An ongoing series of setbacks appears to be forcing San Francisco-based Yellow Cab Co-Op to file for bankruptcy. Company executives sent a letter to each of the cab drivers who work for the co-op in December of 2015 that lays out a plan for the future. Drivers can expect to maintain their employment, but things may have to change dramatically for the co-op to be financially viable again.
One of the setbacks that is having a detrimental effect on Yellow Cab’s bottom line is the upsurge of passengers using tech-based competitors like Uber and Lyft. Both of these apps are widely used on smart phones, enabling users to catch rides quicker and often at a lower rate than those charged by cab companies.
However, representatives from Yellow Cab argue that Uber and Lyft drivers are not subject to the same rigorous background checks that they must undergo. Also, cabbies opine that many of the drivers who work with Uber and Lyft just don’t know the city streets as well as they do. Cabbies further cite their superior insurance protection as an additional reason why customers should choose their service over the services of their rivals.
The other setback that is affecting Yellow Cab’s profitability is the amount of money they’ve had to shell out as a result of personal injury litigation. Company officials note that they have been ordered by courts to pay numerous sizable settlements in the last couple of years. One of these cases in particular, Fua v. Sanchez, resulted in an eight million dollar award to plaintiff Ida Fua. The left side of Fua’s body was paralyzed when the Yellow Cab she was riding in crashed into other cars at 60 mph. This award, combined with other sizable judgments, severely impaired Yellow Cab’s financial stability.
Yellow Cab is likely to file for Chapter 11 bankruptcy soon. This reorganization bankruptcy will discharge many of the company’s debts, and neither drivers nor passengers should be affected. However, company officials say that they will need to hire more drivers if they want to become more profitable in the future.
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