Electric scooter rental company Lime is teaming up with Uber to bring an unconventional mode of transportation to the world.
Uber Technologies is investing in Lime as part of a US$335-million financing round, the companies plan to announce on Monday. The deal, led by Alphabet’s venture arm, GV, values the scooter business at $1.1-billion.
While details of the partnership are still being finalised, Uber plans to promote Lime in its mobile application and slap its logo on the scooters, executives from the two companies said. Uber took a similar step with a start-up called Jump Bikes, which rents electric bicycles, before acquiring the business for more than $100-million in April. Uber said it still plans to roll out e-bikes in more cities around the world.
The Uber-Lime alliance has implications for the brewing scooter ground war. Since Lime was founded 18 months ago, the San Mateo, California-based company has raised $467-million. Los Angeles-based Bird Rides has nearly as much cash. It was founded by Travis VanderZanden, a onetime Uber executive who has adopted a similar aesthetic to his former employer: in contrast to Lime’s bright colour scheme and affable executives, Bird uses darker tones, and its founder is a controversial figure. Investors recently valued VanderZanden’s year-old company at $2-billion.
Lime said its service, which lets customers rent scooters scattered around cities and leave them on the sidewalk for the next person to pick up, is available in more than 70 markets in the US and Europe. The new cash will go toward buying tens of thousands of lightweight electric scooters.
The scooters are manufactured in China to the company’s design specifications. Brad Bao, a former Tencent executive who co-founded Lime, is proud of the company’s investment in custom vehicles, as opposed to buying ones off the shelf. However, there’s a looming threat of a price hike as the US targets scooters on a list of potential China tariffs. Lime said it doesn’t expect the trade war to impact its business. “We choose the harder path,” said Bao. “We’re a capital-heavy business.”
Lime’s partnership with Uber raises as many questions as it answers about the ride-hailing company’s scooter strategy. Uber has filed an application in San Francisco to introduce a scooter service of its own. There’s also the risk of cheaper forms of transportation eating into Uber’s main business of car fares.
“As a company we’ve leaned into self-cannibalisation throughout our history,” said Rachel Holt, the former head of Uber’s North America ride-hailing business who’s now leading scooter and bike-rental efforts along with public transportation partnerships. She said Uber undercut its original ride-hailing business with a cheaper carpooling service. “We are going to continue to double down on the Jump acquisition that we’ve made, and we’ve got a very expansive roll-out strategy there that we’re excited about,” she said.
Since taking over as Uber CEO last year, Dara Khosrowshahi has articulated a strategy that would make the company’s app a central place for all kinds of urban transportation. This includes public transit, rental cars, scooters and bicycles.
Uber was drawn to Lime because it’s already available in major cities. “We feel like their footprint is obviously quite expansive at this point, and we’re really excited to see where it can go,” Holt said. However, the deal doesn’t preclude Uber from entering the scooter business on its own, she said.
Lyft, which has gained popularity in the US over the last year as Uber has stumbled, is also poised to get into the scooter and bike-rental businesses. It said last week it’s buying Motivate, the operator of Citi Bike in New York and similar services in other cities.
But Lime said it was most impressed by Uber’s strategy and its global heft. “Not many ride-share programs are global,” said CEO Toby Sun. Lime is developing “Uber-type market share and Lyft-type reputation”, Sun said. “In this kind of market, they go together.”
While the pact with Uber is set to have a more visible and immediate impact on Lime’s business, Google’s parent company is making the largest financial commitment to the scooter start-up. Alphabet is investing both directly and through its GV fund. Alphabet is also an Uber investor, but the two have a tortured history. Alphabet’s Waymo has sparred with Uber in the courtroom and on the road, where people can hail rides from the search giant’s self-driving minivans in Arizona.
GV partner Joe Kraus is joining Lime’s board, and he’s very excited about scooters. He said: “This reminds me a tremendous amount of the early days of the Internet.” — Reported by Eric Newcomer and Brad Stone, (c) 2018 Bloomberg LP
Warren Buffett proposed investing US$3bn in Uber Technologies earlier this year but the talks fell apart following disagreements over the terms and size of the deal, people familiar with the matter said.
The now-dead Uber transaction is reminiscent of the winning bet Buffett’s Berkshire Hathaway made on Goldman Sachs Group during the financial crisis. Buffett invested $5bn in Goldman Sachs, lending his imprimatur to the bank when it was reeling after the collapse of rival Lehman Brothers in late 2008. In exchange, Buffett’s company got preferred stock that ultimately netted Berkshire more than $1.6bn in profit. Berkshire also got warrants to buy Goldman stock that produced an even bigger gain.
Buffett proposed similar terms to Uber in the wake of a crisis of the ride-hailing company’s own making. Buffett would have effectively lent Uber his sterling reputation, along with some capital, in exchange for cushy deal terms. A spokesman for Uber declined to comment. Buffett did not immediately respond to a request for comment left with an assistant.
Under the proposed agreement, Berkshire Hathaway would have provided a convertible loan to Uber that would have protected Buffett’s investment should Uber hit financial straits, while providing significant upside if Uber continued to grow in value, said the people, who spoke under condition of anonymity because the discussions were private. Buffett’s initial offer was well above $3bn, one of the people said.
During negotiations, Uber CEO Dara Khosrowshahi proposed decreasing the size of the deal to $2bn, one person said, hoping to get Buffett’s backing while giving him a potentially smaller share of the company. The deal fell apart after the two sides couldn’t agree on terms, one of the people said.
Buffett confirmed the talks to CNBC. “I’m a great admirer of Dara. Some of the reported details are not correct but it’s true that Berkshire had discussions with Uber,” Buffett told the news channel.
Uber’s cash position remains strong. At the end of the first quarter, Uber had $6.3bn in cash, along with a $1.5bn term loan that will be recorded in the second quarter. But the Berkshire discussions show the company’s continued appetite for capital. The discussions with Berkshire Hathaway took place as Uber pursued its term loan.
Uber seemed open to taking both Buffett’s investment and the loan, which it closed in March, the people familiar with the matter said. Uber had also just received $1.25bn from a large deal with SoftBank in January. Alongside that direct investment, SoftBank and its consortium purchased $8bn in Uber stock from existing shareholders.
Coming so soon after that cash infusion, Buffett’s attempt to take a stake in Uber while it was on the rocks may have been too late to squeeze favourable terms from the company.
In recent months, Uber has been working to find its footing after controversies over its culture and the fatal crash of one of its self-driving cars in March. Khosrowshahi, who has moved to turn around Uber’s public reputation, joined the company in September 2017. While there are still several vacancies on the board and he has yet to find a chief financial officer, he’s helped to calm disputes among Uber’s board of directors and move the company past its flurry of 2017 crises.
Under Khosrowshahi’s leadership, Uber has mounted a global apology tour, running advertisements that feature the CEO speaking directly to the camera, promising that the Uber is turning over a new leaf. — Reported by Eric Newcomer and Olivia Zaleski, with assistance from Katherine Chiglinsky, (c) 2018 Bloomberg LP
What makes Uber Technologies the most valuable venture-backed technology company in the world? Investors say size and growth. The business is transforming global transportation networks. On closer inspection of its financial performance, Uber also pioneered a very expensive way of establishing a market and staying on top.
Uber has had little trouble finding investors eager to buy into its vision. It relishes telling backers about gross bookings, or the amount riders pay for service. That number is enormous, totaling US$37bn last year. But most of that goes to drivers. Uber’s cut, or net revenue, came to $7.4bn. Compared to public companies with similar valuations, Uber’s revenue lags well behind.
At the same time, Uber has worked to downplay its persistent losses. Because the company doesn’t disclose financial results with much consistency, it’s easy to lose sight of how much of investors’ money Uber has spent. Since its founding nine years ago, Uber has burnt through about $10.7bn, according to a person familiar with the matter. Over the past decade, only one public technology company in North America lost more in a year than Uber lost in 2017. None has burned such a tremendous amount in the first stage of its life.
Investors have contributed $17.3bn to Uber, said the person, who isn’t authorised to discuss the figure and asked not to be identified — an enormously long leash for the company to experiment with and subsidise global growth. Figuring out whether that investment will pay off is partly based on what you think will happen to Uber’s losses.
An analysis of Uber’s financial position, based on Bloomberg reporting and voluntary disclosures by the privately held company, shows that Uber is a corporate anomaly. Few companies in history have grown so fast or lost so much money in such a short period of time. Uber has developed what may be considered a Peter Pan syndrome. After reaching a stage of maturity most companies never realise, it has yet to turn a profit and remains deeply in the red.
Uber showed a sign of promise in the first few months with Dara Khosrowshahi at the helm: its loss narrowed from the previous quarter. “Our growth at scale remains incredibly strong, and we are driving meaningful improvements in our margins,” an Uber spokesman wrote in an e-mailed statement. “Under Dara’s leadership, we are making big bets for the long term in new technology like Express Pool and in businesses like UberEats, which is growing at an extraordinarily fast rate.”
Typically, when a business posts a multibillion-dollar loss, it’s followed by many quarters or years of penance. Hewlett-Packard reported a loss of $14.7bn in 2012, mostly due to the discovery of financial falsehoods related to the acquisition of Autonomy. HP made up for that loss in subsequent years when it generated billions in profit.
The only other public tech companies that have come close to rivalling Uber’s ability to lose money are chip makers. In 2008, Micron Technology reported a net loss of more than $2bn at a time when its main memory chip products were selling for less than the cost to produce. Things were bad, and yet, it was less than half of Uber’s $4.5bn loss last year.
Amazon.com is famous for its losses over the years. But even in the heyday of the dot-com bubble, the e-commerce giant never came close. Amazon’s biggest loss was in 2000 — a $1.4bn embarrassment, or about $2bn adjusted for inflation. Most years, Amazon turns a profit, albeit a small one.
What Uber backers can point to, though, is a nearly unmatched pace of sales growth. Even as Uber’s revenue reached $2.3bn in the fourth quarter of 2017, its annual growth rate remained strong, at about 90% compared to 2016. That’s faster than most tech companies with a similar valuation. Only one US tech company of Uber’s size, Micron, grew at anything close to that last year.
Uber delivered triple the sales growth last year of the average tech company in North America valued from $40bn to $60bn. But does that make it a good investment? Judged by sales-to-market value — one way to decide whether a company has already become expensive relative to its peers — Uber’s valuation is 7.3 times annual revenue. For the comparison group, that ratio is 4.2 times. The lower the ratio, the better deal you’re getting as an investor. Uber is quite expensive judged purely on annual revenue. Investors usually prefer to evaluate companies on price to earnings, but, of course, Uber doesn’t have any, so that’s not an option.
Making matters more complicated, the financials Uber has long given shareholders and the media presented a prettier picture than reality. Uber traditionally prefers a loss calculation that doesn’t include interest, tax, stock-based compensation and other expenses. This adjusted accounting downplays the scale of Uber’s losses over the years. Uber has said adjusted numbers better reflect its business. However, it agreed to share financial details with Bloomberg for all of 2017 using both accounting practices in an effort to be more transparent about its business.
Back in the dot-com days of the late 1990s, a similar measure was favoured by analysts trying to persuade investors to put money in untried companies. It was mostly abandoned after many of them failed to make the difficult journey to profitability, and investors started demanding concrete results and a clearer picture of the bottom line. Uber is well-advised to follow suit before selling shares to the public as early as next year. — Reported by Ian King and Eric Newcomer, (c) 2018 Bloomberg LP
Late last week, two Silicon Valley powers got into an online scrum over a technology that is neither developing nor likely to take off anytime soon. On his grand tour of Asia, Uber CEO Dara Khosrowshahi won headlines by predicting that private air taxis — flying cars — will be whizzing over US cities within a decade, negating the need for costly new transportation concepts like the Hyperloop.
Elon Musk, who popularised the idea of a high-speed, tube-based transportation system dubbed the Hyperloop and has expressed scepticism before about flying cars, didn’t pass up the opportunity to do so again. “If you love drones above your house, you’ll really love vast numbers of ‘cars’ flying over your head that are a thousand times bigger and noisier and blow away anything that isn’t nailed down when they land,” he tweeted.
“Challenge accepted,” Khosrowshahi responded, pledging to pursue advancements in battery technology and rotor design. But this was just innovation theatre. Uber Technologies is not actually working on developing batteries or rotors, nor is it making its own stealthy air taxis, as far as we know. Unlike its expensive and controversial effort to build driverless cars, the so-called Uber Elevate initiative seeks to incorporate air taxis that other companies may build someday into an Uber-like hailing service.
The whole debate, flush with assumptions about a future that may or may not arrive at some hazily defined point in time, is typical of the many anxious discussions we’ve been having lately about technologies like killer robots, job-crushing automation and super-human artificial intelligence.
Now we’re debating the roll-out of flying cars. Well, I’ve seen the prototypes and some elegantly produced videos, and while the progress is real, we are still years away from aircraft that offer a safe alternative to the daily commute. Then there are the regulatory challenges — and the non-trivial need to create an entirely new air traffic control system that does not depend on humans staring out of control towers — and it may be decades before we ever have to worry about them landing quietly in our backyards.
Of course, the Hyperloop isn’t imminent, either. Although Musk and several start-ups are working on it, there’s no known prototype capable of achieving the speed or distance Musk theorised in his original specification for the technology. Securing permits from officials is another major hurdle. In the flying-car debate, Musk is doing that Steve Jobs thing: expressing distaste for any idea he did not come up with himself.
The squabble between Musk and Khosrowshahi reminded me of an eminently sensible piece last year in MIT Technology Review by the roboticist Rodney Brooks, who noted that humans “tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run”. Brooks wrote that progress in AI has been repeatedly overestimated and that “all the evidence I see says we have no real idea how to build” autonomous agents with human levels of intelligence.
Despite current levels of hysteria around AI and robotics, Brooks said, we cannot conceive of what form they will eventually take and what tools we will have to manage it. The hysteria over AI — much of it stirred up by the mischievous Musk himself — leads to “fears of things that are not going to happen”, like the widespread destruction of jobs, Brooks writes.
The same dynamic is true now of flying cars. Regardless of duelling tweets between a millionaire and a billionaire, the future remains unknowable. The only guarantee is that you won’t be commuting in one of these things for a long time. — Reported by Brad Stone, (c) 2018 Bloomberg LP
Speaking at a conference in San Francisco, Uber Technologies CEO Dara Khosrowshahi has rattled through the company’s ambitions: food delivery, freight, autonomous vehicles and even buses and bikes.
Ultimately, Uber’s business is getting people from “point A to point B”, he said at a Goldman Sachs-hosted event on Wednesday. Achieving such goals means the company will continue to lose money, he acknowledged, a day after Uber reported a loss of US$4.5bn for 2017 on $7.5bn in net revenue.
To drive home his point, Khosrowshahi compared Uber to Amazon on more than one occasion. While Amazon had almost $178bn in sales in 2017, net income was $2.2bn. “Cars are to us what books are to Amazon,” he said. Khosrowshahi said that by 2023, he could imagine Uber providing the entire transportation network for a city.
Uber started out as a car-booking service, but has since expanded into ride sharing and food delivery, while testing autonomous vehicles and transport of goods. The San Francisco-based company has raised approximately $19bn in funding and has a blended valuation of $54bn, making it the biggest venture-backed technology enterprise without a stock listing.
“We’re a publicly reporting private company — go figure,” Khosrowshahi said. The CEO said that while he’s somewhat uncomfortable running a money-losing business after joining from profit-generating Expedia, it’s the right strategy for Uber. If the ride-hailing provider were to shed its younger businesses, Uber could become profitable but it would miss out on promising opportunities, he said.
“The business that was handed to me was a better business than I thought,” Khosrowshahi said, adding that he still needs to improve Uber’s brand. He’s been trying to “bring peace to the kingdom”, he said. Last week, Uber’s settled its trade-secrets fight with Alphabet’s self-driving car unit, Waymo. The fact that neither side was happy with the settlement was proof that it was a good deal for both sides, the CEO said. He also celebrated the governance reforms that went into effect after a financing deal with SoftBank Group.
“Rather than having their capital cannon facing me, I’d rather have their capital cannon behind me,” Khosrowshahi said of the Japanese telecommunications provider and tech investor. He also reiterated Uber’s interest in holding a public offering in 2019.
Uber is looking to partner with autonomous vehicle companies, the CEO said, adding that the company is prepared to slowly integrate autonomous vehicles in its network filled with human drivers. By taking a “hybrid approach”, he predicted that Uber’s network of human drivers would only grow, even as Uber introduces autonomous vehicles.
Khosrowshahi opened the interview with Goldman Sachs president David Solomon with an audience-pleasing quip. He he joined Uber, he said, because it was a verb. “My father always told me if you can run a verb, say ‘yes’.” — Reported by Eric Newcomer, (c) 2018 Bloomberg LP
Uber Technologies, whose losses have piled up in the quest for growth around the world, will be profitable within three years, said CEO Dara Khosrowshahi.
Bending the company’s financial trajectory out of the red would be a dramatic shift for the global ride-hailing service, which has been losing billions of dollars per year. Speaking in an interview at the World Economic Forum in Davos, Khosrowshahi said that even as the company would continue to be aggressive about expansion, it was finding ways to be more efficient.
Almost six months into his tenure leading Uber, Khosrowshahi is attempting to reverse what has been an unprecedented period of turmoil. The company is facing various government investigations, allegations of sexual harassment and increasing competition from rivals around the world. Khosrowshahi said his goal for 2018 is to “get back to normalcy” after the challenges left by former CEO Travis Kalanick.
“Breakneck growth can hide cultural issues,” he said.
Khosrowshahi said the company was investing heavily in autonomous car technology and that it would begin adding the cars in some cities within 18 months. The vehicles will at first only carry passengers on select routes that will expand over time.
The company is also developing vehicles that will fly people to certain destinations within cities that Khosrowshahi predicted will be available for customers within 10 years.
Khosrowshahi has said he wants to take Uber public as early as next year, a process that would open the company’s financial performance up to more scrutiny. The company recently finalised a deal that makes the Japanese technology conglomerate SoftBank Group its largest shareholder.
Rajeev Misra, a SoftBank executive joining Uber’s board, suggested in a recent interview with the Financial Times that Uber focus on core markets such as the US, Europe, Latin America and Australia. In the interview at Davos, Khosrowshahi disagreed, saying the company would be “leaning forward” to expand.
Since taking over as CEO last summer, Khosrowshahi has been on a charm offensive to improve the company’s image. He said the company must work more closely with regulators rather than the more combative approach it took with Kalanick.
Khosrowshahi said he’s been working to change Uber’s boorish corporate culture. He commended former Uber engineer Susan Fowler, who wrote a blog post about the company’s sexist culture that led to an investigation at the company and a broader debate about the treatment of women in Silicon Valley and business. He called the fallout “difficult,” but “one of the best things that happened at Uber” because of the changes it brought about.
He said the company still has work to do to make its culture more welcoming for women. — Reported by Adam Satariano, (c) 2018 Bloomberg LP
Hackers stole the personal data of 57m customers and drivers from Uber Technologies, a massive breach that the company concealed for more than a year. This week, the ride-hailing firm ousted its chief security officer and one of his deputies for their roles in keeping the hack under wraps, which included a US$100 000 payment to the attackers.
Compromised data from the October 2016 attack included names, e-mail addresses and phone numbers of 50m Uber riders around the world, the company told Bloomberg on Tuesday. The personal information of about seven million drivers was accessed as well, including some 600 000 US driver’s licence numbers. No social security numbers, credit card information, trip location details or other data were taken, Uber said.
At the time of the incident, Uber was negotiating with US regulators investigating separate claims of privacy violations. Uber now says it had a legal obligation to report the hack to regulators and to drivers whose licence numbers were taken. Instead, the company paid hackers to delete the data and keep the breach quiet. Uber said it believes the information was never used but declined to disclose the identities of the attackers.
“None of this should have happened, and I will not make excuses for it,” Dara Khosrowshahi, who took over as CEO in September, said in an e-mailed statement. “We are changing the way we do business.”
After Uber’s disclosure on Tuesday, New York attorney-general Eric Schneiderman launched an investigation into the hack, his spokeswoman Amy Spitalnick said. The company was also sued for negligence over the breach by a customer seeking class-action status.
Hackers have successfully infiltrated numerous companies in recent years. The Uber breach, while large, is dwarfed by those at Yahoo, MySpace, Target, Anthem and Equifax. What’s more alarming are the extreme measures Uber took to hide the attack. The breach is the latest scandal Khosrowshahi inherits from his predecessor, Travis Kalanick.
Kalanick, Uber’s co-founder and former CEO, learned of the hack in November 2016, a month after it took place, the company said. Uber had just settled a lawsuit with the New York attorney general over data security disclosures and was in the process of negotiating with the Federal Trade Commission over the handling of consumer data. Kalanick declined to comment on the hack.
Joe Sullivan, the outgoing security chief, spearheaded the response to the hack last year, a spokesman said. Sullivan, a one-time US federal prosecutor who joined Uber in 2015 from Facebook, has been at the centre of much of the decision making that has come back to bite Uber this year. Bloomberg reported last month that the board commissioned an investigation into the activities of Sullivan’s security team. This project, conducted by an outside law firm, discovered the hack and the failure to disclose, Uber said.
Here’s how the hack went down: two attackers accessed a private GitHub coding site used by Uber software engineers and then used login credentials they obtained there to access data stored on an Amazon Web Services account that handled computing tasks for the company. From there, the hackers discovered an archive of rider and driver information. Later, they e-mailed Uber asking for money, according to the company.
A patchwork of US state and federal laws require companies to alert people and government agencies when sensitive data breaches occur. Uber said it was obligated to report the hack of driver’s licence information and failed to do so.
“At the time of the incident, we took immediate steps to secure the data and shut down further unauthorised access by the individuals,” Khosrowshahi said. “We also implemented security measures to restrict access to and strengthen controls on our cloud-based storage accounts.”
Uber has earned a reputation for flouting regulations in areas where it has operated since its founding in 2009. The US has opened at least five criminal probes into possible bribes, illicit software, questionable pricing schemes and theft of a competitor’s intellectual property, people familiar with the matters have said. The San Francisco-based company also faces dozens of civil suits. London and other governments have taken steps toward banning the service, citing what they say is reckless behavior by Uber.
In January 2016, the New York attorney general fined Uber $20 000 for failing to promptly disclose an earlier data breach in 2014. After last year’s cyberattack, the company was negotiating with the US Federal Trade Commission on a privacy settlement even as it haggled with the hackers on containing the breach, Uber said. The company finally agreed to the FTC settlement three months ago, without admitting wrongdoing and before telling the agency about last year’s attack.
The new CEO said his goal is to change Uber’s ways. Uber said it informed New York’s attorney-general and the FTC about the October 2016 hack for the first time on Tuesday. Khosrowshahi asked for the resignation of Sullivan and fired Craig Clark, a senior lawyer who reported to Sullivan. The men didn’t immediately respond to requests for comment.
Khosrowshahi said in his e-mailed statement: “While I can’t erase the past, I can commit on behalf of every Uber employee that we will learn from our mistakes.”
The company said its investigation found that Salle Yoo, the outgoing chief legal officer who has been scrutinised for her responses to other matters, hadn’t been told about the incident. Her replacement, Tony West, will start at Uber on Wednesday and has been briefed on the cyberattack.
Kalanick was ousted as CEO in June under pressure from investors, who said he put the company at legal risk. He remains on the board and recently filled two seats he controlled.
Uber said it has hired Matt Olsen, a former general counsel at the US National Security Agency and director of the National Counterterrorism Centre, as an adviser. He will help the company restructure its security teams. Uber hired Mandiant, a cybersecurity firm owned by FireEye, to investigate the hack.
The company plans to release a statement to customers saying it has seen “no evidence of fraud or misuse tied to the incident”. Uber said it will provide drivers whose licences were compromised with free credit protection monitoring and identity theft protection. — Reported by Eric Newcomer, with assistance from Erik Larson, (c) 2017 Bloomberg LP
Uber’s warring board members have finally agreed to terms for an investment by SoftBank that could be worth US$10 billion. “We’ve entered into an agreement with a consortium led by SoftBank and Dragoneer on a potential investment,” an Uber spokesman confirmed.
The Japanese giant will lead an investment of US$1 billion in fresh stock at Uber’s current valuation of US$68 billion. It will then set a price to buy existing shares at a lower valuation over the next month. SoftBank can still walk away from the deal if it does not reach a target of owning 14 percent of Uber shares.
Uber’s board had agreed to a change in governance structure to pave the way for the SoftBank deal over a month ago. But a tussle between co-founder Travis Kalanick and investor Benchmark had put the deal in limbo. Last week, SoftBank’s Masayoshi Son had floated a possible investment in rival Lyft instead.
Why it matters:
The deal could end the boardroom battle that has bogged down Uber. It will strengthen the position of new CEO Dara Khosrowshahi who had spoken out earlier, criticizing Kalanick’s moves behind his back to control the board.
This deal would make SoftBank a major investor in Uber as well as its Asian ride-hailing counterparts Didi, Ola, and Grab. The Japanese giant will thus be betting on ride-hailing tech being the winner, whichever company comes out on top in the end.
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Uber has hired Tony West, a former Justice Department official and general counsel at PepsiCo Inc., as its chief legal officer. The new appointment comes as the embattled ride-sharing company faces multiple lawsuits, federal investigations, and scandals.
(Image: Wikimedia/Creative Commons)
Starting in 2014, West served as executive vice president of Government Affairs, general counsel and corporate secretary for PepsiCo, where he prioritized diversity and ethical practices. The food and beverage conglomerate has consistently been ranked by Black Enterprise as one of the top best companies for diversity during his tenure. Prior to that, West was appointed as an assistant attorney general at the Department of Justice, which happens to be investigating Uber’s business dealings.
“As a former federal prosecutor and senior Department of Justice official in the Obama administration, he’s well-equipped to handle the investigations into our past practices,” said Khosrowshahi Friday in a statement. “And at Pepsi, he has emphasized diversity on his team and across the company. But perhaps most importantly, Pepsi has been named one of the world’s most ethical companies 10 years in a row. Under Tony’s leadership, I’m confident that we will one day join this list.”
Last week, three Latina software engineers filed a lawsuit in San Francisco against Uber, alleging that they endured unequal pay and treatment due to their gender and race. The global tech company was also banned in London in September over public safety and security concerns. In the midst of these challenges, Black Enterprise SVP/Chief Content Officer Derek T. Dingle says hiring West was a smart move.
“Not only are they gaining a professional with vast corporate experience and a diversity champion having worked as general counsel and serving as an executive officer for PepsiCo, one of the nation’s largest companies, but they also get talent with an intimate understanding of how federal investigations work,” says Dingle. “His legal expertise and strategic approach will be invaluable in handling the DOJ’s investigation into the company’s business practices. West’s appointment will go a long way to help Uber’s new CEO Dara Khosrowshahi reach his stated goal of positioning Uber to one day be considered among ethical corporate leaders. However, achieving that objective will take some time.”
In an interview with The Washington Post, West admitted that the tech giant faces challenges ahead. “I’m not the first to recognize that the company over-indexed on growth without putting in the appropriate guardrails,” he said. “Fostering a culture of compliance is going to be one of my top priorities.”
*Our original article stated that Tony West was still operating as the EVP, government affairs, general counsel and corporate at PepsiCo, Inc. However, PepsiCo confirmed that West stepped down from this role on PepsiCo on October 27, 2017.
Uber’s board of directors has voted for a change in governance structure that will pave the way for an investment from SoftBank. The Japanese giant, which is considering putting in over US$1 billion, is also an investor in Asian ride-hailing companies Didi Chuxing, Grab, and Ola.
The approved measures will reduce the clout of co-founder and ousted CEO Travis Kalanick, according to NYT sources. But some measures proposed by new CEO Dara Khosrowshahi, including one that could have prevented Kalanick’s return as CEO, were dropped before the meeting.
The board also approved a resolution to go public by 2019. Uber was last valued at US$69 billion.
Why it matters:
This may have defused a boardroom battle between Kalanick and early investor Benchmark, one of the main movers in forcing a change at the top. But Kalanick had extra voting rights, because of his special class of Uber stock. He used this to appoint two board members before yesterday’s meeting, without discussing it with Dara Khosrowshahi and the rest of the board.
With the British prime minister calling London’s refusal to extend Uber’s license “disproportionate”, and Uber’s chief executive heading to London to talk to regulators, a compromise is in the offing. But it shouldn’t give Uber a false sense of security: isolated regulatory demands are not its biggest problem.
Viewed in isolation, each of Uber’s setbacks this year triggered a disproportionate response. Neither a toxic work culture, nor unequal gender representation, nor any of the specific legal or business issues that dragged down the ride-hailing company was lethal.
Nor was any of these problems likely beyond former CEO Travis Kalanick’s ability to fix or sweep under the rug, as he’d done for years.
That all of the crises broke out at once was the result of an emotional backlash against the company’s arrogant push for global dominance. Something akin to this backlash is also beginning to catch up with Facebook and Google. They’ve done nothing in particular terribly wrong, it’s just the general perception of large, uncaring, overly powerful corporations running on unchecked ambition.
TfL, the London traffic authority, has a list of specific problems Uber has failed to solve: the way it reports criminal incidents and does medical and background checks on its drivers. It can all be pretty easily fixed, especially with CEO Dara Khosrowshahi’s personal involvement. Prime Minister Theresa May wants to move on because the Uber case contradicts her party’s claims that Brexit Britain will be open for business. London Mayor Sadiq Khan has nothing to gain politically from banning Uber but everything from being seen to make it comply with rules. Khosrowshahi has nothing to gain by not cooperating — that’s why he’s coming to London.
But even if his talks succeed — as everyone wants them to — new trouble will almost immediately crop up for Uber in the UK and everywhere else it operates. It’s not well liked, and it’s fair game for politicians, regulators and judges who don’t like it, as well as for the many drivers and customers who have had a bad experience with it.
This requires a big, unconventional trust-building campaign. Unfortunately, Khosrowshahi appears to have an incomplete understanding of the problem’s emotional nature.
In a letter to staff after the London ban, he wrote, correctly, that “there is a high cost to a bad reputation” and “it really matters what people think of us”. But he also added he didn’t believe the company “did everything that is being said about us in London today” and promised Uber wouldn’t abandon its principles, meaning that it would “vigorously appeal TfL’s decision”. Despite Khosrowshahi’s public apology to Londoners, these lines must have raised red flags with mayor Khan, who has little respect for Uber’s “principles”: He’s described their implementation as “unfair pressure” on the TfL and “aggressive threats about taking us to court and all the rest of it”.
That’s part of Uber’s reputation problem; Khan’s reaction to the perceived pressure is emotional, and even if Uber fixes its specific problems with the TfL after fighting it at every step, that emotion will remain. Khosrowshahi is right to try dissolving the bad blood with apologies and promises of change, but Kalanick used to do that, too. PR methods won’t work, as they didn’t at the end of Kalanick’s tenure; perfunctory nods to social respionsibility — the wheelchair-accessible vehicles and “Clean Air Plan” Khosrowshahi mentioned in his letter of apology — won’t do the trick either.
Overcoming its bad reputation requires from Uber a series of surprising, disarming moves.
For starters, it needs to start asking rather than demanding; rather than pursue its “vigorous appeals”, it should politely request a little time to meet TfL requirements. Uber should declare, openly and publicly, that its first impulse will be, from now on, to follow rules rather than challenge them. The fierce resistance has already made clear it won’t take over the world by sheer aggression, so why keep provoking it?
But simply playing deliberately from a position of weakness won’t be enough. On its own, it’ll just let regulators bite off the whole arm, not just the proffered finger. In order to gain trust, and to guard against bureaucratic nitpicking, Uber needs to be proactive and do things it doesn’t strictly have to do.
In London, the company books its rides through a Dutch subsidiary, which allows it to avoid the UK’s 20% value-added tax. A TfL official apparently raised the issue during the licensing discussion, though the transport authority has no tax-related powers. Uber could voluntarily abandon the practice. It could also voluntarily offer its drivers some benefits of employment, such as paid leave or a minimum wage guarantee, in recognition that though they are technically self-employed, the ride-hailing company dictates how they must work once they log into the Uber app. Uber’s fares are about 35% lower than those of London’s black cabs; assuming these fares are sustainable and not just a case of temporary dumping to gain market share, Uber can afford to make such gestures and still remain competitive.
It’s not enough for Khosrowshahi to act nicer than Kalanick. He needs to put his money (okay, Uber investors’ money) where his mouth is and show clearly and unequivocally that the company is changing, that it’s putting fairness ahead of aggression on its priority list. There’s no way to make the bad reputation go away on the cheap. — (c) 2017 Bloomberg LP
Uber Technologies’ potential ban in London is giving new CEO Dara Khosrowshahi an early opportunity to demonstrate a more humble approach to conflict than co-founder Travis Kalanick.
Responding to last week’s decision by London authorities to revoke its licence, Khosrowshahi acknowledged the company played fast and loose with the rules in its race to upend the global transportation industry.
“I apologise for the mistakes we’ve made,” he said in an open letter published on Monday. Khosrowshahi added: “You have my commitment that we will work with London to make things right and keep this great city moving safely.”
But even as Khosrowshahi was striking a conciliatory note, the company was also pursuing a more political strategy keeping with the rulebook Kalanick’s honed during years of battles with cities around the world.
Uber said it will appeal the regulator’s decision, threatened to take the city to court, and started an online petition that now has more than 750 000 signatures. The first result of a Google search for “Uber London” is an ad linking to the petition.
Even so, London mayor Sadiq Khan welcomed Monday’s comments from Uber’s new CEO. “Obviously I am pleased that he has acknowledged the issues that Uber faces in London,” Khan said in a statement. “Even though there is a legal process in place, I have asked TfL to make themselves available to meet with him.”
Transportation for London is the regulator that governs the city’s subway, buses and taxis.
Uber has disputed the findings of regulators, but said over the weekend it’s open to making concessions. The city criticised the company over its failure to conduct background checks on drivers, report crimes, and for a programme called “Greyball” used to avoid regulators.
“We won’t be perfect, but we will listen to you; we will look to be long-term partners with the cities we service; and we will run our business with humility, integrity and passion,” said Khosrowshahi.
Although it’s just a statement aimed at winning over those in London, Khosrowshahi is giving a glimpse of the softer touch he may use handling the long list of troubles he inherited at Uber. — Reported by Adam Satariano, (c) 2017 Bloomberg LP
Uber Technologies’ licence to operate in London has been revoked, a surprise decision that will affect the 3.5m people and 40 000 drivers who use the app in the city.
The city’s transportation regulator, Transport for London, said the licence will expire on 30 September. Regulators said it denied the licence because Uber’s “approach and conduct demonstrate a lack of corporate responsibility”.
City officials cited Uber’s use of a secret software tool called “Greyball” that the company built to avoid regulators. Uber was also faulted for not properly reporting crimes and obtaining medical certificates.
“TfL has concluded that Uber London Limited is not fit and proper to hold a private hire operator licence,” the regulator said in a statement. Uber has 21 days to lodge an appeal.
The decision is a victory for the city’s traditional black cab industry, which has been hurt by the proliferation of Uber drivers and has pushed for tighter regulation of the San Francisco-based ride-hailing service. Taxi drivers must go through extensive testing before receiving a licence, while Uber drivers have fewer requirements.
London’s decision adds to the problems facing Dara Khosrowshahi, Uber’s new CEO, who is juggling a host of controversies ranging from a lawsuit alleging the company stole self-driving car technology from Alphabet, to a bribery investigation in Asia, to a boorish company culture. — Reported by Adam Satariano, (c) 2017 Bloomberg LP