Advisors, a mergers and acquisitions advisory firm that specializes in transportation and logistics companies. However, the M&A firm failed to find a buyer.

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Yellow

Yellow, the more well-known of the two, officially filed for Chapter 11 bankruptcy yesterday, August 7th. The company began to hemorrhage vast numbers of employees last week in a bid to prevent officially filing for bankruptcy.

‘The layoffs could immediately impact up to 8,000 members of the company’s sales force, business operations and technology departments – and if the company fails, another 22,000 unionized drivers and freight handlers could face unemployment,’ Daily Mail wrote at the time.

But bankruptcy was unavoidable for the century-old company. Yellow CEO Darren Hawkins in a statement Sunday:

It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business.

Today, it is not common for someone to work at one company for 20, 30, or even 40 years, yet many at Yellow did. For generations, Yellow provided hundreds of thousands of Americans with solid, good-paying jobs and fulfilling careers.

Yellow CEO Darren Hawkins in a statement Sunday, said

He blamed the downfall on the unions. “We faced nine months of union intransigence, bullying and deliberately destructive tactics.”

ZeroHedge reported: ‘Yellow’s bankruptcy marks the largest filing in US trucking history. The firm was responsible for roughly 15% of major corporations’ less than truckload. It has struggled with a sizeable debt load and changing consumer habits in a post-Covid environment. Yellow has $1 billion in debt due in 2024 alone and has struggled to find common ground with the Teamsters Union.’

‘The Nashville-based company had 30,000 employees nationwide, with the union representing about 22,000 of those employees. Last week, the company notified its labor force about bankruptcy plans,’ the outlet added.

Yellow titled their press release with “International Brotherhood of Teamsters Drives Nearly 100-Year-Old Company Out of Business 30,000 American Jobs Lost.”

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AUTHOR COMMENTARY

Of the numerous canaries in the coalmine this is another one of them.

The economy is continuing to collapse and worsen by the day, as inflation continues to worsen and remain persistent (contrary to the government’s numbers); and because of this more jobs are going to be lost. Furthermore, because of this, there will no doubt be more shipping and transportation delays to come; as companies like Amazon only get even bigger.

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[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).

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