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Uber Cuts 3,000 More Jobs, Shuts 45 Offices in Coronavirus Crunch -- Update

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05/18/2020 | 03:00 pm

By Preetika Rana

Uber Technologies Inc. is cutting several thousand additional jobs, closing more than three dozen offices and re-evaluating big bets in areas ranging from freight to self-driving technology as Chief Executive Dara Khosrowshahi attempts to steer the ride-hailing giant through the coronavirus pandemic.

Mr. Khosrowshahi announced the plans in an email to staff Monday, less than two weeks after the company said it would eliminate about 3,700 jobs and planned to save more than $1 billion in fixed costs. Monday's decision to close 45 offices and lay off some 3,000 more people means Uber is shedding roughly a quarter of its workforce in under a month's time. Drivers aren't classified as employees, so they aren't included.

Stay-at-home orders have ravaged Uber's core ride-hailing business, which accounted for three-quarters of the company's revenue before the pandemic struck. Uber's rides business in April was down 80% from a year earlier.

"We're seeing some signs of a recovery, but it comes off of a deep hole, with limited visibility as to its speed and shape," Mr. Khosrowshahi said in his note to employees. The company's food-delivery arm, Uber Eats, has been a bright spot during the crisis, but "the business today doesn't come close to covering our expenses," he wrote.

Uber is in talks to buy rival Grubhub Inc., according to people familiar with the matter, a deal that would help stem losses from the cost-intensive business of building out delivery operations and give Uber an edge in competing with industry leader DoorDash Inc. Mr. Khosrowshahi didn't reference the potential deal in his memo.

After its founding in 2009, Uber quickly became one of the world's hottest startups, transforming how millions of people get around. Co-founder Travis Kalanick envisioned a future in which robotaxis roam streets and delivery drones fly overhead -- with Uber at the center of it all. As the company grew, it spent big to expand into areas beyond ride-hailing, amassing billions in losses along the way.

Investor enthusiasm started to wane even before the pandemic. Uber had one of last year's most anticipated stock market debuts. The result disappointed, with Wall Street increasingly wanting to see a path to profitability for Uber and other high-profile tech companies.

Mr. Khosrowshahi -- appointed in 2017 after a series of scandals led to Mr. Kalanick's outster -- pulled Uber out of markets where it was weak and laid off more than 1,100 employees last year. In February, before the pandemic hit its home market, Mr. Khosrowshahi made a tall promise: He vowed to make Uber profitable by the end of 2020, a year earlier than previously expected. He recently moved that timeline back to next year.

"I will not make any claims with absolute certainty regarding our future, " Mr. Khosrowshahi wrote in his note on Monday. "I will tell you, however, that we are making really, really hard choices now, so that we can say our goodbyes, have as much clarity as we can, move forward, and start to build again with confidence."

As part of the latest changes, Uber will scale back on noncore businesses. Mr. Khosrowshahi said the company is winding down its product incubator and artificial-intelligence lab, and exploring "strategic alternatives" for Uber Works, which pairs prospective employers with gig workers.

The company is also re-evaluating cash-burning businesses such as freight and autonomous driving. Uber has spent hundreds of millions of dollars to advance self-driving research in recent years.

Uber will book up to $260 million in charges from the restructuring measures it unveiled this month, the company said in a regulatory filing. Its shares closed 3.54% higher in Monday trading, roughly in line with the broader market.

Employees in the U.S. will be the hardest hit by the cuts, according to a person familiar with the matter. Uber is closing one of its offices in downtown San Francisco, which had more than 500 employees. It is also considering moving its Asia headquarters out of Singapore.

Smaller rival Lyft Inc. said last month that it would cut about 17% of its workforce while also furloughing workers and slashing pay amid efforts to cut costs.

Mr. Khosrowshahi said he wants to rally around core businesses -- mobilizing people and goods -- and build an organizational structure that avoids duplication. He announced that Andrew Macdonald, Uber's senior-vice president of rides, has been appointed head of a unified mobility team that will cover all aspects of Uber's rides business, including its public-transportation partnerships. Pierre-Dimitri Gore-Coty, vice president of Uber Eats, was named head of a unified delivery team that will include grocery deliveries.

While these measures should help rein in costs, Uber faces a fundamental question as governments begin to ease stay-at-home orders: Will people resume using its core rides services and, if so, how does the company assure drivers -- and riders -- that they are safe?

The company has allocated $50 million to buy supplies for drivers, including masks, disinfectant sprays and wipes. Starting Monday, the Uber app will ask drivers across much of the world to verify they are wearing face masks by taking selfies. Riders will also need to confirm they are wearing face coverings.

Meanwhile, regulatory hurdles loom for the ride-sharing giant. California sued Uber and Lyft earlier this month, alleging the companies' misclassification of drivers as independent contractors deprives the drivers of rights such as paid sick leave and unemployment insurance -- issues that became front-and-center during the pandemic. The state's gig economy law that took effect Jan. 1 aimed to force the companies to classify drivers as employees.

Uber and Lyft have said their drivers are properly classified under the law. The ride-hailing companies have joined other startups that rely on gig workers and raised more than $110 million to back a ballot initiative for November, asking that voters exempt them from the law. The ballot initiative also would guarantee benefits such as health-care subsidies for drivers who work a certain number of hours a week.

Mr. Khosrowshahi didn't mention the lawsuit in his memo.

He said he struggled to make the decisions that culminated in Monday's announcement and even consulted other CEOs, hoping there was a way the company could "wait this damn virus out."

"I wanted there to be a different answer," Mr. Khosrowshahi said, "but there simply was no good news to hear."

Write to Preetika Rana at preetika.rana@wsj.com

 

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