In an email sent to all employees on Monday, Dara Khosrowshahi, the Chief Executive Officer at Uber Technologies Inc. said that the company was cutting its workforce by 23%. The email said that the decision was made to become profitable despite the ongoing coronavirus pandemic and the company would be concentrating more on their core-business in food delivery and ride-hailing. A total of 6,700 jobs will be cut of which 3,700 had already been announced earlier in May. Khosrowshahi also disclosed that the company was planning to reduce their investments in a number of ‘non-core projects’. Uber’s share price was up 6.9% at $34.69 after the announcement.
A regulatory filing was made by the company on Monday in which it said that the restructuring and layoff measures would lead to a one-time, mostly cash-based charges in the second quarter between $210 million and $260 million. Overall, these measures are expected to generate cost savings of about $1 billion as compared to the budget plans pre-pandemic. Before the COVID-19 pandemic wreaked havoc on Uber’s business, the company had a total of 28,600 employees, as per a regulatory filing that was made at the end of the first quarter.
The initial wave of lay-offs, which was about 3,700 jobs affected the less-costly recruiting and customer support teams whereas the announcement made on Monday will affect 3,000 people across different departments. Late last month, Uber’s smaller US competitor, Lyft had announced that it would reduce 17% of its total workforce. According to Khosrowshahi, Uber has to establish itself as a self-sustaining business that no longer requires any capital from the outside. He also added that Uber Eats, the food delivery business of the company, was the next big growth opportunity for them.
Before the pandemic had begun, Uber had stated that it would finally become profitable by the end of this year on the basis of adjusted earnings before taxes, interest, amortization and depreciation. That guidance was withdrawn by the company when its ride-hailing business was pummeled by the global stay-at-home measures taken to curb the spread of the Coronavirus. The bulk of Uber’s revenue is generated by ride-hailing trips and these saw an 80% global decline in April. Nonetheless, the company said that the demand for these services was slowly recovering. On May 7th, Uber announced that it was now planning to become profitable at some point in the next year on an adjusted basis.
This was partially due to an increase in its food order deliveries. Uber Eats was referred to as a silver lining by Khosrowshahi during this crisis. He also said that this loss-making unit would also become profitable one day. In the first quarter, the demand for Uber Eats had increased by 50%, but the unit had still made a loss of $313 million on an adjusted basis. Currently, Uber is in talks for purchasing food delivery rival GrubHub Inc. in a move to increase its market share. The company is working on different business, which include a freight logistics network and self-driving cars.
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