By Preetika Rana
Uber Technologies Inc. is cutting several thousand additional
jobs, closing more than three dozen offices and re-evaluating big
bets in areas ranging from freight to self-driving technology as
Chief Executive Dara Khosrowshahi attempts to steer the
ride-hailing giant through the coronavirus pandemic.
Mr. Khosrowshahi announced the plans in an email to staff
Monday, less than two weeks after the company said it would
eliminate about 3,700 jobs and planned to save more than $1 billion
in fixed costs. Monday's decision to close 45 offices and lay off
some 3,000 more people means Uber is shedding roughly a quarter of
its workforce in under a month's time. Drivers aren't classified as
employees, so they aren't included.
Stay-at-home orders have ravaged Uber's core ride-hailing
business, which accounted for three-quarters of the company's
revenue before the pandemic struck. Uber's rides business in April
was down 80% from a year earlier.
"We're seeing some signs of a recovery, but it comes off of a
deep hole, with limited visibility as to its speed and shape," Mr.
Khosrowshahi said in his note to employees. The company's
food-delivery arm, Uber Eats, has been a bright spot during the
crisis, but "the business today doesn't come close to covering our
expenses," he wrote.
Uber is in talks to buy rival Grubhub Inc., according to people
familiar with the matter, a deal that would help stem losses from
the cost-intensive business of building out delivery operations and
give Uber an edge in competing with industry leader DoorDash Inc.
Mr. Khosrowshahi didn't reference the potential deal in his
memo.
After its founding in 2009, Uber quickly became one of the
world's hottest startups, transforming how millions of people get
around. Co-founder Travis Kalanick envisioned a future in which
robotaxis roam streets and delivery drones fly overhead -- with
Uber at the center of it all. As the company grew, it spent big to
expand into areas beyond ride-hailing, amassing billions in losses
along the way.
Investor enthusiasm started to wane even before the pandemic.
Uber had one of last year's most anticipated stock market debuts.
The result disappointed, with Wall Street increasingly wanting to
see a path to profitability for Uber and other high-profile tech
companies.
Mr. Khosrowshahi -- appointed in 2017 after a series of scandals
led to Mr. Kalanick's ouster -- pulled Uber out of markets where it
was weak and laid off more than 1,100 employees last year. In
February, before the pandemic hit its home market, Mr. Khosrowshahi
made a tall promise: He vowed to make Uber profitable by the end of
2020, a year earlier than previously expected. He recently moved
that timeline back to next year.
"I will not make any claims with absolute certainty regarding
our future, " Mr. Khosrowshahi wrote in his note on Monday. "I will
tell you, however, that we are making really, really hard choices
now, so that we can say our goodbyes, have as much clarity as we
can, move forward, and start to build again with confidence."
As part of the latest changes, Uber will scale back on noncore
businesses. Mr. Khosrowshahi said the company is winding down its
product incubator and artificial-intelligence lab, and exploring
"strategic alternatives" for Uber Works, which pairs prospective
employers with gig workers.
The company is also re-evaluating cash-burning businesses such
as freight and autonomous driving. Uber has spent hundreds of
millions of dollars to advance self-driving research in recent
years.
Uber will book up to $260 million in charges from the
restructuring measures it unveiled this month, the company said in
a regulatory filing. Its shares closed 3.54% higher in Monday
trading, roughly in line with the broader market.
Employees in the U.S. will be the hardest hit by the cuts,
according to a person familiar with the matter. Uber is closing one
of its offices in downtown San Francisco, which had more than 500
employees. It is also considering moving its Asia headquarters out
of Singapore.
Smaller rival Lyft Inc. said last month that it would cut about
17% of its workforce while also furloughing workers and slashing
pay amid efforts to cut costs.
Mr. Khosrowshahi said he wants to rally around core businesses
-- mobilizing people and goods -- and build an organizational
structure that avoids duplication. He announced that Andrew
Macdonald, Uber's senior-vice president of rides, has been
appointed head of a unified mobility team that will cover all
aspects of Uber's rides business, including its
public-transportation partnerships. Pierre-Dimitri Gore-Coty, vice
president of Uber Eats, was named head of a unified delivery team
that will include grocery deliveries.
While these measures should help rein in costs, Uber faces a
fundamental question as governments begin to ease stay-at-home
orders: Will people resume using its core rides services and, if
so, how does the company assure drivers -- and riders -- that they
are safe?
The company has allocated $50 million to buy supplies for
drivers, including masks, disinfectant sprays and wipes. Starting
Monday, the Uber app will ask drivers across much of the world to
verify they are wearing face masks by taking selfies. Riders will
also need to confirm they are wearing face coverings.
Meanwhile, regulatory hurdles loom for the ride-sharing giant.
California sued Uber and Lyft earlier this month, alleging the
companies' misclassification of drivers as independent contractors
deprives the drivers of rights such as paid sick leave and
unemployment insurance -- issues that became front-and-center
during the pandemic. The state's gig economy law that took effect
Jan. 1 aimed to force the companies to classify drivers as
employees.
Uber and Lyft have said their drivers are properly classified
under the law. The ride-hailing companies have joined other
startups that rely on gig workers and raised more than $110 million
to back a ballot initiative for November, asking that voters exempt
them from the law. The ballot initiative also would guarantee
benefits such as health-care subsidies for drivers who work a
certain number of hours a week.
Mr. Khosrowshahi didn't mention the lawsuit in his memo.
He said he struggled to make the decisions that culminated in
Monday's announcement and even consulted other CEOs, hoping there
was a way the company could "wait this damn virus out."
"I wanted there to be a different answer," Mr. Khosrowshahi
said, "but there simply was no good news to hear."
Write to Preetika Rana at preetika.rana@wsj.com
(END) Dow Jones Newswires
May 19, 2020 03:35 ET (07:35 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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