Looks like a lot of Uber employees including some counsel may have to investigate the reality of the gig economy and we bet that many will be somewhat surprised by how hard it all is.
Media reports say…
Uber Technologies eliminated an additional 3,000 jobs on Monday, closing offices around the world as certain regions revealed less growth than the outfit had hoped for. We covered the ride-hailing firm’s financial situation last week, as reports circulated that it wanted to drop a few billion to acquire Grubhub and enhance its own food-delivery service in the wake of the coronavirus pandemic.
At the time, the firm had already cut 3,700 jobs pertaining to customer support and human resources. Even in the absence of people shunning shared transportation and local governments forcing citizens to stay indoors, Uber’s preexisting inability to turn a profit would probably have forced the company to restructure eventually. The pandemic pinned the accelerator to the floor mat, however, likely forcing additional cuts by the company’s own admission. Considering Uber has already axed about a quarter of its global workforce, it’s probably time to place it on death watch.
According to Bloomberg, the company is hunting for ways to save money. For car manufacturers, the end result of the pandemic has meant tamping down mobility-related side projects and programs that have nothing to do with the core business. General Motors’ Maven project was an early victim.
Uber’s taking similar actions by shutting down its Incubator think tank and AI Labs, as well as a job-matching service called Uber Works. It also intends to further consolidate offices around the globe, forcing additional job cuts. CEO Dara Khosrowshahi confirmed the measures in an email to staff on Monday.
From Bloomberg:
“We must establish ourselves as a self-sustaining enterprise that no longer relies on new capital or investors to keep growing, expanding and innovating,” Khosrowshahi wrote to employees, while dismissing the idea that the moves were done to appease investors. Uber shares initially rose as much as 9 [percent] on the news on Monday, but by 3 p.m. in New York were up only about 3 [percent].
As a result of the changes, Uber will incur $175 million to $220 million in charges, mostly in the second quarter, according to a securities filing Monday.
Since the pandemic began, Uber has been moving to focus its efforts on a few key regions and businesses. The company shuttered a half-dozen food delivery operations, offloaded its cash-burning electric bike group to scooter startup Lime and permanently closed 40 [percent] of its driver stations. One of the offices that will close is in Singapore, where Uber had already sold its Southeast Asia business to local rival Grab in 2018.
Social distancing and shelter-in-place orders stemming from the pandemic have hobbled so-called sharing economy businesses, as customers find themselves with few places to travel, and a new reticence to use the cars or homes of strangers. Lyft Inc., the main alternative to Uber in North America, is cutting about 17 [percent] of staff, furloughing more and reducing salaries. Airbnb Inc. is cutting a quarter of its workforce.
Despite posting its first decline in overall ridership in Q1 of 2020, there are reasons to assume ride sharing might rebound after the pandemic panic subsides a bit. Mass transit is broadly believed to be less appetizing to urbanites in the coming months than outfits like Uber/Lyft and taxi cabs.
Still, no one is under the assumption they’ll become suddenly desirable; it just happens to be the only business in its portfolio that actually seems capable of making it any money. Unfortunately, that doesn’t seem possible for 2020 — leaving Khosrowshahi to suggest $1 billion in cost-cutting measures could help the business turn a profit by the end of 2021. Maybe cornering the food-delivery market will play into that. Talks with Grubhub are rumored to be progressing, though neither company is interested in expressing any confirmation or denial of what’s going on at this juncture.
