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 This is expected, given the company’s withdrawn 2020 guidance, but worth considering from the perspective of the self-employed driver with a car note to cover.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.
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 rising share prices appear more as endorsements of the cuts than as concerns about why they were necessary in the first place. (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.