The day before Lyft closed in-house rental service and laid off nearly 60 employees, the team in charge of the program was consumed by what they saw as a much bigger problem.
In June, the rental team was trying to launch the service in New York without success. The launch was delayed multiple times and for a variety of reasons, including the need to find a new insurance provider in the state. But even after the new insurance policy started on July 1, Lyft has yet to open its rental business in New York, leaving the team with questions, according to sources who spoke to TechCrunch on condition of anonymity.
Management eventually told the team it was going all out with New York and would instead shift operations to opening an in-house rental program in Austin, where there are fewer regulatory hurdles.
Within three weeks, Lyft executives would shut down the entire for-hire program, leaving workers to scramble to find other positions with the company or risk losing their employment status altogether. Lyft also announced this around 60 employees will be laid off.
The layoff announcements came just ahead of Lyft’s second-quarter earnings, which will be released Thursday. The earnings call could provide more clarity on the company’s direction and whether further layoffs are expected.
July surprise
During the failed New York launch attempt, alarm bells went off for at least one employee who spoke to TechCrunch on condition of anonymity. The employee, seeking some peace of mind, echoed comments made by Lyft co-founder and president John Zimmer during a company-wide meeting in May when he talked about changing priorities, hiring delays and budget cuts and assured everyone of it layoffs were not contemplated.
What happened next surprised many employees. Employees received an email on July 19 from Cal Lankton, vice president of fleet and global operations — which TechCrunch saw — informing them that Lyft had finished reprioritizing after first quarter earnings call and decided to close its in-house rental program and continue to provide a similar service through its partnerships with Hertz and Sixt.
The email also said that Lyft will consolidate some regions into global operations and centralize its market operations team — mainly on-site operations such as driver support and vehicle service centers. Lankton said two locations — the San Francisco auto service center and the Detroit center — will be closed.
“We have been working 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 announcement, affected team members on the central Lyft Rentals and Global Operations teams will receive a calendar invite by 10:45 a.m. PST to learn what this means for their roles.”
Most of the 60 affected employees found out via memo. Meanwhile, hourly workers who worked onsite at local service centers found out when they got to work and were told to go home, according to one source.
Ten minutes after payroll employees received the initial memo, they received a follow-up email from Henry Imber, head of Lyft rentals, explaining a bit about what the termination process would look like and inviting the team to a video conference call.
Dazed and shaking, the team joined the call and were told they would have 30 days to find a new role at Lyft or be separated. HR said they would offer recruiting help, but didn’t provide any details on what that would look like until they got pushback from staff.
Team members wanted to know if they would be assigned to 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 make it to the recruiter’s desk.
The redundant staff have been offered 10 weeks’ compensation, which will be a lump sum 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?
After news of the layoffs, Lyft helped the team with resume polishing, interview preparation and LinkedIn consulting, as well as expedited interviews for company positions. But frustration remains high for employees who feel they should simply be put into new roles instead of having to compete with outsiders.
“The mood is pretty sour,” said one Lyft employee. “It’s quite solemn, but everyone was very professional.”
According to Lyft’s jobs page, the ride-hailing company is hiring in various departments, mostly in marketing, operations and products.
It’s unclear where the freed-up resources will now go, but they will likely go back to Lyft’s core ride-sharing business. In times of excess, companies often feel driven to start new, perhaps risky, lines of business. But when business or the economy, or both, collapses, it’s common to see these same companies revert back to their original mission. Elevator started its rental business in December 2019just after Uber shut down a similar venture and just before the pandemic tore apart the world and Lyft’s balance sheet, which has yet to fully recover.
One Lyft employee who spoke to TechCrunch said the company’s first-quarter earnings announcement “triggered all this kind of panicked, reactionary decision-making.”
In the first quarter of 2022, Lyft reported strong gains in terms of active trips and revenue per rider compared to the low levels of the first wave of COVID, but the company also reported a significant decline in revenue per rider compared to levels in the fourth quarter of 2022. 2021 as well as the second quarter of consecutive declines in active travel.
Investors were spooked by the unclear growth path in the near term. The company’s stock fell more than 12% in after-hours trading that day and has only continued to decline.
As of this writing, Lyft shares are trading at $16.71, down from $21.56 on May 4, when Lyft reported first-quarter earnings. The stock’s weak performance also affected laid-off employees who received a stake in the company as part of their compensation. They got a special equity subsidy because of the stock drop, but that doesn’t do much if the company’s stock continues to fall.