Why Uber is cutting 3,300 jobs despite years of ‘growth’
These are Uber's largest personnel cuts since the Covid-19 pandemic and come as the company trains its sights on artificial intelligence and robotaxis.
What does a “simpler and faster” Uber look like? For starters, the company is shedding 10 per cent of its global workforce and plans to invest the savings in its “future”.
The move translates into nearly 3,300 fewer employees at the San Francisco-based company as it faces growing competition from robotaxis such as Waymo and challenges in its food delivery business. Uber employed about 34,000 people at the end of last year, according to Reuters.
Why is Uber cutting 3,300 jobs?
Uber’s shares rose 2 per cent on Wednesday but have fallen 7 per cent this year. Khosrowshahi said the layoffs are coming after five years of growth at Uber, which has also made the company more complex.
“But that growth has also brought complexity: more layers, more co-ordination, more fragmented ownership, and in some cases structures that made sense when businesses were smaller but no longer serve us well at our current scale,” he wrote in a letter to employees.
Uber CEO Dara Khosrowshahi said the layoffs have come not despite but because of Uber’s growth in the past five years. (Express File Photo by Anil Sharma)
Today’s changes “are designed to do two things: make Uber simpler and faster, and create more capacity to invest in our future,” he continued.
The layoffs have been conveyed to most employees but in some countries, local laws would lead to different processes.
These are its largest cuts to personnel since the Covid-19 pandemic and come as the company trains its sights on artificial intelligence and robotaxis. In May 2020, it had let go 6,700 people, nearly a quarter of its staff.
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Where will Uber reinvest the savings?
Analysts at Citi, the global investment bank and financial services company, pencilled in about $825 million in annual savings due to the cuts. This would allow Uber to invest in launching more robotaxis. The company has promised to funnel more than $10 billion into expanding its robotaxi network and plans to have its fleet in at least 15 states this year to take on mighty opponents in Alphabet’s Waymo and Elon Musk’s own ambitious plans.
“This action is likely enabled, at least in part, by greater efficiencies from Uber’s AI investments,” said Ronald Josey, an analyst at the bank, according to business news organisation Financial Times.
Uber faces growing competition
The company’s food delivery business has lost ground to DoorDash in the US, while biting into the consumer pie in United Kingdom, France and Germany. In US though, it has a 34 per cent share of the food delivery market, compared to about 64 per cent for DoorDash.
Most Uber employees will return to office
Most of Uber’s remaining employees will be required to work from the office, with only about 1 per cent allowed to work fully remotely. Compliance to its hybrid work policy will be “reinforce(d)”, meaning staff has to work from office three days a week.
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Unlike several other tech executives announcing job cuts, Khosrowshahi did not directly blame AI for the layoffs. However, AI-driven efficiencies are likely to have played a role, with tracking website Layoffs.fyi reporting more than 123,000 job cuts across nearly 390 companies this year.
With inputs from Reuters
Why is Uber cutting 3,300 jobs?
Bureaucracy: Uber says rapid growth has created too many layers and fragmented ownership. Cost savings: Citi estimates the cuts could save about $825 million annually. Robotaxis: Uber wants to invest heavily in autonomous vehicles as Waymo and Tesla expand. AI: The company says a leaner organisation will help it invest in technology and future growth. Food delivery: Uber Eats faces intense competition from DoorDash and other platforms. Return to office: Only about 1% of employees will reportedly remain fully remote.
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Uber CEO Dara Khosrowshahi said the layoffs have come not despite but because of Uber’s growth in the past five years. (Express File Photo by Anil Sharma)