Asian MIT grad asks AI to make her photo more ‘professional,’ gets turned into white woman



Carl Samson
Mon, July 31, 2023

[Source]

A recent Asian American Massachusetts Institute of Technology (MIT) graduate made headlines this month after sharing evidence of racial bias in artificial intelligence (AI).

What she asked for: Rona Wang, 24, has been experimenting with AI portrait generators. In a recent attempt, she purportedly used a program called Playground AI to turn an image of her in an MIT sweatshirt into “a professional LinkedIn profile photo.”

What she got: The program, to Wang’s surprise, returned an image that gave her a fairer complexion, dark blonde hair and blue eyes.

“I was like, ‘Wow, does this thing think I should become white to become more professional?’” she told Boston.com.

Reactions: On July 14, Wang shared the result in an X post, which has now received over 5.9 million views.

Social media users replied to the post with their own takes and theories. Druv Bhagavan, a M.D./Ph.D. student at Washington University School of Medicine in St. Louis, warned about delegating important tasks to AI tools as “unbiased training data is rarely ever used.” Meanwhile, user @CityBureaucrat wrote, “AI stands for Aryan Intelligence.”

Playground AI’s response: Responding to Wang’s post, Playground AI founder Suhail Doshi said that “models aren’t instructable like that” and will pick “any generic thing based on the prompt.” However, he said in another tweet that Playground AI is “quite displeased with this and hope to solve it.”

The big picture: Racial bias is an ongoing concern in AI-generated images. While some programs have been accused of turning subjects white, others have been slammed for turning subjects Asian. Outside image generation, racial discrimination in AI facial recognition is also a concern, particularly among African Americans. How and whether artificial intelligence manages to solve these issues are yet to be seen.

Asian American workers most likely to be replaced by AI, study reveals



Ryan General
Mon, July 31, 2023

[Source]

Asian Americans are among the groups most vulnerable to displacement by artificial intelligence (AI) in the U.S., a new study by Pew Research Center has revealed.

About the study: The study, released on Wednesday, looked into the exposure of American workers to AI technologies and their potential risk of being replaced or assisted by AI systems.

Technical writers, budget analysts, web developers and data key operators are among those with high exposure to AI displacement, while workers such as firefighters, barbers and janitors have low exposure due to the nature of their work.

Impact on racial disparities: Overall, the study found that approximately 19% of American workers held jobs that are the most exposed to AI technologies.
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Asian workers face the highest risk of displacement at 24% compared to their white, Black and Hispanic counterparts. According to the findings, about 20% of white workers were found to be exposed, while 15% of Black workers and 13% of Hispanic workers faced similar risks.

Other findings: Women faced a slightly higher risk with 21% of female workers being exposed to AI in their jobs, compared to 19% of male workers. This discrepancy is attributed to the different types of jobs typically held by individuals of different genders.

The study also revealed a correlation between education levels and susceptibility to AI displacement or assistance. Workers with a bachelor’s degree or higher accounted for 27% of the workforce and were more than twice as likely to be exposed to AI technologies in their jobs than those with only a high school diploma, of which 12% faced similar risks.

More from NextShark: Chinese scientist behind world’s first gene-edited babies shares children’s status

The study also shed light on income disparities among workers with varying levels of AI exposure. Those in jobs with the highest exposure to AI technologies earned an average hourly wage of $33, while those in positions with the least exposure earned an average of $20 per hour.

Study’s implications: The findings, which provide crucial insights into the impact of AI on the American workforce, hold significant implications for policymakers and employers.

By identifying the groups most vulnerable to AI displacement, the study’s authors aim to provide policymakers with the ability to devise targeted strategies to support affected individuals and create measures to minimize potential workforce disruptions.

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Global disruption: A previous study published by the University of Oxford in 2013 predicted that 47% of U.S. jobs could be eliminated by AI over the next two decades.

Meanwhile, a more recent study by Goldman Sachs suggested that generative AI tools could potentially disrupt around 300 million full-time jobs worldwide, signifying a significant disruption in the global job market.

NASA hears signal from Voyager 2 spacecraft after mistakenly cutting contact


In this Aug. 4, 1977, photo provided by NASA, the "Sounds of Earth" record is mounted on the Voyager 2 spacecraft in the Safe-1 Building at the Kennedy Space Center, Fla., prior to encapsulation in the protective shroud. After days of silence, NASA has heard from Voyager 2, more than 12 billion miles away in interstellar space. Flight controllers accidentally sent a wrong command nearly two weeks ago that tilted the spacecraft's antenna away from Earth and severed contact. The project manager said Tuesday, Aug. 1, 2023 that the fact that the Deep Space Network has picked up a “heartbeat signal” means the 46-year-old craft is alive and operating.

 (AP Photo/NASA, File) 

MARCIA DUNN
Tue, August 1, 2023 

CAPE CANAVERAL, Fla. (AP) — After days of silence, NASA has heard from Voyager 2 in interstellar space billions of miles away.

Flight controllers accidentally sent a wrong command nearly two weeks ago that tilted the spacecraft’s antenna away from Earth and severed contact.

NASA's Deep Space Network, giant radio antennas across the globe, picked up a “heartbeat signal," meaning the 46-year-old craft is alive and operating, project manager Suzanne Dodd said in an email Tuesday.

The news “buoyed our spirits,” Dodd said. Flight controllers at the Jet Propulsion Laboratory in California will now try to turn Voyager 2’s antenna back toward Earth.

If the command doesn’t work — and controllers doubt it will — they’ll have to wait until October for an automatic spacecraft reset. The antenna is only 2% off-kilter.

“That is a long time to wait, so we'll try sending up commands several times" before then, Dodd said.

Voyager 2 rocketed into space in 1977, along with its identical twin Voyager 1, on a quest to explore the outer planets.

Still communicating and working fine, Voyager 1 is now 15 billion miles (24 billion kilometers) from Earth, making it the most distant spacecraft.

Voyager 2 trails its twin in interstellar space at more than 12 billion miles (19 billion kilometers) from Earth. At that distance, it takes more than 18 hours for a signal to travel one way.

___

The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.

Cosmic Question Mark Spotted in Deep Space Suggests the Universe Is Stumped

George Dvorsky
Mon, July 31, 2023 

Do you realize, there’s a question mark floating in space?

The James Webb Space Telescope captured the eerie punctuation mark, found buried within an image of Herbig-Haro 46/47—a tightly bound pair of actively forming stars located 1,470 light years from Earth.

The high-resolution near-infrared image, captured by the Webb Space Telescope, a project from NASA in collaboration with the European Space Agency and the Canadian Space Agency, came out last week. But if you zoom in close enough (at the center bottom), you’ll see an astronomical feature that, from our perspective, bears an uncanny resemblance to a question mark, as Space.com points out.

The image, released last week, shows Herbig-Haro 46/47, and an apparent question mark in deep space (as shown by yellow indicators at bottom center)

The unexpected question mark suggests a cosmological message from aliens, God, or the posthuman civilization running our simulated universe, but its underlying cause is far less extraordinary.

In response to a Space.com query, representatives of the Space Telescope Science Institute (STScI), which manages Webb’s science operations, speculate that this cosmic question mark could be a distant galaxy or a pair of interacting galaxies. In those scenarios, gravitational forces could have manipulated these galactic structures, leading to the distorted, question mark-like shape. Interestingly, this might be the first time that astronomers have set their eyes on this distant object (or objects), which exists far outside the bounds of our Milky Way galaxy.


Zoomed in even further, the feature still exhibits a distinctly question mark-like appearance.

Matt Caplan, an assistant professor of physics at Illinois State University, reaffirmed this suspicion, telling Space.com that the unique feature is likely two galaxies in the process of merging. In his interpretation, the distinct shape of the upper object is a potential sign of the “larger galaxy getting tidally disrupted,” he told Space.com. In other words, the bigger galaxy is being pulled apart, or distorted, due to gravitational forces.

That we’re bound to see familiar shapes in mundane objects should be expected, especially when peering into the vastness of space. There’s the ghost-like Boomerang nebula, the spooky face of Arp-Madore 2026-424 s (two merging galaxies), and the jack-o-lantern Sun, as some other examples.

More: The weirdest images ever taken on Mars

Gizmodo

First test images from Euclid space telescope unveiled

AFP
Mon, July 31, 2023 

Project leaders believe the Euclid space telescope's test images show it is capable of ultimately fulfilling its mission to shed more light on dark matter and dark energy (-)

The Euclid space telescope, launched July 1 on a mission to shed more light on elusive dark matter and dark energy, has reached its destination orbit and on Monday its European operators revealed its first test images.

The star-filled snapshots were taken during the space telescope's commissioning -- a phase during which its powerful instruments are finely calibrated -- and therefore not representative of its full potential.

But the European Space Agency (ESA) says the tests already show it will be capable of fulfilling its massive mission.

"After more than 11 years of designing and developing Euclid, it's exhilarating and enormously emotional to see these first images," Euclid project manager Giuseppe Racca in a statement.

After blasting off from Florida, the satellite has traveled about one million miles (1.5 million kilometers) away from Earth to its observational orbit.

From there, Euclid will chart the largest-ever map of the universe, encompassing up to two billion galaxies across more than a third of the sky.

By capturing light that has taken 10 billion years to reach Earth's vicinity, the map will also offer a new view of the 13.8-billion-year-old universe's history.

Its visible light camera will let it measure the shape of galaxies, while its near-infrared spectrometer and photometer -- developed with the help of NASA -- will allow it to measure how far away they are.

But when the instruments were switched on, researchers were spooked by "an unexpected pattern of light contaminating the images," the ESA said.

An investigation led researchers to believe that "some sunlight was creeping into the spacecraft, probably through a tiny gap," but that it was only detected when Euclid was oriented in certain ways.

"By avoiding certain angles," ESA said, Euclid's imaging device "will be able to fulfil its mission."

Scientists hope to use information gathered to address what Racca previously called a "cosmic embarrassment": that 95 percent of the universe remains unknown to humanity.

Around 70 percent is thought to be made of dark energy, the name given to the unknown force that is causing the universe to expand at an accelerated rate.

And 25 percent is believed to be dark matter, thought to bind the universe together and make up around 80 percent of its mass.

The telescope's scientific operations are due to begin in October.

la/cha/des/st

NO PASARAN! THE INTERNATIONAL BRIGADES 
Spain identifies 212 German, Austrian and Dutch fighters who went missing during Spanish Civil War


- People put red carnations next to photographs during the 87th Spanish Republic anniversary ceremony to pay tribute to people killed in the Spanish Civil War at the Almudena cemetery in Madrid, on April 14, 2018. Spain’s Catalonia regional government says it has identified 357 foreign militiamen who disappeared in the region during the Spanish Civil War. Of these, 212 are Germany, Austria and Netherlands nationals. Researchers have also been able to find the likely exact area where all they died or were badly wounded. 

(AP Photo/Francisco Seco, File)

DAVID BRUNAT
Sun, July 30, 2023 

BARCELONA, Spain (AP) — Spanish government researchers said Sunday they had identified 357 foreign fighters who went missing during the Spanish Civil War (1936-1939), the conflict that foreshadowed World War II.

Researchers confirmed the names of 212 fighters from Germany, Austria and the Netherlands, according to a statement from the government Sunday. Some 102 are of German origin, 70 Austrian and 40 Dutch. It gave no information on how many people of other nationalities had been identified.

The identified combatants fought within the International Brigades, military units set up by the Communist International to fight against General Francisco Franco’s fascist forces. Some 40,000 foreign men and women joined up as volunteers, fighting alongside the forces of the democratic Second Spanish Republic and against the rise of fascism in Europe in late 1930s.

The findings are based on a year of research in records held in documentary archives in Spain and Russia. Researchers combed through the daily lists of casualties and missing soldiers compiled by officers in the International Brigades.

The names of private soldiers were frequently omitted from the lists, making the research process more difficult. These lists are held in the Russian State Archive of Socio-Political History, in Moscow. Researchers also dipped into the main archives on the Spanish Civil War located in Spain.

By cross-referencing documents, researchers were also able to identify the likely area where the soldiers died or were badly wounded. It is an important step toward locating their remains inside mass graves scattered across the country.

This research provides “very valuable information that gives us the opportunity to contact the families of the missing combatants and, in the future, to intervene in the mass graves that have been located,” said Alfons Aragoneses, head of the project.

All those identified were part of the Thälmann Brigade, a Communist unit made up largely of anti-Nazi Germans. The battalion was active on the Ebro River front in northeastern Spain between March and September 1938, the site of the longest and deadliest battle of the war.

The research is ongoing and it is funded by Catalan regional government, with the aim of contributing to the country’s historical memory. The second phase of the project will try to identify missing militiamen from Great Britain, Ireland, Canada and the United States. The final step would require opening the graves in search of bodies.

Historians estimate nearly 10,000 foreign volunteers died in combat on Spanish soil during the war. How many are still unidentified, buried inside graves, remains unknown.

The Spanish Civil War served as a testing ground for Hitler’s Germany and Mussolini’s Italy prior to World War II. This triggered an international outcry to try to save the Republic’s democratic government, which eventually succumbed to Franco in 1939.

HEGEMONIC HUBRIS

China's Great Leap Backward: So much for the next dominant superpower

Joe Tauke
Sun, July 30, 2023 

China balloon bubble about to burst Getty Images/sizsus

The "Chinese century" is over.

After all the prognostications, projections and proclamations of the past 20 years asserting that China would soon overtake the U.S. as the world's dominant superpower, the People's Republic is now facing twin perpetual headwinds, and has no realistic options for countering either of them.

The first could accurately be described as the strongest long-term force driving the fates of all great powers: demographics. What was, for many previous decades,China's ultimate advantage — its never-ending supply of working-age laborers — peaked at almost exactly one billion people in 2010, according to the Chinese census. The next census, in 2020, revealed that for the first time since China's economic liberalization in the 1970s, the working-age cohort had shrunk, decreasing by more than 30 million. The U.N. estimates that this group will continue to contract, dropping to 773 million by 2050. (In other words, between now and then China is likely to lose a number of workers larger than the entire population of Brazil.) The under-14 population will also fall in that same period, from just over 250 million in 2020 to a median projection of 150 million in 2050. Not only will the workers be disappearing, but nobody is expected to replace them.


(United Nations)Every age-related trend in China is going in the wrong direction. The nation's median age, once well below the Western world's, is now older than America's and headed further north with every passing year. Deaths outnumbered births last year for the first time since 1961. The fertility rate, which normally must be at 2.1 children per adult woman just to maintain a steady population, has slipped to below 1.1 — a figure made worse by the fact that, unlike in virtually every other country on the planet, China doesn't have a relatively even gender split in its adult population, the long-term result of male favoritism combined with the central government's infamous one-child policy. Basic math dictates that tens of millions of these "extra" men will never start families of their own. To compound the problem even further, women in China have indicated lower interest in having children than ever before; more than two-thirds have expressed "low birth desire." According to Prof. James Liang of Peking University, fertility rates in Beijing and Shanghai have fallen to an astonishing 0.7, "the lowest in the world."
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In Japan, economic stagnation produced a period that was called the "Lost Decade." That stagnation eventually persisted so long that some began to refer to it as the "Lost Generation." In China, an even more ominous buzz-phrase has become popular online: The "Last Generation."

Much has been made of the difficulties China will face in attempting to manage a rapidly-shrinking workforce against a rapidly-growing retirement age population, which is projected to double by 2050. But that issue may actually be preferable to what is likely to happen afterward, or perhaps sooner if some of China's older population doesn't wind up living as long as expected. Here are the UN estimates for China's total population between now and 2100:


(United Nations)Notice the lower-end expectations at the end of the century: 600 million, 500 million, perhaps as low as 450 million. Even the median projection puts the number at around 750 million. This is not just a rogue estimate by a single U.N. agency — the Shanghai Academy of Social Sciences has issued an extremely specific prediction of 587 million. If you think China has ghost cities now, imagine that vast nation with barely one-third of the population it has today. What will happen to property values in a country where between 50 and 70 percent of its people have disappeared? What will happen to tourism? To retail? So many articles have been written about what happens when a modern society grows "too old," as has happened in Japan and Germany, among others. But how many have been written about what happens when the majority of a modern society vanishes altogether?

To make matters worse, if that seems possible, all these numbers rely on official Chinese statistics, and the government has likely been overstating them. According to an extensive examination of different sets of books by University of Wisconsin Prof. Yi Fuxian, it's possible to find the "fudging" effects by comparing local and provincial data to that published at the national level.

"For the official statisticians," Yi explains, "the primary school enrolment data should be reliable because public education covers every Chinese child. They were wrong, however, because primary school enrolment data in China is often inflated so that local authorities can claim more education subsidies from Beijing. … According to a report by CCTV on January 7, 2012, the Jieshou city in Anhui province reported 51,586 primary school students, when the actual number was only 36,234, allowing them to extract an additional 10.63 million yuan (about $1.54 million) in state funding. On June 4, 2012, China Youth Daily reported that a middle school in Yangxin county, Hubei province reported 3,000 students, while the actual number was only 700."

In a country as large as China, what do these figures look like when aggregated to a national scale? According to Yi, government data "showed that China had 366 million new births" between 1991 and 2010, "but the group aged 0-19 in the 2010 census was only 321 million." In other words, either 45 million of those children had died between birth and the census, or they never really existed in the first place.

That was just one cohort, in one census, but it's hardly the only example. "In 2010, the population aged 3-14 was only 169 million, according to the 2010 household registration database, and 176 million, according to the 2010 census," Yi continued. "Yet, according to the Chinese statistics bureau, there were 210 million births in the 1996-2007 period." Again, either China has secretly experienced the greatest wave of mass child deaths that the world has ever seen, or the birth-rate numbers were always grossly exaggerated.

China's demographic headwinds, therefore, may be hurricane-strength. To be fair, most major nations in the West also face declining birth rates and aging citizens. The enormous difference in projected demographics, at least in many of those cases, comes down to immigration. Even with a current fertility rate of only 1.6, the U.S. population projects to reach roughly 400 million by the end of the century, according to the U.N.'s median estimate. East Asian countries tend to have much more restrictive immigration policies, but nowhere is this as true as in the People's Republic. Since 1950, which is as far back as the data goes, China has never experienced a single year of net positive migration. Ever.

As previously mentioned, Beijing faces not one but two enormous burdens going forward. The second should not come as much of a surprise, as it was intertwined with China's population burst during all the good years: the economy.

Yes, the mighty Chinese economy, the boomiest boom that's ever boomed… is going to become a big, big problem. Much of this problem will, of course, be caused by the enormity of the demographic crunch. But there are specific details that will amplify the impact of that crunch. A whopping 70 percent of Chinese household wealth is held in real estate. Seventy. Percent. (The comparable number in the U.S. is less than half that.) The demand for investment properties has been so high that China's construction eruption simply cannot be reasonably compared to those that have occurred in any other major economy, even ones that have experienced giant housing bubbles of their own. As this graphic from the Reserve Bank of Australia shows, "residential gross fixed capital" as a proportion of GDP is close to 20% in China — the comparable proportions in Australia, Japan, South Korea and the U.S. are all around 5% or less.

Keep in mind that China's population is shrinking, and will continue to do so with increasing velocity. According to the World Bank, home price-to-income ratios in Beijing, Shanghai, and Shenzhen exceed "a multiple of 40;" the same figure is "only" 22 in London and 12 in New York, two notoriously expensive cities in the West.

It is likely impossible to overemphasize the potential economic damage that will likely ensue when previous decades of population growth, urbanization and the frenzied real estate investment that has accompanied them run into the brick wall of new decades with consistently fewer buyers — and that doesn't mean "fewer buyers" in the normal sense of a bubble popping, but the literal absence of hundreds of millions of buyers over time. What will happen as those aforementioned ghost cities begin to multiply? And perhaps the more important question: How can China possibly make its all-important transition to a consumer-based economy when consumers as a whole have shoved so much of their wealth into properties that will often end up being worthless? How in the world is this supposed to work? How could it work?

That consumer transition becomes more necessary every day, because China has no other realistic option for productive growth moving forward. For years, Beijing has obsessively pushed economic activity toward investment, which sounds appealing at first simply because of the connotations of the word. But the Middle Kingdom long ago started running up against the law of diminishing returns when it comes to endlessly increasing investment. As Carnegie's China scholar Michael Pettis explained earlier this year, "China has the highest investment share of GDP in the world. It also has among the fastest growing debt burdens in history. These are not unrelated. With growing amounts of investment directed into projects whose economic benefits are less than their economic costs, the surge in China's debt burden is a direct consequence of this very high investment share."

Pettis is not strictly talking about central government debt here, but rather total debt within the economy. Given the prodigious real estate boom in the People's Republic, one could be forgiven for assuming that's mainly what Pettis is describing, and such data surely factors into the next two charts. But there are many other sectors that do as well. Below is a graph of the increase in all outstanding non-financial corporate debt in four nations — the U.S., France, Thailand and Malaysia — since the global financial crisis. For simplicity's sake, the debt level in each country was set to a value of 100 in the final quarter of 2007, and the data goes through the final quarter of 2022:


(Federal Reserve)

That's admittedly not the easiest visual aid to digest, so here's a summary: The total amount of such debt in the U.S. increased over those 15 years to a level of 220, or slightly more than double the amount that existed in 2007. Malaysia, which has posted the fastest average growth of the four countries in that time, wound up with almost the same relative amount of internal debt growth. France and Thailand, which have both had economic struggles in the post-crisis period, took very different paths and ended up at the bottom and top of the chart, respectively.

Here's why the comparison is worth digesting. Below is the same exact chart, except with China added:


(Federal Reserve)The enormity of the Chinese debt load makes the differences between the other four nations practically vanish. Notice the scale on the left side of the graph. Starting at a base of 100, the Chinese measurement reached nearly 5,000 last year, or 50 times what it was in 2007.

There is likely no economist on the planet who would advocate multiplying any significant category of debt 50 times over, no matter what the reason. But this is as much the result of political pressure to hit government GDP targets as anything else. To go back to Pettis, he explains the Chinese view by saying that for Beijing, GDP is an input, whereas virtually every other country understands it as an output. In other words, most nations tabulate their economic activities and eventually spit out a number that is recorded as GDP. Many arguments are fought over exactly how to go about that calculation and what it means, but the basic premise is pretty much the same. In China, the central government determines what GDP shall be for the quarter, and then it's up to provincial and local officials to do whatever is necessary to hit their numbers, regardless of the actual necessity or utility of the projects. (Furthermore, if those officials can't even reach their goals by incessantly building bridges to nowhere, they may simply lie and claim success anyway.)

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Local governments are forbidden from directly borrowing money, so their administrators do what any local government apparatchiks worth their salt around the world do when they need money they're technically not supposed to have: They find a loophole and exploit it relentlessly. In China's case, that means forming "independent" corporations known as "Local Government Financing Vehicles," which are somewhat-inexplicably allowed to be the equivalent of Clark Kent putting on a pair of glasses to fool everyone into thinking that he's not Superman. The LGFVs can borrow money that local governments can't. So that's what they do. Especially when the alternative is to displease the Politburo.

As you might imagine, this type of policy-making does not tend to result in more money allocated to things like expanding sick leave, pension reform, parental leave, debt reduction or anything else that fails to artificially goose GDP. Instead, funds are dumped into watermelon museums that nobody needs and endless Skynet (they seriously call it that) "internal security" cameras that people need even less.

The ironic lack of social safety nets in an ostensibly Communist country, combined with a seemingly unstoppable regime of compulsive over-investment, has for many years resulted in the exact opposite of what China needs — consumers have felt and still feel it necessary to have some of the highest savings rates in the world, which means they aren't becoming a larger part of the economy but rather a smaller part of it. Here's a graph published by Reuters, which shows that private consumption as a share of Chinese GDP has been falling for decades. A similar chart from the Reserve Bank of Australia compares household consumption in China to other major Asian economies:


(Reserve Bank of Australia)All these factors, and likely many more, have recently produced a series of announcements that, at least to some, were not much of a surprise: "China's economy may never overtake the U.S.," declared Business Insider. "China Quietly Abandons Goal of Overtaking U.S. Economy," opined Newsweek. Nikkei chimed in that "China's GDP is unlikely to surpass U.S. in next few decades."

"The next few decades" is probably generous. The Chinese economy, if measured by anything remotely approaching the slightest degree of accuracy, won't surpass America's because it can't. The structural forces that have allowed it to grow at breakneck speed for half a century are now the same forces preventing it from continuing to do so. Chinese labor costs today are significantly higher than costs for the same amount of labor in both its Asian neighbors and Latin America, including Mexico, where manufacturing for the American market is much more convenient despite the overhanging power of the cartels. In fact, Mexico became the largest overall U.S. trading partner in the first quarter of this year, after surpassing China to become the biggest trade partner specifically for manufactured goods last year.

China's "factory of the world" status is slowly evaporating because cheaper workers can now be found elsewhere, which often come without problems like blatant IP theft across countless industries or figuring out whether any given supply chain involves Uyghur forced labor camps. The Chinese population is shrinking, meaning that domestic labor costs will continue to surge upward even as overall GDP growth falls. The government in Beijing is worried about "South Park" and Winnie the Pooh. China is no longer a place where capitalist dreams go to succeed, and indeed the fact that it ever was reflects one of the biggest mistakes the Western world has made since the fall of the Iron Curtain.

President Xi Jinping probably won't be happy with the way the rest of the "Chinese century" is likely to turn out. If it's any consolation, he should be happier right now than he will be in the years ahead.

Apple supplier Foxconn plans $500 million component factories in India - Bloomberg News

Mon, July 31, 2023


(Reuters) -Apple's main supplier, Foxconn Technology Group, is planning to invest close to $500 million to build two component factories in India, Bloomberg News reported on Monday, citing people familiar with the matter.

These factories will be built in the southern state of Karnataka and at least one of them will produce Apple parts, including for iPhones, the report said.

The exact locations of the new plants in the state are yet to be decided and a formal announcement is expected as early as this week.

Foxconn and Apple did not immediately respond to Reuters requests for comment.

Karnataka has already approved investment to the tune of 80 billion rupees ($972.88 million) by a Foxconn unit in March, making it the third southern Indian state after Andhra Pradesh and Tamil Nadu to allow Foxconn plants.

As part of its investment drive in India in its bid to diversify beyond China, the Taiwanese company has also signed a deal with Tamil Nadu to invest 16 billion rupees in a new electronic components manufacturing facility that will create 6,000 jobs, the state government said on Monday.

The Foxconn Industrial Internet facility will be built in the Kancheepuram district near the state capital of Chennai, a state government source said on condition of anonymity as details are not yet public.

($1 = 82.2300 Indian rupees)

(Reporting by Urvi Dugar and Chavi Mehta in Bengaluru; Editing by Arun Koyyur)

Apollo Leads Deal to Provide Trucking Firm Yellow With Bankruptcy Loan


Reshmi Basu, Rachel Butt and Jeremy Hill
Tue, August 1, 2023 


(Bloomberg) -- Creditors led by Apollo Global Management Inc. are nearing a deal to provide Yellow Corp. with fresh cash during a coming bankruptcy, according to people with knowledge of the matter.

The investing giant is finalizing a deal to lead a debtor-in-possession, or DIP, financing for the imperiled trucking company, said the people, who asked not to be identified because the matter is private. Apollo is well-positioned to provide the financing because it owns most of one of Yellow’s term loans, the people said. Talks aren’t final and plans may change, they added.

Representatives for Apollo and Yellow declined to comment.

The less-than-truckload carrier, which accepts shipments that don’t fill a whole trailer, has been teetering in recent weeks and told workers it was shutting down, according to the labor union that represents Yellow’s drivers. The company has more than $1 billion of debt maturing next year that it has struggled to refinance. Apollo was the lead lender on the company’s $600 million term loan in 2019, when it was known as YRC Worldwide Inc.

Much of Yellow’s current debt predicament stems from a now-controversial rescue loan it took on during the Covid-19 pandemic. The US government lent the company some $700 million in 2020, making up 95% of what was dispersed under a Cares Act program to offset losses for businesses critical to national security. The company owes about half its total debt load to the US Treasury, according to company filings.

Yellow has faced years of financial stress. The company staved off a bankruptcy filing in 2009 after bondholders agreed to swap debt for equity, only to have to restructure again in 2011.

Bloomberg Businessweek

Teamsters local unions endorse agreement with delivery giant UPS

Story by Reuters • Yesterday 

FILE PHOTO: United Parcel Service (UPS) vehicles are seen at a facility in Brooklyn, New York City© Thomson Reuters

(Reuters) - The Teamsters local unions, which represent 340,000 workers at United Parcel Service, voted 161-1 on Monday to endorse the tentative agreement reached with the delivery giant on July 25.

The agreement, estimated to be at $30 billion by the union, provides historic wage increases, one more paid holiday and air conditioning in the company's ubiquitous brown delivery trucks.

It also eliminates a two-tier pay system and forced overtime for delivery drivers.

Related video: Teamsters Union says trucking company Yellow Corp. is headed for bankruptcy 

(KCCI Des Moines)   Duration 0:28  View on Watch

Straight Arrow NewsIn major UPS deal, labor unions continue win streak with strike threats

2:07

"Our tentative agreement is richer, stronger, and more far-reaching than any settlement ever negotiated in the history of American organized labor," said Teamsters General President Sean M. O'Brien.

Of the 176 local unions with UPS members, 14 affiliates did not show up to a meeting in Washington DC to review the agreement.

The union said the rank and file of UPS Teamsters will have the chance to vote on ratification from August 3 to 22.

(Reporting by Ananta Agarwal in Bengaluru; Editing by Arun Koyyur)

Teamsters locals overwhelmingly endorse UPS tentative contract

Mark Solomon
Mon, July 31, 2023 

Teamster local officials endorse UPS contract (Photo: Jim Allen/FreightWaves)

By a vote of 161-1, Teamsters local unions representing 340,000 full- and part-time workers at UPS Inc. (NYSE: UPS) voted Monday to endorse the tentative five-year agreement reached with the delivery giant on July 25 and recommend its passage by the full membership.

Of the 176 local unions with UPS members, 14 affiliates failed to show up to a meeting in Washington, D.C., to review the tentative agreement, the Teamsters said.

The agreement now moves to the rank-and-file, which will have the chance to vote on ratification from Aug. 3-22.

The gains achieved during negotiations, which occurred regionally and nationally since January, are larger and more lucrative than any previous Teamsters contract at UPS, the Teamsters have said.

The tentative agreement, which the Teamsters said is valued at $30 billion, establishes sizable wage increases for all workers for the life of the contract, installation of air conditioning in new vehicles, the end of a controversial two-tier wage system, catch-up raises for part-timers, Martin Luther King Day as a paid holiday for the first time, and new language to prevent forced overtime on days off.

UPS and UAW Labor Disputes Rage Over Wage Fights: Kiplinger Economic Forecasts

Kiplinger
Mon, July 31, 2023 

United Auto Workers are at a standstill in negotiations with the Big Three automakers, and UPS has narrowly avoided a Teamsters strike, for now.

As negotiations between major unions and employers stall, a potential strike could have far-reaching consequences. To help you understand what is going on and what we expect to happen in the future, our highly-experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest...

Keep an eye on these labor disputes with big potential ramifications.

First, union United Auto Workers (UAW) is taking a more aggressive approach to contract negotiations with the Big Three automakers under President Shawn Fain than in previous years. Talks began earlier this month with the goal of reaching a deal before the current one with Ford, GM and Chrysler parent Stellantis expires in September.

Among the union’s demands: increasing wages, ending tiered structures for wages and benefits and reinstating annual cost-of-living adjustments for workers. More important is how the union aims to achieve them.

Under Fain, UAW, which represents 150,000 hourly workers at the Big Three automakers, has refused to name a single automaker on which to initially focus negotiations. Instead, the union has hinted at taking on Ford, GM and Stellantis simultaneously. UAW also says it’s not afraid of a prolonged fight, with $825 million in its strike fund.

During the last round of bargaining in 2019, a breakdown in talks between automakers and the union resulted in a 40-day strike against GM. The automaker claims the strike cost it $3.6 billion that year.

Meanwhile, the Teamsters and UPS averted a possible strike, for now, when they reached a tentative agreement on July 25. Union members need to vote to approve the new contract. Failure to ratify the tentative agreement, which addresses disputes about wages and benefits for part-time employees, could mean another strike threat looms.

If a strike were to occur, you could expect parcel shipping rates to jump by 10%, as capacity is strained at FedEx and other parcel delivery companies. LTL, or less than truckload, companies should also benefit. They carry smaller freight than traditional truckload companies. Also poised to profit: Intermodal rail, a shift that is already happening as shippers schedule alternatives to UPS.

Absent a strike, shipping rates will continue at their current low level.
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This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. 

99-year-old trucking company Yellow shuts down, putting 30,000 out of work

Chris Isidore, CNN
Mon, July 31, 2023 

Joe Raedle/Getty Images

Yellow Corp., a 99-year-old trucking company that was once a dominant player in its field, halted operations Sunday and will lay off all 30,000 of its workers.

The unionized company has been in a battle with the Teamsters union, which represents about 22,000 drivers and dock workers at the company. Just a week ago the union canceled a threatened strike that had been prompted by the company failing to contribute to its pension and health insurance plans. The union granted the company an extra month to make the required payments.

But by midweek last week, the company had stopped picking up freight from its customers and was making deliveries only of freight already in its system, according to both the union and Satish Jindel, a trucking industry consultant.

While the union agreed not to go on strike against Yellow, it could not reach an agreement on a new contract with the trucking company, according to a memo sent to local unions Thursday by the Teamsters’ negotiating committee. The union said early Monday that it had been notified of the shutdown.

“Today’s news is unfortunate but not surprising. Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government. This is a sad day for workers and the American freight industry,” said Teamsters President Sean O’Brien in a statement.

Company officials did not respond to numerous requests for comment Sunday and Monday.

While the company is based in Nashville, Tennessee, it is a national company with terminals and employees spread between more than 300 terminals nationwide. Experts in the field said it was primarily an unaffordable amount of debt, more than the cost of the union contract, that did in Yellow.

“The Teamsters had made a series of painful concessions that brought them close to wage parity with nonunion carriers,” said Tom Nightingale, CEO of AFS Logistics, a third-party logistics firm that places about $11 billion worth of freight annually with different trucking companies on behalf of shippers. He said the company began taking on significant amount of debt 20 years ago in order to acquire other trucking companies.

“Now their debt service is just enormous,” he said, pointing to $1.5 billion in debt on its books.

There are two other national competitors in Yellow’s segment of the trucking market which are also unionized, ABF Freight and TForce. Both were far more profitable in recent years than Yellow, which posted only a narrow operating profit in 2021 and 2022 and a $9.3 million operating loss in the first quarter.

There were reports last week that a bankruptcy filing would come by July 31, although the company said last week only that it continued to be in talks with the Teamsters and that it was considering all of its options. The Teamsters said Monday the company is filing for bankruptcy.

US taxpayers to take a hit

The closing is bad news not only for its employees and its customers, who generally used Yellow because it offered some of the cheapest rates in the trucking sector, but also for US taxpayers. The company received a $700 million loan from the federal government in 2020, a loan that resulted in taxpayers holding 30% of its outstanding stock. And the company still owed the Treasury department more than $700 million according to its most recently quarterly report, nearly half of the long-term debt on its books.

Yellow’s stock lost 82% of its value between the time of that loan and Thursday close after reports of the bankruptcy plans, closing at only 57 cents a share. It bumped up 14 cents a share on Friday, but still remained a so-called penny stock.

The company had received that loan during the pandemic, despite the fact that at the time it was facing charges of defrauding the government by overbilling on shipments of items for the US military. The company eventually settled the dispute without admitting wrongdoing but was forced to pay a $6.85 million fine.

Yellow handles pallet-sized shipments of freight, moving shipments from numerous customers in the same truck, a segment of the trucking industry known as less-than-truckload, or LTL. The company had been claiming as recently as June that it was the nation’s third largest LTL carrier.

But the company handled only about 7% of the nation’s 720,000 daily LTL shipments last year, said Jindel. He said there is about 8% to 10% excess capacity in the LTL sector right now, so the closure of Yellow shouldn’t cause a significant disruption in supply chains. But he said it will cause higher rates for shippers who depend on LTL carriers, since it was the excess capacity that sent prices lower.

Higher prices will hit Yellow customers, Jindel said.

“The reason they were using Yellow was because they were cheap,” he said. “They’re finding out that price was below the cost of supporting a good operation.”

While the US economy has remained strong, spending by consumers has been shifting in recent years from the goods they were buying in 2020 and early 2021 when they were still stuck close to home due to the pandemic, to services, such as plane tickets and other experiences that don’t need to move by truck. Nightingale said industrywide LTL shipments fell 17% between 2021 and 2022, and another 5% in the first quarter compared to the first quarter a year earlier.

He said that while Yellow could be profitable when demand for trucking was strong, it couldn’t get by in the face of the slowdown in freight, and the drop in trucking rates that went with it. Shippers worried about Yellow’s future started shifting to other carriers, as its shipments fell 13% in the first quarter compared a year earlier.

“It’s what Warren Buffett says, when the tide goes out you discover who’s been swimming naked,” Nightingale said.

End of an era in trucking

When the trucking industry was deregulated nearly 40 years ago, the segment of the industry that handled full trailers of cargo, known as truckload, soon was dominated by non-union trucking companies. The only thing low-cost competitors needed to enter that segment of the industry was a truck.

But the LTL segment requires a network of terminals to sort incoming and outgoing freight. That limited, but did not prevent, the entry of low-cost competitors. So unionized carriers such as Yellow continued to be major players, even as non-union rivals grew.

Eventually non-union carriers came to dominate the LTL segment as well. By early in this century, many of the remaining unionized LTL carriers, including Yellow and rivals such as Roadway Express, New Penn and Holland, merged to survive.

Yellow, Roadway and a third company known as CF or Consolidated Freightways had once been known as the Big Three of the trucking industry. CF went out of business in 2002. And with Yellow Corp. closing, the final two parts of the Big Three are now out of business as well.

Yellow’s demise: 2 decades in the making

Todd Maiden

FREIGHT WAVES
Mon, July 31, 2023 

Less-than-truckload carrier Yellow Corp. closes after 99 years in business.

 (Photo: Jim Allen/FreightWaves)

The biggest bankruptcy in U.S. trucking history could occur in the coming days when the nation’s third-largest less-than-truckload carrier, Yellow Corp., files. The company ceased all operations at noon on Sunday, and leadership representing its Teamsters workforce said it had been notified of a pending bankruptcy filing.

The company is still shopping a small 3PL unit, which may delay a filing. However, it laid off most of its nonunion workforce last week and told union employees on Sunday afternoon not to show up.

While the Nashville, Tennessee-based company saw operations deteriorate rapidly in recent months as it unsuccessfully attempted to push through operational changes with its union workforce, its ultimate failure was anything but sudden.
Bankruptcy filing years in the making

A series of large LTL and other acquisitions in efforts to transform Yellow into a global transportation and logistics leader, the ambition of former Chairman and CEO William “Bill” Zollars, were the catalysts for an eventual downfall.

In 2003, Yellow acquired Roadway in a $1.1 billion deal and then leveraged up in 2005 to acquire USF for $1.47 billion. The goal was to emerge with a command position in the LTL space, allowing the company to leverage larger scale into greater operating and cost synergies.

A much bigger organization with a debt-laden balance sheet, the company took on the YRC Worldwide moniker in 2006 as it had become a holding company for numerous transportation and logistics brands operating in more than 70 countries around the world. In that year, it would see its revenue increase more than threefold since the buying spree began to nearly $10 billion, with earnings per share of roughly $5, or $277 million in net income. That would be the financial pinnacle for the company as a freight recession would take hold that year, followed by a near collapse in financial markets two years later.

However, YRC continued to grow through the freight downturn and with a more cumbersome debt profile in place.

A sign posted on terminal gates on Sunday. (Jim Allen/FreightWaves)

Further expansion of its logistics unit occurred in China with the 2007 acquisition of Shanghai Jiayu Logistics. This further fueled the company’s global growth initiatives. The deal complemented its existing freight forwarding and logistics joint ventures in China, which were established in 2005.

Failure to integrate acquisitions and its national LTL freight network (Yellow and Roadway’s national networks weren’t integrated until March 2009) along with its debt burden left the carrier bloated entering the Great Recession. Matters were further compounded by internal service issues and a rapidly declining freight environment, which was highlighted by fierce price competition as some carriers sought to hasten YRC’s demise by underbidding freight.

The leverage proved to be too much and nearly led to a bankruptcy filing in late 2009.
Debt-for-equity swaps, wage concessions and other financial reengineering

By the end of 2009, YRC was in a perilous position. It had to find a solution for pending debt payments and appease its union workforce, which had already consented to reduced wages. YRC was also tasked with attracting freight to its network as competitors underpriced the company and its customer base sought alternatives as both groups were planning for the carrier’s exit.

After months of credit agreement amendments and extensions from its lender group, YRC was finally able to craft a $470 million debt-for-equity deal in the closing hours of 2009. The deal deferred interest and fee payments to lenders through 2010 and provided the company with access to $160 million in liquidity under its revolving credit facility. The transaction wiped out existing shareholders, including union stakeholders, leaving former bondholders owning 94% of the company’s outstanding shares.

That deal was preceded by two rounds of wage concessions from union employees. In early 2009, the union agreed to 10% wage cuts in exchange for a 15% stake in the company. Later in the year, another round of wage cuts, this time an additional 5%, as well as an 18-month cessation of pension fund contributions, would be required to get the debt-for-equity deal done.

The following year, those wage concessions would be extended into 2015 (and eventually into 2019), and the company’s new pension contribution rate would be just 25% of the rate in place in 2009 — all part of Zollars’ final restructuring, which concluded in the summer of 2011. The union’s equity stake would increase to 25%, and it would get a second seat on the board in exchange. The day before the new deal was approved, YRC said Zollars would step down upon its completion.

The 2011 restructuring included $100 million in new capital for the company along with increased liquidity under a new $400 million loan. The debt-for-equity swap left existing shareholder positions reduced to just 2.5% of the outstanding stock.

That would cap Zollars’ career at the helm. He left the same day the transaction was completed, replaced as CEO by former Yellow Transportation head James Welch.

Zollars’ compensation (including cash, stock, changes in pension valuation and perks) totaled $2.5 million in the restructuring year of 2009. He earned more than $12 million in the three-year period ended 2009.
’09 restructuring was only the beginning

Saved from bankruptcy and with a little breathing room, YRC accelerated its corporate overhaul, which began in late 2009 as a bankruptcy filing was looming. Those efforts included divesting non-LTL offerings.

In late 2009, YRC unloaded its dedicated unit and in 2010, the company sold a stake in its logistics operations to private equity to provide incremental liquidity. In 2011, the carrier sold its truckload operations, Glen Moore, to now-defunct Celadon, and in 2012, it sold its stake in Shanghai Jiayu Logistics to its joint venture partner.

Other liquidity improvement measures were required along the way, including selling and leasing back facilities and reducing capital expenditures on equipment. Reverse stock splits would be required to prop up declines in the share price as a result of the equity dilution. The company completed a 1:25 reverse split in 2010 and a 1:300 split in 2011 to comply with Nasdaq listing requirements for shares to maintain a $1 level.

Facing debt maturities, Welch would complete a recapitalization that again included debt for equity in 2014 after tumultuous but ultimately successful negotiations with the union and the lending group. That transaction would relieve $300 million in debt and pave the way for the company to refinance $1.1 billion in debt, providing it with a more stable capital structure for a while.

However, years of neglecting to fund fleet and terminal upgrades led to higher operating costs and service inadequacies compared to peers, fueling a cycle of lower yields and continual underinvestment in the network. Its industry-lagging service scores — dead last among national providers — forced it to become a low-cost provider. Its inability to appropriately charge for the freight it hauled left it barely covering operating expenses in most quarters and booking losses when accounting for interest expense and other items.

In 2019, it was able to negotiate a collective-bargaining agreement that provided it flexibility around job classifications, work rules for part-time employees and the use of purchased transportation. It was also allowed the use of box trucks in LTL operations with non-CDL drivers. Teamsters would get a pay bump of 18% in aggregate throughout the five-year term (essentially a clawback of what they had given up), the restoration of one week of vacation and an increase in the contribution rate to health and welfare benefits.

The new labor deal also laid the framework for a broader overhaul that later became known as One Yellow, in which the carrier began consolidating its four LTL operating companies, closing redundant service centers and altering work rules for some employees, among other restructuring initiatives.

The same year, YRC executed a $600 million term loan refinance, which lowered the interest rate, provided additional liquidity and offered less restrictive covenants on a portion of its debt. The deal also extended the maturity by two years to June 2024.

The more favorable flexibility in its debt profile would be relatively short-lived as the industry was about to endure a COVID outbreak and subsequent lockdowns, which negatively impacted even the strongest carriers.
Controversial $700M Treasury loan not enough to save the ship

In short order, Yellow (officially renamed in 2021) blew through a $700 million infusion from the government in the form of a COVID-relief loan. The program was established shortly after the outbreak to help companies bridge liquidity gaps directly related to lost business from stay-at-home mandates.

Numerous trucks were parked Monday at a Yellow terminal in Houston. (Jim Allen/FreightWaves)

The first tranche of the loan was $300 million, which was used to clear the deck of the company’s immediate cash needs. It covered previously delayed health care and pension plan contribution payments, lease payments on equipment and real estate, and even interest payments on its other debt, among other items.

A $400 million second tranche was used to fund capital expenditures, largely the purchase of tractors and trailers, which received considerable scrutiny from industry participants. The thought on the part of the government may have been, “In for a penny, in for a pound.” Yellow estimated it would save $10,000 to $12,000 per tractor annually running newer models, and that the upgrades would be the key to reaching longer-term financial stability.

In total, the company replaced roughly 2,400 tractors (17% of the fleet) and 3,600 trailers, and it purchased 600 rail containers — executing roughly three years of tractor capex in a 15-month period. However, the new loan raised its total outstanding debt to nearly $1.6 billion from $880 million at the end of the 2020 first quarter (the last update prior to the loan announcement).

The Treasury’s issuance of the loan in July 2020 has been heavily scrutinized since. An oversight commission concluded recently there were many shortcomings in the decision-making process used to issue the loan.

A key concern all along was the company’s “precarious financial condition” prior to the pandemic given its history of operating at a loss and its poor credit ratings. Yellow’s financial profile and the Treasury’s “less favorable” lien position, compared to the company’s other creditors, present “significant” default risk to taxpayers, the commission found.

Yellow qualified for the loan under a Treasury-created “catch-all” category — “critical to maintaining national security.” The carrier was thought to handle 68% of the Defense Department’s LTL freight at the time, a number that the commission later estimated to be only between 20% and 40%. The commission also took issue with why LTL service couldn’t be handled by another carrier and why a backup plan for service wasn’t in place in the event Yellow shut down.

However, the commission ultimately acknowledged the loan program lacked established guidelines and underwriting was done on the fly as government authorities were required to move quickly to provide emergency liquidity. It provided future remedies should the need for another crisis-induced lending program arise.

At the end of the 2023 first quarter, Yellow owed the government $729.4 million, including capitalized interest. It had made total cash interest payments of $59.6 million by the end of May, according to a company representative.

In addition to collateral for the loan, the government received a 30% equity stake in Yellow, which would likely be wiped out if it files bankruptcy. Yellow’s two top-paid executives earned more than $6 million combined in total compensation the year the Treasury loan was issued.
No change of operations, no Yellow

In the end, Yellow’s inability to get a deal done with the union would prove fatal. Months of back and forth proved fruitless.

Running out of money and options, Yellow sued the union for breach of contract, saying the Teamsters didn’t have the right to reject the change of operations it asserted was vital to its survival. The company said the union also had dragged its feet in coming to the bargaining table when it was well aware Yellow would soon be out of funds.

Throughout the process, the union maintained it had already given enough in the form of billions in wages, benefits and pension concessions. It also said it wouldn’t allow Yellow to jump the line and rush negotiations as it was working on other labor deals with closer expiration dates. It offered to begin its normal collective-bargaining protocols, likely in August, or see the current contract through to its March 31, 2024, expiration.

Missed benefits payments to health, welfare and pension funds managed by Central States put the final nail in the coffin. The delinquency allowed the Teamsters to issue a strike notice, which spooked customers and brokers into accelerating the rate at which they were pulling freight out of the carrier’s network.

“The board members, especially those who represent the Teamsters, have not done service to the members or to the company,” Satish Jindel, founder of transportation advisory firm SJ Consulting Group, told FreightWaves.

He also faulted Yellow’s leadership for not taking pay cuts when it was desperately seeking concessions from the Teamsters.

“The board and the executives should have announced taking cuts in their compensation before asking for any accommodation from the rank and file,” Jindel said. “As they say — ‘leading by example.’ The failure of the company cannot be put at the feet of the Teamsters.”

The bankruptcy would mark the largest filing in U.S. trucking history. The last major LTL closure was Consolidated Freightways, the third-largest carrier in 2002 when it filed. That company was generating roughly $2.3 billion in revenue with 20,000 employees (14,500 of them Teamsters).

Yellow had 30,000 employees, including 22,000 Teamsters.

More FreightWaves articles by Todd Maiden

Yellow is shutting down and headed for bankruptcy, the Teamsters Union says. Here's what to know


BY WYATTE GRANTHAM-PHILIPS
Mon, July 31, 2023 



Yellow Corp. trucks are seen at a YRC Freight terminal Friday, July 28, 2023, in Kansas City, Mo. After years of financial struggles, Yellow is reportedly preparing for bankruptcy and seeing customers leave in large numbers — heightening risk for future liquidation. While no official decision has been announced by the company, the prospect of bankruptcy has renewed attention around Yellow's ongoing negotiations with unionized workers, a $700 million pandemic-era loan from the government and other bills the trucker has racked up over time. 

(AP Photo/Charlie Riedel)

NEW YORK (AP) — Trucking company Yellow Corp. has shut down operations and is headed for a bankruptcy filing, according to the Teamsters Union and multiple media reports.

After years of financial struggles, reports of Yellow preparing for bankruptcy emerged last week — as the Nashville, Tennessee-based trucker saw customers leave in large numbers. Yellow shut down operations on Sunday, according to the Wall Street Journal, following the layoffs of hundreds of nonunion employees on Friday.

In an announcement early Monday, the Teamsters said that the union received legal notice confirming Yellow was ceasing operations and filing for bankruptcy.

“Today’s news is unfortunate but not surprising. Yellow has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government,” Teamsters general president Sean O’Brien said in a statement. “This is a sad day for workers and the American freight industry.”

The Associated Press reached out to Yellow for comment on Monday. No bankruptcy filings had gone live as of the early morning.

The bankruptcy reports have renewed attention around Yellow’s ongoing negotiations with unionized workers, a $700 million pandemic-era loan from the government and other bills the trucker has racked up over time. Yellow, formerly known as YRC Worldwide Inc., is one of the nation’s largest less-than-truckload carriers. The company's reported closure puts 30,000 jobs at risk.

Here’s what you need to know.

WHAT WOULD BANKRUPTCY MEAN FOR YELLOW?

According to Satish Jindel, president of transportation and logistics firm SJ Consulting, Yellow handled an average of 49,000 shipments per day in 2022. Last week, he estimated that number was down to between 10,000 and 15,000 daily shipments.

With customers leaving — as well reports of Yellow stopping freight pickups last week — bankruptcy would “be the end of Yellow,” Jindel told The Associated Press, noting increased risk for liquidation.

“The likelihood of them surviving and remaining solvent diminishes really by the day,” added Bruce Chan, a research director at investment banking firm Stifel.

Yellow declined to comment when contacted by The Associated Press on Friday. In a Wednesday statement to The Journal, the company said it was continuing “to prepare for a range of contingencies.” On Thursday, Yellow said it was in talks with multiple parties about selling its third-party logistics organization.


Even if Yellow was able to sell its logistics firm, it would “not generate a sufficient amount of cash to keep them operational on any sort of permanent basis,” Chan said. “Without a major equity injection, it would be very difficult for them to survive.”

HOW MUCH DEBT DOES YELLOW HAVE?

As of late March, Yellow had an outstanding debt of about $1.5 billion. Of that, $729.2 million was owed to the federal government.

In 2020, under the Trump administration, the Treasury Department granted the company a $700 million pandemic-era loan on national security grounds. Last month, a congressional probe concluded that the Treasury and Defense Departments “made missteps” in this decision — and noted that Yellow’s “precarious financial position at the time of the loan, and continued struggles, expose taxpayers to a significant risk of loss.”

The government loan is due in September 2024. As of March, Yellow had made $54.8 million in interest payments and repaid just $230 million of the principal owed, according to government documents.

Yellow’s current finances and prospect of bankruptcy “is probably two decades in the making,” Chan said, pointing to poor management and strategic decisions dating back to the early 2000s. “At this point, after each party has bailed them out so many times, there is a limited appetite to do that anymore.”

In May, Yellow reported a loss of $54.6 million, a decline of $1.06 per share, for its first quarter of 2023. Operating revenue was about $1.16 billion in the period.

A Wednesday investors note from financial service firm Stephens estimated that Yellow could be burning between $9 million and $10 million each day. Using a liquidity disclosure from earlier this month, Yellow had roughly $100 million in cash at the end of June, the note added — estimating that the company has been burning through increasing amounts of money through July.

“It is reasonable to believe that the Company could breach its $35 mil. liquidity requirement at any moment,” Stephens analyst Jack Atkins and associate Grant Smith wrote.

DID THE COMPANY JUST AVERT A STRIKE?

Last week's reports of bankruptcy preparations arrived just days after a strike from the Teamsters, which represents Yellow’s 22,000 unionized workers, was averted.

A series of heated exchanges have built up between the Teamsters and Yellow, who sued the union in June after alleging it was “unjustifiably blocking” restructuring plans needed for the company’s survival. The Teamsters called the litigation “baseless” — with O’Brien pointing to Yellow’s “decades of gross mismanagement,” which included exhausting the $700 million federal loan.

On July 23, a pension fund agreed to extend health benefits for workers at two Yellow Corp. operating companies, averting a strike — and giving Yellow “30 days to pay its bills,” notably $50 million that Yellow failed to pay the Central States Health and Welfare Fund on July 15, the union said. While the strike didn’t occur, talks of a walkout may have caused some Yellow customers to pull back, Chan said.

“The financial struggles of Yellow are not related to the union and the contracts,” Jindel said, pointing to management’s responsibility around its services and prices. He added the union wages from Yellow are “lower than any competitor.”

WHAT WOULD HAPPEN IF YELLOW WENT UNDER?

As Yellow customers take their shipments to other carriers, like FedEx or ABF Freight, prices will go up.

Yellow’s prices have historically been the cheapest compared to other carriers, Jindel said. “That’s why they obviously were not making money,” he added. “And while there is capacity with the other LTL carriers to handle the diversions from Yellow, it will come at a high price for (current shippers and customers) of Yellow.”

Chan adds that we’re in an interesting time for the LTL marketplace — noting that, if Yellow liquidates, “the freight would find a home” with other carriers, which may not have been true in recent years.

“It may take time, but there’s room for it to be absorbed,” he said.

AP Business Writer Matt Ott contributed to this report.

Box trailers and trucks are seen at Yellow Corp. trucking facility Monday, July 31, 2023 in Nashville, Tenn. The troubled trucking company is shutting down and filing for bankruptcy, the Teamsters said Monday. An official bankruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt. 

(AP Photo/George Walker IV)

Safety vests for Yellow drivers Ron Fisher and J. Keilholz are zip-tied to fencing at the YRC Freight terminal as it lies closed in St. Louis, on Monday, July 31, 2023. Troubled trucking company Yellow Corp. is shutting down and filing for bankruptcy, the Teamsters said Monday. An official backruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt. 

(Robert Cohen/St. Louis Post-Dispatch via AP)

A motorist passes a safety vest for Yellow driver Ron Fisher that was left zip-tied to the fence as the YRC Freight terminal lies shuttered in St. Louis, on Monday, July 31, 2023. Troubled trucking company Yellow Corp. is shutting down and filing for bankruptcy, the Teamsters said Monday. An official backruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt.

 (Robert Cohen/St. Louis Post-Dispatch via AP)

A Yellow box trailer blocks the entrance to the shuttered YRC Freight terminal in St. Louis, on Monday, July 31, 2023. Troubled trucking company Yellow Corp. is shutting down and filing for bankruptcy, the Teamsters said Monday. An official backruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt.

 (Robert Cohen/St. Louis Post-Dispatch via AP)

Box trailers are seen at Yellow Corp. trucking facility Monday, July 31, 2023 in Nashville, Tenn. The troubled trucking company is shutting down and filing for bankruptcy, the Teamsters said Monday. An official bankruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt. 

A sign for Yellow Corp. trucking company stands outside its facility Monday, July 31, 2023 in Nashville, Tenn. The troubled trucking company is shutting down and filing for bankruptcy, the Teamsters said Monday. An official bankruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt. 

Box trailers and trucks are seen at Yellow Corp. trucking facility Monday, July 31, 2023 in Nashville, Tenn. The troubled trucking company is shutting down and filing for bankruptcy, the Teamsters said Monday. An official bankruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt. 

Box trailers are seen at Yellow Corp. trucking facility Monday, July 31, 2023 in Nashville, Tenn. The troubled trucking company is shutting down and filing for bankruptcy, the Teamsters said Monday. An official bankruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt.

A sign for Yellow Corp. trucking company stands outside its facility Monday, July 31, 2023 in Nashville, Tenn. The troubled trucking company is shutting down and filing for bankruptcy, the Teamsters said Monday. An official bankruptcy filing is expected any day for Yellow, after years of financial struggles and growing debt.

 

AP Photos/George Walker IV