Lyft has assured that there will be no layoffs. Now employees are fighting for their next performance.

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The day before Lyft closes own rental service and laid off about 60 employees, the team in charge of the program became preoccupied with what they saw as a much bigger problem.

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Throughout June, the rental team unsuccessfully tried to launch the service in New York. The launch has been repeatedly delayed for various reasons, including the need to find a new insurer in the state. But even after the new insurance policy began on July 1, According to sources who spoke to TechCrunch on condition of anonymity, Lyft has yet to open its rental business in New York, leaving the team with questions.

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Ultimately, management informed the team that it was betting entirely on New York and would instead move operations to open an in-house rental program in Austin, which has fewer regulatory hurdles.

Within three weeks, Lyft executives will shut down the entire leasing program, leaving workers trying unsuccessfully to find other positions with the company or risk losing their employment status altogether. Lyft also announced that about 60 employees will be laid off.

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The layoff announcements were made just ahead of Lyft’s second-quarter earnings report due Thursday. The earnings report could provide more clarity on the company’s direction and expected further cuts.

july surprise

During the failed launch attempt in New York, wake-up calls were raised for at least one employee who spoke to TechCrunch on condition of anonymity. An employee looking for peace of mind stuck to comments from Lyft co-founder and president John Zimmer during a company-wide meeting in May when he talked about the reprioritization, hiring slowdowns and budget cuts and assured everyone that layoffs were not considered.

What happened next took many employees by surprise. On July 19, employees received an email from Cal Lankton, VP of Fleet and Global Operations reviewed by TechCrunch, informing them that Lyft had completed its reprioritization after first quarter income statement and decided to close its in-house rental program and continue to provide similar services through partnerships with Hertz and Sixt.

The email also says that Lyft will consolidate some regions in global operations and centralize its market operations team — mostly local operations such as driver support and vehicle service centers. Lankton said two locations — the San Francisco Auto Service Center and the Detroit Hub — would be closed.

“We have been working hard to assign as many team members as possible to other roles in the business,” Lankton wrote in an email sent to employees. “However, there will not be room for everyone in this new structure. Following this announcement, affected members of the Lyft Rentals and Global Operations central teams will receive a calendar invitation by 10:45 AM PST to learn what this means for their roles.”

Most of the 60 affected employees learned about it from a memo. Meanwhile, hourly employees who worked on-site at local service centers found out when they showed up for work and were told to go home, according to one source.

Ten minutes after hires received the initial memo, they received an additional email from Henry Imbert, head of Lyft’s rentals, explaining a little about what the downsizing process would look like and inviting the team to a video conference call.

Dazed and shocked, the team joined the call and were told they would have 30 days to find a new role at Lyft or part ways. HR said they would offer recruitment assistance but did not provide any details on what that would look like until they were turned down by staff.

The team members wanted to know if they would get new roles, or at least receive preferential, accelerated treatment. HR said laid-off employees would not be reassigned to new positions, but their resumes would end up on the recruiter’s desk.

The laid-off employees were offered a 10-week severance pay, which would be a lump sum payable on August 19, their last day on the job.

Lyft did not respond to a request for comment. TechCrunch will update the article if the company does.

What’s next for Lyft?

Following the news of the layoffs, Lyft helped the team with resume polishing, interview prep and LinkedIn consultations, and expedited job interviews at the company. But the frustration is still great for employees who think they should just be promoted to new roles rather than compete with outsiders.

“The mood is pretty bad,” said one Lyft employee. “It’s pretty solemn, but everyone was professional.”

According to Lyft’s job page, the company is recruiting from different departments, primarily from marketing, operations, and products.

It’s unclear where the freed up resources will now go, but they will likely flow back to Lyft’s core ride-sharing business. In times of excess, companies often feel the urge to open up new, possibly risky lines of business. But when a business or the economy, or both, plummets, you can often see those same companies return to their original mission. Elevator started his rental business in December 2019just after Uber closed a similar venture and shortly before the pandemic tore apart the world and Lyft’s balance sheet, which has still not fully recovered.

A Lyft employee who spoke to TechCrunch said the company’s first-quarter earnings report “set this whole panicky and reactionary decision-making process into motion.”

In the first quarter of 2022, Lyft posted significant growth in active ridership and revenue per passenger compared to the lows of the first COVID wave, but the company also reported a notable decline in revenue per passenger compared to Q4 2021 levels, as well as the second quarter of consecutive reduction in active passenger traffic.

Investors were spooked by the unclear short-term growth trajectory. The company’s shares fell more than 12% in after-hours trading that day and continued to decline.

As of this writing, Lyft shares are trading at $16.71, up from $21.56 on May 4, when Lyft reported its first quarter earnings. The decline in stock returns also affects laid-off employees who were given a stake in the company as compensation. They have been given a special subsidy due to the stock drop, but that doesn’t do much if the company’s stock continues to fall.

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