Uber has announced plans to cut 3,700 full-time staff – about 14% of its workforce – as business plunges following pandemic shutdowns.
Chief Executive Dara Khosrowshahi will also waive his base salary – set at $1m in 2019 – through to the year end. The announcements come a day ahead of the firm’s quarterly results.
Even before the pandemic, Uber was struggling to balance its books, making a loss of $8.5bn (£6.9bn) in losses in 2019. Uber said the reductions will come from its customer support and recruiting teams and would result in $20m in severance pay and other costs.
Executives in March warned the firm had seen demand for its taxi services fall by more than 60% in Covid-19 hotspots, though they said ordering via its Uber Eats food delivery service had increased.
“Since we don’t know how long a recovery will take, we are taking steps to bring our costs in line with the size of our business today,” the firm said in a statement on 6 May. The reductions are a sign that the impact from the shutdowns is continuing to ripple out into the US economy.
On 6 May, payrolls processor ADP reported that private employers in the US cut a record 20.2 million jobs last month – more than double the jobs lost in the aftermath of the 2008 financial crisis.
“Job losses of this scale are unprecedented,” said Ahu Yildirmaz, co-head of the ADP Research Institute.
Uber’s smaller rival Lyft last week also announced plans to axe about 17% of its workforce or almost 1,000 employees, furlough another 300 people and reduce executive pay. The firm, which is due to share quarterly results later on Wednesday, also cited the impact of the pandemic. Both Uber and Lyft were hit this week by a legal action by the state of California over its classification of drivers as independent contractors, a move that means they do not have to provide drivers with paid sick leave and other benefits.
Analysts have said changing the designation could lead to a potential 30% increase in costs. At the end of last year, Uber had already paid out $149m to settle individual claims on the subject.
Analyst Dan Ives of Wedbush Securities called the job cuts “painful but necessary”, noting that both Uber and Lyft face long-term difficulties as more people work from home and avoid taxis for fear of infection.
“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,” he wrote in a note.
Source: bbc.com
