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Less than 24 hours after it was
reported
that Uber was considering layoffs of 20% of staff, its big rival Lyft
is announcing its own cuts.
Today the company
said
it would be reducing employee count by 17%, working out to 982 employees, and furloughing an additional 288, due to the effects of the COVID-19 pandemic and its impact on Lyft’s business.
It also will put in place salary reductions of 30% for executive leadership, 20% for vice presidents and 10% for all other employees, while members of
Lyft’s
board of directors will forego 30% of their cash compensation for the second quarter of 2020.
Lyft said that it will take a restructuring charge of between $28 million and $36 million as a result, which will come through in its Q2 financials.
The news comes in the wake of technology sector layoffs now
crossing 32,221 people
since March 11. Transportation has been hit in a particularly tough way, in part because people are not moving around as much due to stay-at-home orders; and in part because of the worries of infection that people have around driving in vehicles in close quarters where others have been.
The Lyft layoffs are only a part of the labor discussion. Drivers for Lyft (and other ride-hailing platforms around the globe) are likely seeing similarly reduced incomes. If demand is high, drivers can profit through increased platform spend. If Lyft is cutting staff, it’s easy to presume that platform spend (GMV) is sharply down. This is expected, given the company’s withdrawn 2020 guidance, but worth considering from the perspective of the self-employed driver with a car note to cover.
Lyft has
promised $6.5 million
in “initiatives that support drivers and vulnerable communities” impacted by COVID-19, and Uber has made efforts
to support some drivers during the pandemic. Both companies have also publicly discussed how their platform might help during the crisis, with Uber looking into delivering medications
and Lyft working on delivery efforts for support orgs
.
Market response
Heading into 2020,
Uber
and Lyft had made (adjusted) profitability promises to their investors
, pledges that could be in doubt thanks to COVID-19 and its impacts on traveling. However, earlier this year Uber held a conference with analysts in which it promised that it would not run out on cash
, even if ride-hailing cratered and stayed sharply depressed for the rest of the year.
Uber and Lyft shares
rose in the wake of the news
. Today, the day after Uber’s reported consideration of staff cuts and Lyft’s confirmed staff reductions, the companies are up 6% and 5%, respectively. Investors appear unconcerned that removing staff will harm operations. Indeed, the change in the value firms appears more endorsement of the cuts than concern about their necessity. (TechCrunch dug into Uber’s potential cuts this morning
.)
It’s earnings season, with Uber reporting May 7 and Lyft a day earlier on May 6. We’ll know a lot more soon.
