Uber Technologies (NYSE: UBER) has laid off 3,000 more employees and closed 45 more offices, the Wall Street Journal reports, just after a first round of layoffs that totaled more than 3,700 employees.
CEO Dara Khosrowshahi wrote in an email to employees that Uber was “making really, really hard choices right now,” including re-evaluating non-core cashburning businesses like Uber Freight and autonomous driving. Khosrowshahi said that Uber was looking at “strategic alternatives” for its staffing business Uber Works, but did not use that language specifically for Freight.
“We remain committed to growing the Uber Freight business, innovating in the Freight industry, and supporting our partners – carriers and shippers alike,” an Uber Freight spokesperson told FreightWaves. “Today’s news does not impact our product roadmap, or our ability to provide best-in-class service to our customers.”
Uber Freight, Uber’s digital freight brokerage business, had already adjusted its growth strategy and the way it priced freight to customers as part of Uber’s new emphasis on driving toward profitability. As late as February 2020, Khosrowshahi said that Uber would be EBITDA-profitable by the end of 2020, but the coronavirus pandemic pushed that date back to 2021.
Uber’s financial reporting and channel checks across the freight brokerage industry confirmed that Uber Freight was adjusting its model earlier this year. Uber Freight raised contracted rates on several large customers by double-digit percentages. Multiple sources told FreightWaves that the digital brokerage gave back a multi-million dollar award to a Fortune 100 consumer packaged goods shipper earlier this year.
And the digital brokerage’s attitude toward growth changed – the first quarter of 2020 marked the second quarter in a row that Uber Freight’s gross revenue had declined sequentially. Still, the $199 million in gross revenue Uber Freight reported in the first quarter 2020 put it on a $796 million annual run rate, enough to place the business in the top 15 or 20 freight brokerages in the United States.
But Uber Freight is far from achieving profitability; the segment lost $64 million in ‘adjusted EBITDA’ in the first quarter of 2020, which was admittedly better than the $81 million loss in the fourth quarter of 2019. Uber’s financial reporting makes it impossible to reconstruct Freight’s gross margins – the typical measure of performance for non-asset third-party logistics providers reliant on purchased transportation – or its operating costs. Uber Freight’s operating costs are thought to be much higher than most freight brokerages because of its investments in technology, which allowed the business to move tens of thousands of touchless loads.
In January, the Chicago Tribune reported that Uber was offering some of its new Chicago space up for subleases; when FreightWaves questioned Uber Freight management earlier this month, they did not comment further on the subleasing.
The question around Uber Freight has always been how and why it fits into Uber’s overall business. Uber’s Rides business was unique because the company created capacity by convincing people to drive passengers in their own cars, but the Freight business cannot create Class 8 trucks out of thin air. That left Uber Freight subject to the supply-and-demand dynamics of a fragmented, highly competitive market with many tech-savvy brokerages already established. Freight brokerage revenue, it turns out, is more volatile – and so are its margins – unlike the B2C marketplaces for rides and food delivery that Uber has effectively been able to create and control.
Ultimately the difficulty of acquiring non-recurring freight revenue and managing volumes in a volatile, cyclical industry makes freight brokerage a fundamentally different kind of business than Rides. And the variable performance of a digital freight brokerage could ultimately be dilutive to Uber’s valuation, if it got big enough to matter.
In July 2018, FreightWaves wrote about Uber shuttering its autonomous trucking program, which had the potential to make its freight brokerage offering something truly revolutionary: “If Uber Freight loses the benefit of selling the concept of an autonomous trucking future, investors might prefer company executive attention on protecting and building out the core business.”
Harold Cummings
Here’s How You Save Uber Freight!!! Merge or Acquire A Company Like “Metro Trailers”. Gain The Assets Hence The Equipment Then Rent/Lease It To Qualified Independent CDL Drivers Pairing Them With The Loads From Uber’s Freight Brokerage Business. This Will Empower The Drivers And Bring Speed & Efficiency To The Supply Chain. Uber Will See More Profits And Save This Division Of Uber’s Portfolio.
Harold Cummings,MBA
CEO
Lithonia Diesel
h.cummings03@gmail.com
tim winchell
Harold what planet do you live on ??? or did you go to uber school of brokerage ?????? Im with the rest of them.Get rid of uber it’s a joke..How do you make money when you can’t even answer a phone ????
DJ
There’s the problem in a nutshell, suppressing rates. Not a good idea in any business especially trucking.
Dave
Any company not making a profit at the moment is suspect on their survival. Lot’s of layoffs already and more coming as there is no more cash from the california and new york sh!!ty VC dudes. It’s time the market got real again and let us that know what we are doing take back over lol.
Mark
Dave you sound like a bit of a cry baby…… maybe you interviewed at Uber and were not selected. Uber Freight is no worse than the legacy brokers like CH and TQL and the rest of those clowns.
Jesse M
From what I can tell Uber Freight is actually better than the legacy brokers. Some of the best people went over there from CH, TQL, Coyote and others. Sad to see them fall apart like so many other brokers right now.
Dave
Did you say the BEST went there… LMFAO. HAHAHAH. Can you count????
Dave
Mark you Idiot…What’s the difference between UF, CH Robinson, and TQL?
Which one is broke, losing money, losing customers, needs regular cash infusions to stay alive, LOSES 32 cents on every single mile covered, and probably won’t exist in 6 months????
No…you don’t get a prize for getting this right. Anyone applauding their business model deserves to be unemployed (or more likely unemployabie)
Jesse M
Dave – Why do you hate Uber Freight so much? We need companies like Uber to shake things up. The legacy brokers haven’t done anything for the last 10 years and needed a kick in the ass. Hopefully as Uber shuts down the talented team they have will go on to do many new things in trucking.
Erica H
I’m all for innovation but UF didn’t exactly do much to push advances – they came in and suppressed rates in hopes of taking market share. They brought kids in from college that demanded high salaries, completely disconnected from average truckers without a willingness to learn and be humble. Their plan is now backfiring. I applaud the risk they took and their willingness to look at the industry with fresh eyes but it failed. The trucking industry needs more tech to optimize and produce more profitable results but UF wasn’t it.
DS
…his business is cut throat and UF hires overly compensated college kids who THINK they know how the world works, they get overly expensive office space in the worlds most expensive cities, and dump huge sums into stupid makreting….”
and than they post loads on load boards and never answer their phone to actually book them, or if they answer after 79 rings they have no idea whats going on, whose load it is, pu and delivery parameters, etc etc…
never seen lazier bunch of people in my life…
Dave
And we all know just how hard it is in brokerage to turn a $64m loss into even a tiny profit. This business is cut throat and UF hires overly compensated college kids who THINK they know how the world works, they get overly expensive office space in the worlds most expensive cities, and dump huge sums into stupid makreting.
Brokerage is a business that thrives on grit and low expenses not snazzy offices in Chicago or NYC.
Erica H
This is spot on – Uber thought they could come in and steal all the revenue, but they were lacking what it takes to succeed in our cut throat industry.
DS
…his business is cut throat and UF hires overly compensated college kids who THINK they know how the world works, they get overly expensive office space in the worlds most expensive cities, and dump huge sums into stupid makreting….”
and than they post loads on load boards and never answer their phone to actually book them, or if they answer after 79 rings they have no idea whats going on, whose load it is, pu and delivery parameters, etc etc…
never seen lazier bunch of people in my life…
Jesse M
It was clear meeting with people from Uber Freight that Uber gave up on Freight about 6 months ago. It’s a shame as they really assembled a killer team from many of the local brokerages. Most have already left or actively interviewing as they know what is coming.
Dave
Uber Freight will be gone in 6 months. you cant run on fumes forever and its not like their parent is making money.
TIIMMMBBBERRRRRRRRR…….
Mark
Hope you are under that tree Dave