Coronavirus is already in Silicon Valley and forcing Uber, Lyft, and Airbnb among other tech companies to sack workers. The ride-sharing company in its filing with SEC said it is sacking 3,700 workers which amounts to 14% of its worldwide workforce. Rivals Lyft and Airbnb also said they will be laying off workers and executing policy changes that will affect their global operations.
Uber cited the negative impacts of COVID-19 as its main reason for the decision, saying the pandemic affected its entire spectrum of business, organizational strategy, financial buoyancy, investments in new products, as well as ability to attract and retain drivers among others.
To reduce the impact of the pandemic and diversify its revenue, Uber invested $170 million in Lime – a scooter-rental startup, bringing up the value of the new firm to $150 million. By the terms of the investment, Lime will now control Jump – Uber’s bike-sharing operation, while both Uber and Lime will merge their apps for interoperability.
Just this week, Uber reported its first-quarter revenue to be $3.54 billion while its net loss is put at $2.9 billion. The announcement bumped Uber’s shares to a significant amount according to CEO Dara Khosrowshahi.
Incidentally, the attorney general of California, Xavier Becerra, filed a lawsuit against Uber and Lyft for allegedly misclassifying their drivers as contractors when they ought to have been classified as employees under new state laws. They are charged with intentionally doing this to avoid paying health benefits to the workers among other employee benefits.
As part of measures to cushion the effects of COVID-19 on the ride-sharing company, CEO Khosrowshahi said he gave up his monthly salaries for the remaining part of this year, and that the company will shutter 180 driver resource centers around the world.
Daniel Ives, an analyst at Wedbush Securities, said many gig economy companies such as Airbnb and Uber will suffer uncertain futures until the world discovers the coronavirus vaccine. He said the businesses might adapt their operative structures; the fact remains that their core business will suffer some decline.
“Uber and Lyft and many other companies are trying to adjust their business models to the category 5 storm that is COVID,” Ives said. “The gig economy is right in the eye of it.”