Uber cuts 3,000 more jobs, shuts 45 offices in coronavirus crunch

Uber's rides business was down 80% year-over-year in April

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.

Continue Reading Below

TickerSecurityLastChangeChange %
UBERUBER TECHNOLOGIES INC.35.82-0.50-1.38%

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 additional 3,000 people means Uber is shedding roughly a quarter of its workforce in under a month.

WILL CORONAVIRUS KILL UBER, LYFT RIDESHARE BUSINESS?

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 was down 80% year-over-year in April.

(iStock)

"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 added.

TickerSecurityLastChangeChange %
GRUBGRUBHUB INC58.75+2.01+3.54%

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 it an edge in competing with industry leader DoorDash Inc. Mr. Khosrowshahi didn't reference the potential deal in his memo.

GRUBHUB AND UBER CHIEFS CONTINUE DEAL TALKS

The pandemic hit when Uber was pivoting from growth at all costs to a profitable future. Mr. Khosrowshahi was trimming costs even before the outbreak, in an effort to propel Uber toward a path to profitability by the end of the year. He recently pushed that timeline to next year.

"I will not make any claims with absolute certainty regarding our future, " Mr. Khosrowshahi wrote in his note. "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 new 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 OFFERS GRUBHUB $60 A SHARE FOR TAKEOVER

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 from Singapore to a different market.

Mr. Khosrowshahi said he wants to rally around core businesses--mobilizing people and goods--and build an organizational structure that avoids duplication. Andrew Macdonald, Uber's senior-vice president of rides, was 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 appointed the head of a unified delivery team that will also include grocery deliveries.

While these measures will help rein in costs, Uber still faces uncertainty as governments begin to ease stay-at-home orders: Will people return to its core rides business and, if so, how does the company assure drivers--and riders--that they are safe?

VARNEY: INVESTORS DURING CORONAVIRUS JUDGING ECONOMIC FUTURE FOR THEMSELVES

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 most parts 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 over the ride-sharing giant. California sued Uber and smaller rival Lyft Inc. earlier this month, alleging the companies' misclassification of drivers as independent contractors deprives them 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.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

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 reference 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," he said, "but there simply was no good news to hear."

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

CLICK HERE TO READ MORE ON FOX BUSINESS