Uber intends to cut another 3,000 employees from its global workforce, the Wall Street Journal recently reported. The San Francisco-based corporation will also shutter 45 offices worldwide as well as its Works unit, artificial intelligence laboratories, and tech incubator. Earlier this month, the ride-hailing company slashed its headcount by 3,700 staffers amid continuing COVID-19 related headwinds.
So far, Uber has reduced its staff by 25 percent in the last two weeks.
Uber’s Second Round of Layoffs
In an email, CEO Dara Khosrowshahi explained the firm initiated its latest round of terminations to preserve its future during a particularly challenging period. As such, the executive said the company would reorient itself around its taxi and food delivery services. “We must establish ourselves as a self-sustaining enterprise that no longer relies on new capital or investors to keep growing, expanding and innovating,” wrote Khosrowshahi.
TechCrunch reported the corporation would spend $145 million on employee severance and another $80 million to close its facilities.
As a result of the coronavirus pandemic, Uber’s ride-hailing revenue has fallen by 80 percent. Although the firm has seen a 70 percent rise in meal delivery orders, that part of its business remains unprofitable. In response, the company drastically scaled back its operations, including reducing its headcount and closing 180 support centers.
Uber also divested its COVID-19 ravaged electric scooter segment Jump as part of a $170 million investment in Lime.
The corporation has sought to diversify and expand its core offerings to compensate for its near-term losses. The firm lets consumers order convenience store goods, pet supplies, and over-the-counter medication in select markets. They have also mandated that drivers and passengers wear face coverings during rides to lower the risk of spreading communicable diseases.
Uber also reportedly entered takeover negotiations with GrubHub to expand its presence in the food delivery space.
More Cuts Coming?
Although Uber conducted two rounds of layoffs, more cuts may come.
Before the onset of the coronavirus outbreak, Uber intended 2020 as the year it would finally reach profitability. The pandemic’s effect on its core business prompted the company to reschedule that goal for 2021. But to get there, the corporation might have to eliminate additional promising but unprofitable segments.
Last year, the corporation poured $200 million into its Freight division with hopes of disrupting heavy truck delivery like it did the taxi industry. But in the last quarter, the unit contributed $29 million to its overall $2.9 billion loss. As things stand, the company would probably be best served by cutting its losses and reevaluating the sector when conditions improve.
Similarly, Uber’s advanced technologies group (ATG), which houses its self-driving car program, lost $113 million in Q1. On the one hand, establishing a fleet of autonomous vehicles would help the firm bring its Rides and Eats businesses into maturity. On the other hand, the unit has burned billions of dollars with no meaningful benefits and several negative outcomes.
Bloomberg’s analysis suggests Uber could save $600 billion by shuttering Freight and ATG. With COVID-19 still not contained, the corporation is unlikely to be cash positive for some time. As such, it would not be surprising for the firm to dispense with two costly, non-essential divisions to remain operational.