Uber Warns in IPO Filing That Its Drivers Will Be Even Less Happy

just_me

Well-Known Member
(It's refreshing to see decent journalism)

- link to article

''A plan for cash bonuses is unlikely to paper over tensions around its business model.

By Joshua Brustein and Josh Eidelson

April 11, 2019, 5:21 PM MST
Updated on April 11, 2019, 8:02 PM MST

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Uber drivers have complained over the years that they’ll get nothing when the company goes public, generating a windfall for its already-wealthy stockholders. That’s not entirely true. In a filing Thursday for its upcoming initial public offering, Uber Technologies Inc. said it would pay $300 million in cash bonuses, or what it calls “driver appreciation rewards.” About 1.1 million drivers will receive the payments in a couple weeks, with some in the U.S. getting as much as $10,000 each.

It’s a number that seems smaller than it may first appear. The total payout equates to less than 0.5 percent of the company’s value, as measured by its last private valuation. On average, an eligible driver will get about $273. They will be able to use that cash to buy stock at the IPO price. Lyft Inc., the main alternative to Uber in the U.S., also offered cash bonuses to drivers who had completed more than 10,000 rides and said it was reserving a portion of the shares in its IPO for them to purchase.

The moves are unlikely to mollify critics. “The long-term model of driving for less than minimum wage after you pay the expenses for your car is not a model that a company can mask with a onetime bonus,” said Nicole Moore, a Lyft driver and organizer for the driver advocacy group Rideshare Drivers United – Los Angeles.

Throughout the IPO prospectus, Uber alludes to tensions that have long been obvious to anyone who has driven for or ridden in an Uber. Uber’s operations are far from profitable, and anything more than a token gesture to its unsatisfied workforce would pose a barrier to stemming the losses. The company warned the situation will get worse. “As we aim to reduce driver incentives to improve our financial performance, we expect driver dissatisfaction will generally increase,” it said in the filing.

Uber also said it faces challenges attracting drivers in sufficient numbers, while adding that an improved economy could present more problems. People with other employment options might stop signing onto the app. The company would have to offset those losses with financial incentives whose effectiveness is uncertain. Uber boosted driver incentives by $300 million last year, and warned investors that those costs may keep going up. The company has at times paid drivers more for rides than it collects from passengers and expects that to continue, especially in markets where it faces significant competition. Uber’s operating loss last year was $3 billion.

Things could get even trickier. Like its competitors, Uber’s business model relies on classifying drivers as independent contractors, who aren’t covered by protections like overtime pay and unionization rights that are afforded to employees by law in many countries. The IPO filing said Uber’s approach is being challenged in “numerous legal proceedings globally.”

Losing these fights would mean it could have to take on additional costs, such as benefits, payroll tax contributions, minimum wages and paid breaks. “Any such reclassification would require us to fundamentally change our business model,” Uber wrote. Lyft made a similar warning in its IPO filing last month.


Among the challenges cited by Uber are rulings in France and the U.K., a pending U.S. appeals court ruling in Philadelphia and more than 60,000 drivers who have filed, or signaled they will file, cases in arbitration claiming they are, in fact, employees. The company also cites a groundbreaking California Supreme Court ruling last year that deems workers to be employees under state wage law unless they are doing “work that is outside the usual course” of a company’s business.

It could be hard for Uber to make such an argument about its drivers. The company, as well as others in similar situations, have been meeting with unions and lawmakers. The hope is to cut a deal that would water down that ruling in exchange for providing workers with other perks or protections. But legislation is advancing in California that would codify the new, tougher standard and make it apply it to all sorts of state laws.

Uber’s decision not to classify its drivers as employees kept it from offering them stock early in its history. It explored the idea of rewarding drivers in part with equity compensation as far back as 2016 but decided it couldn’t do so without running afoul of U.S. securities law. Another ride-hailing company, Juno, began offering restricted stock units to drivers as a way to lure them from Uber. But it cancelled the program when it was acquired by a competitor and offered small cash payouts instead.

Last October, Uber asked the Securities and Exchange Commission to change its rules to allow equity compensation to drivers. The commission’s decision on the rule change is still pending. For the drivers who would have acquired Uber stock when the company was small, the chance to share in the spoils has passed.''
 

CarterPeerless

Well-Known Member
It’s sad that Uber has so little confidence in the superiority of its product. Uber could raise its rates by 100%, take the hit to their ridership but actually make a profit. Lyft would follow suit in about one second as they are losing even more per ride than Uber.

No one is ever going back to taxis and their bullshit. Uber could charge 90% of the rate of taxis, and still eat their lunch purely on the convenience of the app.

And then they could also raise pay for drivers, reducing driver turnover and lawsuits and all the bad things that come with being a Richard head.

Or they can continue to treat their product like a commodity until one of Uber or Lyft dies (or both).
 

Scissorz

Active Member
I’m still amazed at the lack of market research in this industry. I’m not sure that a base rate of 90% of cab rate would be needed. Something on the order of 60-70% would work. The convenience is really what people want.
 

SEAL Team 5

Well-Known Member
Uber Technologies Inc. said it would pay $300 million in cash bonuses, or what it calls “driver appreciation rewards.” About 1.1 million drivers will receive the payments in a couple weeks, with some in the U.S. getting as much as $10,000 each.
Let's do the simple math on this one.

$300,000,000 in cash bonuses to
1,100,000 drivers is $272.72 to each
driver. Uber claims some drivers get $10,000. That means for each driver
that bonuses $10k there will be 35
drivers that make $0. So if only 1/4
of 1% of drivers make the $10k bonus
the other 1,097,000 drivers make
$245.45 and if only 2.5% of drivers
bonus out with the $10k than the
other 1,070,000 drivers make $0.
And don't forget that bonus money
is subject to all state and federal
taxes including the dreaded SE Tax.
 

Dakidd

Well-Known Member
It’s sad that Uber has so little confidence in the superiority of its product. Uber could raise its rates by 100%, take the hit to their ridership but actually make a profit. Lyft would follow suit in about one second as they are losing even more per ride than Uber.

No one is ever going back to taxis and their bullshit. Uber could charge 90% of the rate of taxis, and still eat their lunch purely on the convenience of the app.

And then they could also raise pay for drivers, reducing driver turnover and lawsuits and all the bad things that come with being a Richard head.

Or they can continue to treat their product like a commodity until one of Uber or Lyft dies (or both).
You are a taxi dumb a** and if you think people don't and won't use conventional taxis if uber brought fairs comparable to legitimate cabs You need to put the pipe down They are somewhat successful now i because they're cheap I'm sure people would prefer riding with somebody that has been vetted and safety trained as Opposed to a driver that has to use GPS to go from the Hyatt downtown to the airport
It’s sad that Uber has so little confidence in the superiority of its product. Uber could raise its rates by 100%, take the hit to their ridership but actually make a profit. Lyft would follow suit in about one second as they are losing even more per ride than Uber.

No one is ever going back to taxis and their bullshit. Uber could charge 90% of the rate of taxis, and still eat their lunch purely on the convenience of the app.

And then they could also raise pay for drivers, reducing driver turnover and lawsuits and all the bad things that come with being a Richard head.

Or they can continue to treat their product like a commodity until one of Uber or Lyft dies (or both).
Overs facing reality they know that if they priced their taxis the comparable to legitimate taxis
It’s sad that Uber has so little confidence in the superiority of its product. Uber could raise its rates by 100%, take the hit to their ridership but actually make a profit. Lyft would follow suit in about one second as they are losing even more per ride than Uber.

No one is ever going back to taxis and their bullshit. Uber could charge 90% of the rate of taxis, and still eat their lunch purely on the convenience of the app.

And then they could also raise pay for drivers, reducing driver turnover and lawsuits and all the bad things that come with being a Richard head.

Or they can continue to treat their product like a commodity until one of Uber or Lyft dies (or both).
Dream on over already knows that if they raised their prices comparable to taxis that they would lose market share post haste The only reason Uber has any market share at all is because they subsidize the rides and That's why they're losing money they would have to charge $4 a mile to be profitable Add who would want to pay $4 a mile with un vetted experienced driver
 

CarterPeerless

Well-Known Member
Pax like the cost savings but that is only part of it. They like that an Uber is there in 5 minutes and they can track the progress to their location. Old style was call a cab company and guess if they will be there in a half hour or never.

They like that the cars are actual cars. Old style was broke down buckets, likely former cop cars that smell like an ashtray and make you question what disease you just picked up.

They like that they have a way to solve problems. Ever have a dispute with a cab company or try to get a lost receipt for an expense report? Good effing luck, that wasn’t going to happen.

All of those things still exist at rates that allow a company to break even and pay drivers a fair wage.

We used to say that when surge hit 2.5x or 3x, the prices were the same as a cab. When those surges hit, people still called Ubers instead of cabs. With fixed surges, it is harder to calculate but Tempe almost always has surge now and people are still calling ubers instead of cabs.

Uber could easily raise rates for pax and drivers in 2019. They have reached critical mass.
 

taxisuper

Well-Known Member
Pax like the cost savings but that is only part of it. They like that an Uber is there in 5 minutes and they can track the progress to their location. Old style was call a cab company and guess if they will be there in a half hour or never.

They like that the cars are actual cars. Old style was broke down buckets, likely former cop cars that smell like an ashtray and make you question what disease you just picked up.

They like that they have a way to solve problems. Ever have a dispute with a cab company or try to get a lost receipt for an expense report? Good effing luck, that wasn’t going to happen.

All of those things still exist at rates that allow a company to break even and pay drivers a fair wage.

We used to say that when surge hit 2.5x or 3x, the prices were the same as a cab. When those surges hit, people still called Ubers instead of cabs. With fixed surges, it is harder to calculate but Tempe almost always has surge now and people are still calling ubers instead of cabs.

Uber could easily raise rates for pax and drivers in 2019. They have reached critical mass.
Good thoughts. One thing you might add. The frequent traveler -business or pleasure- values highly having one or at most two ground transportation apps that centralize his billing and provide relatively the same level of service wherever he goes. They don't want to have to deal with a different app for every city they visit. Likewise, businesses value highly the ability to contract with one or two providers nationwide.
Uber will raise rates. They have to in order to drive to profitability. The market will force this behavior. The unknown is whether drivers will benefit at all. My guess is that, absent some legal game changer, they will not increase in any meaningful way driver pay.
 

I Aint Jo Mama

Well-Known Member
Pax like the cost savings but that is only part of it. They like that an Uber is there in 5 minutes and they can track the progress to their location. Old style was call a cab company and guess if they will be there in a half hour or never.

They like that the cars are actual cars. Old style was broke down buckets, likely former cop cars that smell like an ashtray and make you question what disease you just picked up.

They like that they have a way to solve problems. Ever have a dispute with a cab company or try to get a lost receipt for an expense report? Good effing luck, that wasn’t going to happen.

All of those things still exist at rates that allow a company to break even and pay drivers a fair wage.

We used to say that when surge hit 2.5x or 3x, the prices were the same as a cab. When those surges hit, people still called Ubers instead of cabs. With fixed surges, it is harder to calculate but Tempe almost always has surge now and people are still calling ubers instead of cabs.

Uber could easily raise rates for pax and drivers in 2019. They have reached critical mass.
It's called progress
 

just_me

Well-Known Member
  • Thread Starter Thread Starter
  • #9
fundamentally change our business model
Good thoughts. One thing you might add. The frequent traveler -business or pleasure- values highly having one or at most two ground transportation apps that centralize his billing and provide relatively the same level of service wherever he goes. They don't want to have to deal with a different app for every city they visit. Likewise, businesses value highly the ability to contract with one or two providers nationwide.
Uber will raise rates. They have to in order to drive to profitability. The market will force this behavior. The unknown is whether drivers will benefit at all. My guess is that, absent some legal game changer, they will not increase in any meaningful way driver pay.
Good post. Two points:
- with Uber alone, international travelers know how the Uber system works. They don't have to fuss to try and figure out phone numbers, or find a local taxi cab app - if one exists. (The Uber app was out about 9 years before any local taxi cab company came up with an app). The Uber app works in multiple countries. Taxi cab companies slowness to upgrade technology (and advertise) has cost them. I doubt that the cab companies will ever regain that market share.

- the 'legal game changer' is coming. It's only a matter of time now after the way the California Supreme Court ruled last year - https://arstechnica.com/tech-policy...ce-uber-lyft-to-convert-drivers-to-employees/. Uber and Lyft are going to have to act fast to get the laws changed in order to stop all of the drivers from becoming employees. Or else it's a 'fundamental change our business model' (from the above article).
 

taxisuper

Well-Known Member
fundamentally change our business model

Good post. Two points:
- with Uber alone, international travelers know how the Uber system works. They don't have to fuss to try and figure out phone numbers, or find a local taxi cab app - if one exists. (The Uber app was out about 9 years before any local taxi cab company came up with an app). The Uber app works in multiple countries. Taxi cab companies slowness to upgrade technology (and advertise) has cost them. I doubt that the cab companies will ever regain that market share.

- the 'legal game changer' is coming. It's only a matter of time now after the way the California Supreme Court ruled last year - https://arstechnica.com/tech-policy...ce-uber-lyft-to-convert-drivers-to-employees/. Uber and Lyft are going to have to act fast to get the laws changed in order to stop all of the drivers from becoming employees. Or else it's a 'fundamental change our business model' (from the above article).
You may be right about the game changer, but I'm not sure how many drivers want to go the employee route. Personally, it's a retirement gig for me. I drive a lot but could substitute elsewhere if necessary. I really don't want to have proscribed hours, days etc. when I have to be on the road. This one goes down as "be careful what you wish for." It's a remarkably diverse work force and I see tremendous problems getting even a plurality pulling in the right direction.
 

CarterPeerless

Well-Known Member
Ultimately the problem is that they want everyone to fit into one of two categories - employee and independent contractor. They need to come up with a middle ground classification - Dependent Contractor that has definitions appropriate for situations like this.
 

FXService

Well-Known Member
You may be right about the game changer, but I'm not sure how many drivers want to go the employee route. Personally, it's a retirement gig for me. I drive a lot but could substitute elsewhere if necessary. I really don't want to have proscribed hours, days etc. when I have to be on the road. This one goes down as "be careful what you wish for." It's a remarkably diverse work force and I see tremendous problems getting even a plurality pulling in the right direction.
Employees wouldn't have access to instant pay as all pay would become W-2s now. There goes half of your X drivers right there.
 

Dakidd

Well-Known Member
Employees wouldn't have access to instant pay as all pay would become W-2s now. There goes half of your X drivers right there.
Time you can still get paid daily and be an employee saw computerized They would just have to deduct taxes on a daily basis not that difficult
 
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