About a week after Lyft (NASDAQ:LYFT) said it would lay off 17% of its employees, larger rival Uber (NYSE:UBER) is now following suit in announcing its own layoffs, as the COVID-19 pandemic has eradicated demand within the core ridesharing business. In a regulatory filing this week, the ride-hailing leader disclosed that it is letting go of approximately 3,700 full-time employees within its customer support and recruiting departments.

That's around 14% of the 26,900 employees (which are distinct from contract drivers) that Uber had at the end of 2019, according to the company's annual report.

Uber and Uber Eats app icons displayed on an iPhone

Image source: Uber.

Ride volumes are plummeting

In connection with the restructuring, Uber expects to incur roughly $20 million in charges related to severance and other termination benefits. As part of its expense management efforts, Uber had already implemented a hiring freeze in March as the coronavirus outbreak intensified and governments started to enforce stay-at-home orders and other lockdowns.

Additionally, CEO Dara Khosrowshahi has also agreed to forgo the rest of his base salary for the year in order to further reduce costs, effective May 2. The chief executive's base salary in 2019 was $1 million, according to Uber's most recent proxy statement, which represented a small portion of the total $42.4 million in compensation that Khosrowshahi took home last year. With a third of 2020 in the rearview mirror, the cost savings should amount to approximately just $670,000.

In an internal memo obtained by CNBC, Khosrowshahi said the need for customer support is "down substantially" due to trip volumes plummeting, while the hiring freeze meant that recruiters have no work.

"But, as I said at yesterday's All Hands, this is one part of a broader exercise to make the difficult adjustments to our cost structure (team size and office footprint) so that it matches the reality of our business (our bookings, revenue and margins)," Khosrowshahi wrote. "We are looking at many scenarios and at each and every cost, both variable and fixed, across the company."

Despite the cost-cutting initiatives, The Information reported this week that the ridesharing tech company is in negotiations to lead a $170 million investment in e-scooter start-up Lime. Uber already has a minority stake in Lime, which similarly laid off 13% of its staff (around 80 employees) last week. Ride-hailing companies in recent years have been eyeing the nascent e-scooter rental sector as a new way to burn cash through unsustainable unit economics.

Uber reassured investors in March that it had ample liquidity to "weather this crisis." The company reports first-quarter earnings results today after the close, and investors are going to want more detailed information about just how bad conditions have deteriorated in the core ridesharing segment, particularly as Uber said earlier this week that Uber Eats was exiting seven markets.

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