The worldwide restrictions on travel and businesses imposed by countries to prevent the spread of the novel coronavirus pandemic has hit the business of Uber hard, prompting the company to announce its plans for slash jobs of 3,700 full-time staff – which equates to about 14 per cent of the workforce of the company.
His base salary – set at $1m in 2019, will be waived off for the rest of the year by the company’s chief executive Dara Khosrowshahi.
These announcements were made by the company a day before it is set to announce its quarterly results.
Uber however had been finding it hard to make profits even before the pandemic struck as it accumulated a loss of $8.5bn in 2019.
Talking about the job cuts, the company said that the target of the reductions will by staff from the customer support and recruiting departments. The job culling will result in the company having to expand about $20m in severance pay and other costs.
Even in March, Uber had said that it had noted a 60 per cent drop in demand for its taxi services in the pandemic hot spots even though company had said that there had been an increase in the ordering of outside food through its food delivery service app Uber Eats.
“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,” the firm said in a statement on Wednesday.
Big cities are the lifeline of the business for Uber which includes many cities that ahev been hit very hard by the novel coronavirus pandemic.
About 23 per cent of the total money spent on the platform of Uber was accounted for by the four metro areas in the US, including New York and San Francisco, and London last year.
The job cuts “painful but necessary”, said analyst Dan Ives of Wedbush Securities. He noted that long-term difficulties are likely to be faced by Uber and its smaller US rival Lyft as more people would be working from home and would try and avoid taxis over fear of getting infected with the novel coronavirus.
“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,” he wrote in a note.
Plans to cut down about 17 per cent of its workforce were also announced last week by Lyft. That amounted to almost 1,000 employees of its employees. The company also announced its plans to furlough another 300 employees while also slashing pay for executives because of the pandemic.
The job cut announcements reflect the rippling effect throughout the US economy of the extended period of lockdown. The US economy is predicted to enter into a period of prolonged instead of a quick turnaround.
“Job losses of this scale are unprecedented,” said Ahu Yildirmaz, co-head of the ADP Research Institute.
(Adapted from BBC,com)