Uber CEO says business is ‘absolutely sustainable’ after losing $5 billion in three months
By Matt McFarland, CNN Business September 25, 2019
Washington, DC(CNN Business)Uber is blowing through billions of dollars, but CEO Dara Khosrowshahi is undeterred.
In an interview with CNN correspondent Christiane Amanpour that will air Wednesday, Khosrowshahi defended Uber’s business model, which involves the company investing heavily in promotions to entice customers to its on-demand ride and meal-delivery offerings.
“The model is absolutely sustainable,” Khosrowshahi said. “The business, for example, is still growing 30-plus percent on a global basis. And anytime you have a business that has the kind of market size of trillions of dollars in terms of transportation and food and global commerce, it makes sense for a company to invest.”
Uber (UBER) lost $5.2 billion in the three months ending in June, its largest quarterly loss ever. Stock-based compensation related to its initial public offering accounted for $3.9 billion, but the remaining $1.3 billion in losses were still 50% higher than the year before.
Uber’s stock has fallen roughly 30% since going public in May. It raised $8.1 billion in one of the largest public offerings ever.
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Uber faces numerous challenges to its business, including California legislation that would make it more difficult for companies to classify workers as independent contractors instead of employees. The law could increase driver costs for Uber in the state, and trigger similar legislation nationwide. Uber has claimed the bill will not require it to reclassify the drivers, and Khosrowshahi echoed those statements when speaking with Amanpour.
“The law, of course applies, but we don’t think that the law, as it relates to us, would classify our drivers as full-time workers,” Khosrowshahi said.
The law, known as AB-5, would require a business like Uber to prove its contract workers are free from company control, perform work that is outside the usual course of business for the company and have independently established businesses providing similar work in order to be classified as such.
“We do think that the nature of independent work should change,” Khosrowshahi said. “We do believe that they should get health care. We do believe that they should have minimum earnings.”
But making good on that belief of providing better benefits to drivers could run counter to the company’s recent efforts to control costs.
In July, Uber laid off roughly 400 people, about a third of its marketing staff. Earlier this month, it let go 435 people from its product and engineering teams. It’s also cut back its electric bike and scooter operations in several cities.
Source: CNN
