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Uber/Lyft COVID-19

Uber Discusses Plan to Lay Off About 20% of Employees

Executives at Uber are discussing plans to cut around 20% of the company’s employees, as it copes with a sharp decline in its ride-hailing business due to the coronavirus pandemic, The Information has learned.

Layoffs of that magnitude, which haven’t been finalized but could be announced in stages in the coming weeks, could result in more than 5,400 of Uber’s 27,000 employees losing their jobs. Separately, Uber’s chief technology officer Thuan Pham—who joined Uber in 2013 and is the longest-serving senior executive at the company—has resigned from the company, said a person with knowledge of the situation. Pham has notified managers who report to him of his plan to leave, which comes as the 3,800-person Uber engineering group could be slashed by nearly 800 people in the coming weeks under the proposed job cuts.

The Takeaway
• Uber could layoff around 20% of its employees in the coming weeks
• The cuts could result in more than 5,400 job cuts
• Uber CTO Thuan Pham recently resigned from the company

The ride-hailing provider’s core business in recent weeks is down about 80% compared to the same period last year as widespread stay-at-home orders have wiped out demand for its services, The Information has previously reported. Even recent gains in its smaller Uber Eats meal delivery business don’t make up for much of the revenue shortfall. Still, Uber Eats’ 2,300-employee team may not be cut as much as other groups under the expected layoffs, said a person briefed on the situation.

An Uber spokesman did not have comment on potential layoffs but said in a statment: "As you would expect, the company is looking at every possible scenario to ensure we get to the other side of this crisis in a stronger position than ever."

Cutting 5,000 people could save Uber close to $1 billion annually on salaries and associated expenses, according to rough estimates by The Information. Last month, CEO Dara Khosrowshahi told analysts that even if an 80% decline in Uber’s rides business persisted until the end of the year, as a worst case scenario, Uber would still have $4 billion in cash. That means Uber would burn around $4 billion between now and then, given that it had roughly $8 billion as of mid-March when the Covid-19 crisis took hold in its core markets. That was before the current layoff plans began to take shape.

The Uber Eats business in recent weeks has been growing by at least 70% compared to last year and one of its biggest costs—bonuses for drivers to deliver hot food—has shrunk considerably as such labor becomes cheaper. With ride-hailing disintegrating in the past six weeks, many Uber drivers have found fewer opportunities to make money and have flocked to food delivery services such as Instacart and DoorDash. Drivers are contractors, not Uber employees, and aren’t included in the planned layoffs.

Uber’s U.S. rival Lyft also is expected to cut costs. Some Lyft employees privately say they too are bracing for layoffs this quarter. Lyft had 5,700 employees as of December 31. Its revenue is a quarter of Uber’s.

There is much uncertainty around how quickly Uber and other ride-hailing companies will rebound from the downturn, especially as airport-based travel—traditionally a source of lucrative rides for them—may not recover anytime soon. The same is true of large gatherings such as concerts or sporting events.

In mainland China, which was first to be hit by Covid-19, ride-hailing leader Didi Chuxing appears to have regained much of its business in the biggest cities, according to analysts. But it is possible that more of the ride volume is related to daily commuting compared to other markets such as the U.S.

Before the pandemic, Uber’s ride-hailing business had just become profitable for the first time in its nearly 11-year history after raising prices and cutting back on money-losing UberPool shared rides. Those tactics to turn a profit had raised questions about how much growth was left in the business, given that its growth strategy had long rested on dropping prices.

Uber laid off 435 employees last September, mostly in the U.S., in product and engineering, representing 8% of those organizations’ employees. The layoffs, which include more than 250 engineers, came after the company in July cut 400 staff from its marketing unit—a third of the total in the group at the time. Those job cuts were part of an effort by CEO Dara Khosrowshahi to reduce the company’s cash burn, which was nearly $3.7 billion last year, up from $2.1 billion in 2018.

Several senior Uber executives have been juggling multiple responsibilities, following the departures of four people who reported to Khosrowshahi since June. Earlier this year, some managers privately said they were worried that drawn-out vacancies and a lack of succession planning in a few key roles would take a toll. 

Khosrowshahi has been filling in as chief product officer for several months, a type of position he hasn't held previously in his career (Uber’s organizational structure and senior managers can be found here). Pham’s resignation from Uber means no one from the executive team under Travis Kalanick, Uber’s prior CEO, before scandals befell Kalanick in 2017 will remain at the company.    

Kalanick and Pham were known internally for shunning the idea of running Uber on public cloud services from AWS and others, unlike other fast-growing internet companies such as Airbnb. Instead, they chose to largely manage their own online servers. While that led to some rocky moments early on, people who have worked at the company have said Uber was able to save substantially on costs.

This article has been updated with a statement from Uber.

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