The San Francisco-based company confirmed in a Securities and Exchange Commission filing that fewer people are taking rides in the time of covid-19, the disease caused by the virus. The company has implemented a hiring freeze in addition to cutting thousands of jobs from its customer service and recruiting teams, it said in the filing.
Uber said it expects to spend about $20 million on severance and other benefits for the laid-off employees. CEO Dara Khosrowshahi will not be paid for the rest of the year. His salary was set for $1 million in 2019, with a possible $2 million bonus.
"Days like this are brutal," Khosrowshahi wrote in an email sent to all employees Wednesday. "I am truly sorry that we are doing this, just as I know that we have to do this."
Uber's announcement follows similar cuts by tech companies Lyft and Airbnb, fellows in the on-demand economy that has taken a plunge as people stay at home and try to avoid contact with others.
Lyft said last week it would lay off nearly 1,000 people, or 17% of its staff, as the pandemic cuts into its revenue. Airbnb has started cutting 25% of its workforce, or about 1,900 people, CEO Brian Chesky said in an email to employees Tuesday.
Uber and Lyft both went public last year in disappointing debuts that revealed the darlings of the private markets, who had each raised billions in private-market funding before their IPOs, faced tougher-than-expected scrutiny once public.
Uber's stock price fell more than 4% to $26.90 per share after the layoffs were announced Wednesday.
Airbnb said last year that it planned to go public during 2020, though it's unclear what type of reception the company would face if it moves forward with the plan. It secured a $1 billion loan from investors last month.
Airbnb spokesman Nick Papas declined to comment on any updated IPO plans.
Uber spokesperson Lois van der Laan said in a statement the "unfortunate reality" is there isn't enough work for many customer support employees because people are riding less. Lyft spokesperson Alexandra LaManna said the company had nothing further to share from its layoff announcement last week.
The three companies all rely on people sharing a close space with others - drivers and passengers in Uber and Lyft rides, and vacationers in Airbnb homes where owners often live or have recently left. That proximity has become a liability at a time where people are cautioned or ordered to keep their distance from others.
One exception is Uber Eats, the company's restaurant delivery arm, where executives said demand has surged.
Uber is also closing 180 locations, or 40%, of its Greenlight Hubs, the physical locations where drivers can go for help on things such as onboarding or using the app. Uber temporarily closed all U.S. locations in March due to the pandemic.
Uber and Lyft rely heavily on contracted drivers to power their businesses. By classifying their drivers as contractors rather than employees, the companies are protected from some liability and offering full benefits. But the designation has been controversial, as critics say it means less protection when work dwindles. California sued Uber and Lyft on Tuesday, alleging the drivers are misclassified as independent contractors under a new state law.
On a call with analysts after announcing quarterly earnings Wednesday, Lyft chief executive Logan Green said ride-hail trips on the app were down 75% in April, and the company could not accurately predict the economic impact of the pandemic on its business. While the decline in rides has stabilized, he said, trips are still down about 70% - even as some began to return to the app in cities that loosened restrictions. Citing record unemployment, he said, "we expect driver supply to outstrip rider demand" for the foreseeable future.
"These are the hard truths we're facing," he added. Lyft reported a $398 million loss during its quarterly earnings Wednesday, narrowed from a $1.1 billion loss a year ago during a quarter that included IPO costs. The company said its revenue grew 23% compared with the same quarter last year, to $956 million.
The stock surged more than 15% after hours on better-than-expected results.
Analysts for Wedbush Securities wrote in a note Wednesday that while some people will start using the ride-hailing services again as the country recovers from the pandemic, others will never return.
"On the ride sharing front, Uber and Lyft face Herculean-like challenges looking ahead as the new reality will likely change the business models of these companies (and competitors) for the foreseeable future," the analysts said.
At the same time, other businesses relying on gig workers have surged. On-demand shopping app Instacart said it would try to hire 300,000 shoppers this spring. And Big Tech companies - notably Amazon, which has hired 175,000 warehouse workers and delivery drivers - are expected to emerge from the crisis potentially more powerful. (Amazon chief executive founder Jeff Bezos owns The Washington Post.)
Meanwhile, more than 42,000 people have been laid off from small tech companies since March 11, according to Silicon Valley layoff tracker Layoffs.fyi.
Lyft will announce its quarterly earnings Wednesday, and Uber will do so Thursday.
Published : Aug 19, 2022
Published : May 06, 2020
By : The Washington Post · Rachel Lerman · BUSINESS, TECHNOLOGY