Uber will lay off 3,700 full-time employees, or around 14 percent of its global workforce, the company said in filings with the US Securities and Exchange Commission. In addition, Uber CEO Dara Khosrowshahi will forgo his salary for the rest of the year as the company continues to struggle in response to the COVID-19 pandemic.
The layoffs are expected to hit the company’s customer support and recruiting divisions. Uber says it will incur approximately $20 million in severance and other termination-related expenses. Last week, The Information reported that Uber’s top executives were considering laying off as many as 20 percent of the company’s workforce.
Uber’s ride-hailing business has dried up as a result of widespread shutdown orders due to the pandemic. In a call with investors in March, Khosrowshahi said its gross bookings in most major cities were down by as much as 70 percent. The Information recently reported that the company’s overall business was down 80 percent year over year. Recent gains in its food delivery Uber Eats division have failed to make up for big losses in its core ride-hailing product. The company will report its first quarter earnings on Thursday.
“With people taking fewer trips, the unfortunate reality is that there isn’t enough work for many of our front-line customer support employees,” an Uber spokesperson said. “Since we don’t know how long a recovery will take, we are taking steps to bring our costs in line with the size of our business today. This was a tough decision, but it is the right one to help protect the company’s long-term health and ensure we come out of this crisis stronger.”
Uber is also permanently closing 180 Greenlight Hub driver service centers, which will be the first in a series of cost-cutting measures. According to the company, with trip volume down, there isn’t enough work to support the employees that staff the hubs.
The pain of COVID-19 is being felt across the ride-hailing industry. Lyft, Uber’s main rival, recently announced that it would be laying off nearly 1,000 employees, or about 17 percent of its workforce. Careem, Uber’s Middle Eastern subsidiary, slashed headcount by more than 30 percent and suspended its bus transport app.
In the March call, Khosrowshahi said the company modeled “an extreme edge case” in which trip volume plummeted 80 percent. Even in that dire circumstance, Uber would still end the year with $4 billion in unrestricted cash, plus $2 billion in revolving credit.
But this isn’t the first time that mass layoffs have been on the table for the money-losing business. Uber laid off nearly 1,000 employees from its engineering, product, and marketing departments last year in an effort to shore up spending and address some of the company’s massive deficits.
Uber shares have fallen more than 50 percent in the past month due to investor concerns about the impact of the virus on bookings and a broader market decline. It’s especially bad timing for a business like Uber that had been aiming to achieve profitability in the fourth quarter of this year.