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Uber cuts 23% of its workforce in order to achieve profitability
Uber will focus on its core businesses in ride-hailing and food delivery and slash its workforce by 23 percent in an effort to become profitable given the coronavirus pandemic, CEO Dara Khosrowshahi said Monday in an email to workers.
Uber would cut a total of 6,700 jobs, including the 3,700 that it had announced earlier this month, Khosrowshahi said, adding that the company expects to slash investments in many "non-core ventures."
After the announcement, shares in Uber were up 6.9 per cent to $34.69.
In a regulatory filing Monday, Uber said the layoffs and restructuring measures in the second quarter will result in one-time, mostly cash-based charges ranging from $210 million to $260 million. Overall, the initiatives are estimated to produce annual cost savings of $1 billion compared with pre-pandemic budgetary plans.
Uber hired 28,600 people until the pandemic crippled its business at the end of the first quarter according to a regulatory filing. The initial wave of 3,700 layoffs at the company affected less expensive customer support and recruiting teams, while Monday's announcement affects 3,000 employees across nearly every department.
Smaller U.S. competitor Lyft announced it would slash its jobs by around 17 per cent late last month.
Khosrowshahi said Uber will develop itself as a self-sustaining business that no longer needs outside capital, calling the company's food delivery business Uber Eats the "next tremendous opportunity for growth."
When the pandemic struck, Uber said it would become profitable by the end of this year on the basis of adjusted earnings before interest , taxes, depreciation , and amortization. When global stay-at-home orders to curb the virus the company withheld the guidance pummeled its ride-hailing operation.
Ride-hailing trips, which produce the bulk of Uber 's revenue, dropped by 80 percent globally in April, but demand was gradually recovering, the firm said.
Uber said on May 7 that at some point in 2021, due in part to an upswing in restaurant food order deliveries, it now aimed to become profitable on an adjusted basis.
Khosrowshahi on Monday called Uber Eats a silver lining during the crisis and said he hopes that one day it will be profitable for the loss-making company.
Demand for Uber Eats soared 50 per cent in the first quarter, but on an adjusted EBITDA basis the company still lost $313 million.
Uber is currently in talks to buy GrubHub's food delivery rival to expand his market share.
Uber has worked on several other companies, including the development of self-driving cars and a freight logistics network. Khosrowshahi did not address these businesses specifically in his email and a spokesman declined to comment outside the email.
In the report, he said Uber would close its incubator startup program and research laboratory for artificial intelligence. Uber was also looking for potential alternatives to Uber Works, an Uber program introduced in October to help businesses fill the workforce shortages during high demand with temporary employees.
As part of the restructuring, Khosrowshahi also said the company is shutting or consolidating some 45 office locations globally.
