Ride-sharing jolt prompts Uber to follow Lyft on job cuts

Uber is to cut 3,700 jobs, roughly 14 per cent of its corporate workforce, after lockdowns designed to control coronavirus upended the ride-sharing industry that it pioneered.

In a staff memo seen by the Financial Times, Uber’s chief executive Dara Khosrowshahi warned additional cuts would be announced in due course as the company made “difficult adjustments” to match “the reality of our business”.

“We are looking at many scenarios and at each and every cost, both variable and fixed, across the company,” said Mr Khosrowshahi, who has waived his base salary for the remainder of the year. “You can expect we will have a further, final update for you within the next two weeks.”

The car-booking service joins a string of major Silicon Valley names making deep cuts. On Tuesday, home-sharing site Airbnb said it planned to lay off 25 per cent of its staff as it focused on its core home-sharing business.

Last week, rival ride-sharing service Lyft said it would cut 17 per cent of its workforce. In its latest quarterly results, announced on Wednesday, Lyft said its cost-cutting measures would save it $300m in annual overhead. It earlier announced it planned to dismiss 982 employees and had furloughed 288 more.

Uber’s job cuts, which were rumoured last week after the company’s chief technology officer resigned, initially will mostly affect customer support and recruiting teams, the company said in a filing. It added that it expected to incur a $20m cost for severance payments.

The company said it would close about 40 per cent of its 450 “Greenlight Hubs”, facilities where the company’s drivers are given assistance in signing up to the app and other related needs.

It did not provide any additional information on the extent to which the pandemic had hit its business, other than to reiterate that rides were down “significantly”. “And with our hiring freeze,” Mr Khosrowshahi said in the memo, “there simply isn’t enough work for recruiters.”

In mid-March, as major cities were entering lockdowns, Mr Khosrowshahi told investors and analysts that bookings for cars were down as much as 70 per cent in some earlier closing cities such as Seattle. Uber is expected to report its first-quarter earnings after the markets close on Thursday.

Before the pandemic, Uber told investors it expected to record one profitable quarter by the end of this year, before adjusting for interest, taxes, depreciation and amortisation. It has since withdrawn its guidance for the year, but has not yet updated on its profitable quarter target.

Lyft has also withdrawn its forecast for 2020 and on Wednesday did not offer any projections for its second quarter, where lockdown measures have been in full effect in the US and Canada, the two markets in which it operates.

“While the Covid-19 pandemic poses a formidable challenge to our business, we are prepared to whether this crisis,” said Logan Green, Lyft chief executive and co-founder. “We are responding to the pandemic with an aggressive cost reduction plan that will give us an even leaner expense structure and allow us to emerge stronger.”

Mr Logan told investors the company has experienced a sharp decline in rides starting in mid March. For the month of April, rides were down 75 per cent year on year.

It reported a small recovery since but rides remained 70 per cent lower year-on-year. Unlike Uber, the company has not been able to pivot to food delivery or other less affected segments.

Until the disruption of the pandemic, Lyft’s start to the year had showed promising signals for the company’s target of profitability. Its “active rider” base — the number of people who took at least one trip in the quarter — rose by 3 per cent year-on-year to 21.2m.

Lyft beat Wall Street’s reduced revenue expectations for the first quarter, taking in $956m, up 23 per cent year-on-year. Revenue per rider was $45.06, up almost 20 per cent on the same period last year.

Net losses of $398m for the quarter were in line with analysts’ expectations, and a significant improvement on the same period last year when it lost $1.1bn.

Before adjusting for interest, taxes, depreciation and amortisation, Lyft incurred a quarterly loss of $85.2m, exceeding analysts’ expectations of $200m, according to data from S&P Capital IQ. It said it had $2.7bn of cash or equivalents on hand at the end of the period.

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