Lyft Slashes Over 1,000 Jobs, 26 Percent of Its Workforce

A Lyft pick-up area in Los Angeles, Calif., on Aug. 20, 2020. (Mike Blake/Reuters)

Lyft announced that it would lay off 26 percent of its staff, becoming the latest company to initiate cuts in its workforce, as concerns over a potentially deep recession rise.

The decision, which was filed with the Securities and Exchange Commission on April 27, will affect 1,072 out of the roughly 4,000 employees at the rideshare company and eliminate 250 open positions.

The Sam Francisco-based firm had previously laid off 700 employees, or 13 percent of its staff, last November.

Lyft laid off 60 people, or less than 2 percent of its workforce last July, and scaled back on renting cars to customers after announcing it would slow hiring and reduce the budgets of some of its departments in spring of last year.

In total, the terminations are expected to cost Lyft between $41 million and $47 million in severance pay and benefits in the quarter that ends June 30, according to the securities filing.

New CEO Has Big Plans for Rideshare Service

The latest round layoffs is one of the first moves by the company’s new CEO, David Risher, who took up his new role on April 17.

The news comes a week after Risher released a memo,confirming that the company would cutback its workforce, reported The Wall Street Journal.

He emphasized a need to streamline operations and to return to “better meeting the needs of riders and drivers” in employee communications and public messaging.

Risher’s plan is to drive down costs to help bring its fares more in line with its biggest rival, Uber.

Right before taking over at Lyft, Risher told Yahoo Finance, on March 29, that more cost-cutting was on the horizon.

“Efficiency is also in the air,” he said, adding, “I’m very, very comfortable with the idea that you can sort of get twice the team, you know, without twice the people.”

Risher intends to eventually lower the company’s fares to lure back passengers from Uber after that service started offering lower prices for the same trips.

Investors Disappointed With Lyft’s Financial Results

In late March, after massive pressure from investors, Lyft’s co-founders, Logan Green and John Zimmer, decided to step down from managing the company and appointed Risher, a member of the board.

The last straw was when the company’s shares tumbled more than 35 percent after preliminary results were released in February, which showed a weaker-than-expected revenue outlook for the first quarter of 2023.

Despite record revenue for the fourth quarter, investors have been worried about the ride-hailing company prospects.

Green and Zimmer still remain on the company’s board after leading it through its 2019 IPO and later expansion. However, its stock value has never risen above its IPO price, and remains down around 8 percent this year, reported CNBC.

Lyft’s main competitor, Uber, has seen its shares climb about 17 percent year to date, according to Yahoo Finance.

Uber’s market share rose from 62 percent in 2020 to 74 percent this year, according to The Wall Street Journal.

Meanwhile, Lyft’s market share dropped from 38 to 26 percent.

Uber Surges Past Flailing Rival

Uber has dominated the rideshare market in the aftermath of the pandemic, leaving its rival far behind.

Unlike its rival, Lyft failed to diversify outside transportation and limited its business to North America after the pandemic cratered demand for ride-hailing services,

Uber, on the other hand, was able to soften the blow by aggressively expanding its food-delivery business.

This gave it more diversified business model over Lyft by giving customers a reason to continue using Uber’s app from home, while its competitor fell out of favor.

Uber Eats, the company’s food-delivery unit, was boosted by its roughly $2.65 billion all-stock acquisition of Postmates back in 2020.

Lyft was also slower to roll out bonuses and new features and to hire new drivers in a tight labor market as the American economy reopened after pandemic lockdowns.

Layoffs Dominate Tech Sector

Layoffs have been surging in the tech sector over the past year, with major companies like Meta and Amazon shedding thousands of jobs.

Meta Platforms said in March that it was cutting 10,000 jobs, after terminating 11,000 employees late last year, which was approximately about a quarter of its staff.

The social media company has seen its share value jump in the wake of its massive cost-cutting efforts, rising 15 percent on April 28 after announcing its latest revenue report.

Dropbox announced plans on April 27 to lay off 500 people, or about 16 percent of its staff.

More than 184,000 tech employees have lost their jobs in 2023 alone, according to data from Layoffs.fyi.

Lyft is expected to release its first-quarter 2023 earnings report on May 4.