The day before Lyft shut down its in-house ride-hailing service and laid off about 60 employees, the team in charge of the program was consumed by what they thought was a much bigger problem.
Throughout June, the rental team had been trying to get the service up and running in New York without success. The launch was delayed repeatedly and for various reasons, including the need to acquire a new insurance carrier in the state. But even after the new insurance policy began on July 1, Lyft had yet to open its rental business in New York, leaving the group with questions, according to sources who spoke to TechCrunch on condition of anonymity.
Leadership eventually told the team it would ditch New York altogether and instead shift work to opening the domestic rental program in Austin where there are fewer regulatory hurdles.
Within three weeks, Lyft executives will shut down the entire rental program, leaving workers to scramble to find other positions within the company or risk losing their job status altogether. Lyft also announced that about 60 workers will be laid off.
The layoff announcements came shortly before Lyft’s second-quarter earnings, which are due Thursday. The earnings call could provide more clarity on the company’s direction and whether further cuts are expected.
Throughout the failed New York launch attempt, the alarm sounded for at least one employee, who spoke to TechCrunch on the condition of anonymity. The employee, seeking some quiet time, echoed comments made by Lyft co-founder and chairman John Zimmer during a company-wide meeting in May, when he talked about reprioritizing, slowing hiring and budget cuts, and assured everyone that layoffs were not considered.
What happened next surprised many employees. Employees received an email on July 19 from Cal Lankton, VP of fleet and global operations — seen by TechCrunch — informing them that Lyft had completed its re-prioritization after its first-quarter earnings call and decided to close the in-house rental program and continue to provide a similar service through its partnerships with Hertz and Sixt.
The email also said Lyft will consolidate some areas of its global operations and consolidate its operations team in the market — mostly on-site operations such as driver support and vehicle service centers. Lankton said two locations — the San Francisco vehicle service center and the Detroit Hub — will close.
“We have worked hard to place as many team members as possible in other roles in the business,” Lankton wrote in the email sent to employees. “However, there will not be a role for everyone in this new structure. Following this message, affected team members on the central Lyft Rentals and Global Operations teams will receive a calendar invitation by 10:45 AM. PST to learn what this means for their roles.
Most of the 60 affected workers found out through a memo. Meanwhile, hourly workers working on the ground at local service centers found out when they came to work and were told to go home, according to a source.
Ten minutes after renters received the initial note, they received a follow-up email from Henry Imber, head of Lyft rentals, explaining a bit about what the liquidation process would look like and inviting the team to a conference call.
Surprised and shaken, the team joined the call and were told they would have 30 days to find a new role at Lyft or be fired. HR said it would offer help with recruiting, but didn’t provide details on what that would look like until they get pushback from staff.
Team members wanted to know if they would be assigned new roles or, at the very least, given preferential, expedited treatment. HR said the laid-off employees would not be placed in new roles, but their resumes would go to the recruiter’s office.
The sacked employees have been offered 10 weeks’ severance pay, which will be a one-off payment issued on August 19, their last day of work.
Lyft did not respond to a request for comment. TechCrunch will update the article if the company does.
What’s next for Lyft?
Since the news of the layoffs, Lyft has assisted the team with resume polishing, interview preparation and LinkedIn consultations, as well as interviewing for positions within the company. However, frustration remains high for executives who feel they should simply be placed in new roles, rather than having to compete with outsiders.
“The mood is very sour,” said a Lyft employee. “It’s quite formal, but everyone was professional.”
According to Lyft’s jobs page, the ride-hail company is hiring in various departments, primarily in marketing, operations and products.
It’s unclear where the freed up resources will go now, but they will likely go back into Lyft’s core ride-sharing business. In times of excess, companies often feel galvanized to embark on new, perhaps risky, lines of business. But when business or the economy, or both, take a hit, it’s common to see these same companies return to their original mission. Lyft started the rental business in December 2019just Uber shut down a similar venture and shortly before the pandemic swept the world and Lyft’s balance sheet, which still hasn’t fully recovered.
A Lyft employee who spoke to TechCrunch said the company’s first-quarter earnings call “set in motion all this kind of panicked, reactive decision-making.”
In the first quarter of 2022, Lyft posted strong gains in active ridership and revenue per rider compared to the lows of the first wave of COVID, but the company also reported a notable decline in revenue per rider compared to levels of fourth quarter of 2021, as well as a second quarter of consecutive declines in active passenger traffic.
Investors were spooked by an unclear near-term growth path. The company’s shares fell more than 12% in after-hours trading that day and have only continued to decline.
At the time of writing, Lyft shares are trading at $16.71, down from $21.56 on May 4, when Lyft reported first-quarter earnings. The weakened stock performance also affects laid-off workers who were given a stake in the company as part of their compensation. They were given a special equity grant because of the falling stock, but that doesn’t do much if the company’s stock continues to rise.