The day before Lyft shut down its in-house rental service and laid off close to 60 employees, the team in charge of the program was consumed by what they thought was a much bigger problem.
Throughout June, the rentals team had attempted to get the service up and running in New York without success. The launch was delayed repeatedly and for a variety of reasons, including the need to get a new insurance provider in the state. But even after the new insurance policy began July 1, Lyft had still not opened up its rental business in New York, leaving the team with questions, according to sources who spoke with TechCrunch on condition of anonymity.
Leadership eventually told the team it was punting on New York altogether and would instead shift operations to opening the in-house rental program in Austin where there are fewer regulatory hurdles.
Within three weeks, Lyft executives would shutter the entire rental program, leaving workers scrambling to find other positions within the company or risk losing their employment status altogether. Lyft also announced that around 60 employees would 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 direction of the company and whether further cuts are expected.
July surprise
Throughout the failed attempt to launch in New York, alarm bells went off for at least one staffer, who spoke to TechCrunch on the condition of anonymity. The employee, seeking some peace of mind, held on to Lyft co-founder and president John Zimmer’s comments during a company-wide meeting in May when he spoke about reprioritization, slowing hiring and budget cuts and assured everyone that layoffs were not being considered.
What happened next took many employees by surprise. Employees received an email July 19 from Cal Lankton, VP of fleet and global operations — which TechCrunch has viewed — informing them that Lyft had finished its reprioritization after the first-quarter earnings call and decided to shut down its in-house rentals program and continue to provide a similar service through its partnerships with Hertz and Sixt.
The email also said Lyft would consolidate some regions in global operations and centralize its market operations team — this is mainly on-the-ground operations like driver support and vehicle service centers. Lankton said that two locations — the San Francisco vehicle service center and the Detroit Hub — would be closed down.
“We worked hard to place as many team members as possible in other roles across the business,” Lankton wrote in the email sent to employees. “However, there won’t be a role for everyone in this new structure. Following this message, impacted team members in the Lyft Rentals central teams and Global Operations 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 a memo. Meanwhile, hourly employees who worked on the ground at local service centers found out when they came into work and were told to go home, according to one source.
Ten minutes after the salaried employees got the initial memo, they received a follow-up email from Henry Imber, head of Lyft rentals, that explained a bit about what the wind-down process would look like and invited the team to a video conference call.
Stunned and shaky, the team joined the call and were told they’d have 30 days to find a new role within Lyft or be separated. HR said they would offer recruiting assistance, but didn’t provide any details on what that would look like until they got pushback from the staff.
The team members wanted to know if they would get placed in new roles or, at the very least, get preferential, expedited treatment. HR said the laid off staffers wouldn’t be placed in new roles, but their résumés would make it to the recruiter’s desk.
The laid off employees were offered 10 weeks severance pay, which will be a lump sum payment issued 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 helped the team with résumé polishing, interview prep and LinkedIn consultations, as well as expedited interviews for positions within the company. But disappointment remains high for staffers who think they should just be placed in new roles, rather than having to compete with outsiders.
“The mood’s pretty sour,” said one Lyft employee. “It’s pretty solemn, but everybody’s been professional.”
According to Lyft’s jobs page, the ride-hail company is hiring across departments, most prominently in marketing, operations and product.
It’s not clear where the freed up resources will now be directed, but they’ll likely go back to Lyft’s core ride-sharing business. During times of excess, companies often feel galvanized to start up new, perhaps risky, business lines. But when the business or the economy, or both, takes a nosedive, it’s common to see those same companies revert back to their original mission. Lyft started its rental business in December 2019, just after Uber shut down a similar venture and just before the pandemic ripped through the world and Lyft’s balance sheet, which still hasn’t fully rebounded.
One Lyft employee who spoke to TechCrunch said the company’s first-quarter earnings call “set this whole kind of panicky, reactionary decision-making in motion.”
In Q1 2022, Lyft posted strong gains in terms of active ridership and revenue per rider compared to the lows of the first COVID wave, but the company also reported a notable decline in per-rider revenue compared to Q4 2021 levels, as well as a second quarter of sequential declines in active ridership.
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 decrease.
At the time of this writing, Lyft shares are trading at $16.71, down from $21.56 on May 4, when Lyft reported Q1 earnings. The weakened stock performance also affects the laid off employees who were given stake in the company as part of their compensation. They were given a special equity grant because of the stock drop, but that doesn’t do much if the company’s stock continues to tank.