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Uber said it expects to spend about $20 million on severance and other benefits for the laid-off employees. CEO Dara Khosrowshahi will not be paid for the rest of the year. His salary was set for $1 million in 2019, with a possible $2 million bonus.
“Days like this are brutal,” Khosrowshahi wrote in an email sent to all employees Wednesday. “I am truly sorry that we are doing this, just as I know that we have to do this.”
Lyft to lay off 17 percent of staff as coronavirus takes toll
Uber’s announcement follows similar cuts by tech companies Lyft and Airbnb, fellows in the on-demand economy that has taken a plunge as people stay at home and try to avoid contact with others.
Lyft said last week it would lay off nearly 1,000 people, or 17 percent of its staff, as the pandemic cuts into its revenue. Airbnb has started cutting 25 percent of its workforce, or about 1,900 people, CEO Brian Chesky said in an email to employees Tuesday.
Uber and Lyft both went public last year in disappointing debuts that revealed the darlings of the private markets, who had each raised billions in private-market funding before their IPOs, faced tougher-than-expected scrutiny once public.
Uber’s stock price fell more than 4 percent to $26.90 per share after the layoffs were announced Wednesday.
Uber’s first day of trading ended deep in the red over gig-economy fears
Airbnb said last year that it planned to go public during 2020, though it’s unclear what type of reception the company would face if it moves forward with the plan. It secured a $1 billion loan from investors last month.
Airbnb spokesman Nick Papas declined to comment on any updated IPO plans.
Uber spokesperson Lois van der Laan said in a statement the “unfortunate reality” is there isn’t enough work for many customer support employees because people are riding less. Lyft spokesperson Alexandra LaManna said the company had nothing further to share from its layoff announcement last week.
The three companies all rely on people sharing a close space with others — drivers and passengers in Uber and Lyft rides, and vacationers in Airbnb homes where owners often live or have recently left. That proximity has become a liability at a time where people are cautioned or ordered to keep their distance from others.
One exception is Uber Eats, the company’s restaurant delivery arm, where executives said demand has surged.
Lyft plunges below IPO price, sending cautionary message to other unicorns
Uber is also closing 180 locations, or 40 percent, of its Greenlight Hubs, the physical locations where drivers can go for help on things such as onboarding or using the app. Uber temporarily closed all U.S. locations in March due to the pandemic.
Uber and Lyft rely heavily on contracted drivers to power their businesses. By classifying their drivers as contractors rather than employees, the companies are protected from some liability and offering full benefits. But the designation has been controversial, as critics say it means less protection when work dwindles. California sued Uber and Lyft on Tuesday, alleging the drivers are misclassified as independent contractors under a new state law.
On a call with analysts after announcing quarterly earnings Wednesday, Lyft CEO Logan Green said ride-hail trips on the app were down 75 percent for the month of April, and the company could not predict the economic impact of the pandemic on its business with any certainty. While the decline in rides has stabilized now, he said, trips are still down about 70 percent — even as some began to return to the app in cities that loosened restrictions. Citing record unemployment, he said, “we expect driver supply to outstrip rider demand” for the foreseeable future.
“These are the hard truths we’re facing,” he added. Lyft reported a $398 million loss during its quarterly earnings Wednesday, narrowed from a $1.1 billion loss a year ago during a quarter that included IPO costs. The company said its revenue grew 23 percent compared to the same quarter last year, to $956 million.
The stock surged more than 15 percent after hours on better-than-expected results.
California sues Uber, Lyft over alleged labor law violations
Analysts for Wedbush Securities wrote in a note Wednesday that while some people will start using the ride-hailing services again as the country recovers from the pandemic, others will never return.
“On the ride sharing front, Uber and Lyft face Herculean-like challenges looking ahead as the new reality will likely change the business models of these companies (and competitors) for the foreseeable future,” the analysts said.
At the same time, other businesses relying on gig workers have surged. On-demand shopping app Instacart said it would try to hire 300,000 shoppers this spring. And Big Tech companies — notably Amazon, which has hired 175,000 warehouse workers and delivery drivers — are expected to emerge from the crisis potentially more powerful. (Amazon founder Jeff Bezos owns The Washington Post.)
Meanwhile, more than 42,000 people have been laid off from small tech companies since March 11, according to Silicon Valley layoff tracker Layoffs.fyi.
Uber will announce its quarterly earnings on Thursday.