Uber cuts 3700 jobs, CEO waives salary, as coronavirus bites

Uber is slashing 14pc of its workforce, and hinted at more cuts to come, as ride-sharing services struggle to adapt to the pandemic.

“Days like this are brutal,” said Uber CEO Dara Khosrowshahi. Picture: AFP

Uber Technologies is cutting about 14 per cent of its workforce and, along with smaller rival Lyft, is looking for more ways to save money as their ride-hailing businesses have dropped dramatically amid the coronavirus pandemic.

The pandemic has challenged the very business model that supercharged Uber and Lyft into some of the world’s most valuable start-ups. The San Francisco-based ride-sharing companies face questions about consumers’ willingness to use their services at a time when health experts and government officials are recommending sheltering in place and avoiding contact.

Lyft posted its first sequential drop in quarterly ridership since becoming a public company last year. The business threat comes as both companies, before the pandemic, had been trying to improve their profitability to appease investors that had grown increasingly worried about the hefty losses they were incurring in their rush to grow.

Uber said early on Thursday (AEST) it was cutting about 3700 workers and that chief executive Dara Khosrowshahi agreed to waive his base salary for the rest of the year. Last week, Lyft said it was cutting 17 per cent of its workforce and putting some employees on unpaid furloughs as well as trimming salaries.

Mr Khosrowshahi, in a memo to employees, hinted at more cuts to come, telling workers that job reductions were part of a broader exercise to adjust the company’s cost structure and that he expected a further and final update on that effort within the next two weeks.

“We are looking at many scenarios and at each and every cost, both variable and fixed, across the company,” he said in the memo. “We want to be smart, to move fast, to retain as many of our great people as we can, and treat everyone with dignity, support and respect.”

The CEO acknowledged the pain of the action in his memo: “Days like this are brutal.”

Uber reports its earnings early Friday (AEST).

The Uber logo in a car in Washington. Picture: AFP

Lyft posted a loss of $US398.1 million on sales of $US955.7 million. The better-than-expected sales figure helped to lift beaten-down Lyft shares in after-hours trading. The stock, down 39 per cent in 2020 before the results, rose 19 per cent to $US31.10 in after-hours trading.

Lyft ridership still grew 3 per cent in the three months through March 31 from the year-ago period, but the number of active riders taking a Lyft trip declined to 21.2 million in the first quarter from 22.9 million in the October through December period.

The company has suspended its full-year guidance because of uncertainty about the business effects from the pandemic and shelved a commitment to post its first profitable quarter on an adjusted basis by the end of next year. Lyft reported a loss before interest, taxes, depreciation and amortisation on an adjusted basis of $US85.2 million, compared with a loss of $US216 million on that basis in the year-earlier period.

“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,” Lyft co-founder and CEO Logan Green said in a statement.

The company said cost savings measures it is implementing will reduce annualised expenses about $US300 million by the fourth quarter of this year compared with previous projections. Lyft said it would incur $US28 million to $US36 million in costs related to the job cuts that would largely book in the current quarter. The company also has furloughed some staff and cut pay for others.

Lyft said it ended the quarter with $US2.7 billion of cash and other funds it can quickly tap.

The Lyft Drivers Hub in Los Angeles. Picture: AFP

Uber’s share price, off 6.5 per cent in 2020, has held up better than Lyft’s, in part because of its food-delivery operations. Online ordering from grocery stores and restaurants has surged since the US declared a national emergency in March.

Analysts will be looking closely at Uber’s results to better understand what an increase of its Eats food-delivery business means to the bottom line. Gross bookings of Eats deliveries may rise 42 per cent in the first quarter from a year ago, according to the average estimate of analysts surveyed by FactSet, while staying roughly in line with the fourth quarter.

Pressure on fees from restaurants and local governments could offset any increase in demand because of COVID-19, Wedbush Securities analyst Daniel Ives said.

Before the pandemic, Uber was spending heavily to grow Eats as it faced heavy competition from DoorDash and Postmates. In the fourth quarter, Uber said Eats’ adjusted loss from operations widened by 66 per cent to $US461 million from the year-earlier quarter.

Uber and Lyft have faced pressure from regulators and lawmakers over how their drivers are classified, and on Tuesday California sued the companies, citing the state’s gig-economy law that became effective January 1. The state said the ridehailers’ decision to classify drivers as contractors rather than employees has deprived them of rights such as paid sick leave and unemployment insurance -- two issues made more visible during the pandemic.

As shutdown orders lift, Uber and Lyft may benefit from customers choosing a ride to work because they are wary of returning to the close quarters of public transportation.

“When you’re (packed) against people and you hear distant coughing, I think there’s nothing worse in terms of the human psyche right now because there’s just so much fear,” Brian Roberts, Lyft’s chief financial officer, said in March.

Wall Street Journal