Uber Lays Off Another 350 Employees, But Continues Spending

In an email sent out by Uber’s CEO Dara Khosrowshahi to the company’s employees, it was announced that they had entered their third and final phase of laying off employees. The process was initiated by the company earlier this year and it has just laid off 350 people across a number of teams and departments within the organization. Those who have been affected by this final layoff include employees from performance marketing, Uber Eats, recruiting and Advanced Technologies group and also from different teams within the global platform and rides department. In some cases, the company has also asked some of its employees to relocate.  

The CEO stated in the email that such days were very difficult for the company and its employees and they were going to do everything possible to ensure that they won’t have to face another day like this in the future. He also stated that everyone had to play a role in establishing a work routine, which involved upholding the highest standard of performance, identifying and removing duplicate work, taking action when expectations are not being fulfilled, giving feedback directly and eradicating the bureaucracy that becomes inevitable when companies grow and expand.  

Considering the previous layoffs, the total number of employees that were let go by the company is 1% of its total workforce. This final layoff comes a month after the ride-sharing company had laid off 435 employees across its engineering and product teams and less than three months after the company had laid off 400 people from its marketing team. Suffice it to say, almost all of the departments within the organization have been affected by the layoffs in one way or another. Earlier this year, the self-driving car unit of the company had spun off into its own unit and this is the first round of layoffs to be made within it. 

Previously, Uber stated that its self-driving unit’s team comprised of 1,200 people and despite the layoffs, the unit still has more than 1,200 people working within it. In April, ATG conducted a fundraising round that raised $1 billion and based on its terms, Uber’s self-driving unit is worth $7.25 billion. Nearly 70% of the employees who were affected in Uber’s layoffs are based in Canada and the United States and the remaining are evenly distributed across Latin America, APAC and EMEA. Those who were affected were notified by Uber this morning.  

As reported previously, these layoffs were as a result of Khosrowshahi asking all members of his executive leadership team if their respective organizations would look the way they are if they got the chance to start from scratch. The CEO wrote to employees that in the last few months, the company’s leaders had scrutinized their teams to ensure that the organization was structured to achieve success in the next couple of years. He added that doing so meant making difficult yet necessary changes to ensure that there were right people in the right locations and right roles and everyone was held accountable for ensuring top performance. 

In the second quarter of 2019, Uber suffered a loss of nearly $5 billion, which is the company’s biggest quarterly revenue loss up till now. However, a major portion of these losses were incurred after the company’s IPO in May as stock-based compensation had been paid to the employees. As far as other parts of the business are concerned, the company is making additional investments to ensure its drivers can work as 1099 independent contractors. Along with DoorDash and Lyft, Uber has invested $30 million towards a ballot initiative in 2020 that would enable them to employ their drivers as independent contractors.  

The California State Senate and Assembly passed the gig worker protection bill AB-5. In light of this bill, Tony West, the Chief Legal Officer at Uber made it clear that they were more than willing to invest more money into this campaign’s initiative. Since then, Gavin Newsom, the California Governor, has signed the bill into law and it will be put into effect from January 1st, 2020. Even though West stated that Uber would have no problems in passing the test and proving that its drivers are classified properly, there would be a lot of financial repercussions if Uber was to fail the test.  

While West didn’t state what kind of impact it would be, industry analysts have estimated that there would be a 30% increase in cost if the classification of drivers was changed. The third quarter earnings report will be shared by Uber on November 4th. Currently, the company is trading at $31.26 per share, which is considerably lower than its IPO price of $45. Meanwhile, Uber has continued with its shopping spree. Only months after the ridesharing company declared that it would purchase Careem, a popular ride-hailing app in North Africa and the Middle East, it has made another acquisition. 

Uber declared that it would be acquiring a majority stake in Cornershop, which is a leading provider of online grocery in Chile and Mexico and has only recently begun to expand into new markets. This deal comes only four months after Walmart’s takeover of Cornershop was blocked by Mexico regulators. It is a clear indication that the online grocery operator in Latin America has become a hot commodity and that it was looking for a buyer, probably because it is losing money. With this deal, Uber is making its first entry into grocery delivery.  

This is not a very surprising move for a company that has rapidly expanded its core ridesharing services and its restaurant delivery called Uber Eats all over the world. The CEO said that they wanted Uber to become the operating system for people’s everyday life, whether they want to get a ride, order food from their favorite restaurant and now get their grocery delivered. However, it should be noted that grocery delivery comes with its own unique challenges and has confounded global giants, such as Amazon and Walmart, so it is yet to be seen how Uber deals with it.