US Corporate Bankruptcies Accelerate... Uber Faces Layoffs and Sells Non-Core Businesses

180,098 US Corporate Bankruptcy Filings in Q1

Expected to Expand Further in Q2

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] The wave of corporate bankruptcies is becoming a reality due to the economic recession caused by the spread of the novel coronavirus disease (COVID-19). Uber, once valued at over 130 trillion won and hailed as a new business model, is desperately cutting costs by laying off employees and selling non-core businesses.

According to Bloomberg on the 7th (local time), a total of 180,098 US companies filed for bankruptcy in the first quarter of this year. This is similar to the same period last year, but the number is expected to increase sharply in the second quarter as the impact of COVID-19 intensifies.

Recently, bankruptcy protection filings have been coming in one after another. Neiman Marcus, a US luxury department store, and J.Crew, a mid-priced clothing brand made famous by Michelle Obama, finally filed for bankruptcy protection on this day. With the bankruptcies of mid-priced department store J.C. Penney and Hertz, the second-largest US car rental company, also imminent, bankruptcies among US companies are expected to spread like a flood. Bloomberg reported that the debt of companies on the brink of bankruptcy in the US has surged 161% over the past two months, exceeding $5 trillion. It also reported that the pace of US corporate bankruptcy filings this year has soared to the highest level since the aftermath of the 2009 global financial crisis. This leads to job losses. The US Department of Labor announced that new unemployment claims for the week of April 26 to May 2 reached 3,169,000. Over the past seven weeks, 33.5 million Americans have lost their jobs due to COVID-19. Experts predict that the US government will announce 21.5 million unemployment claims for April on the 8th.

Companies are also making painful self-help efforts. According to the Associated Press, ride-sharing company Uber announced that it will sell its bicycle and scooter sharing business "Jump" to Lime, a kickboard sharing startup in which it holds equity. Jump has been recording losses of about $60 million per quarter.

This decision by Uber comes after it recorded a large loss in the first quarter. On this day, Uber announced a loss of $2.9 billion (about 3.5 trillion won) in the first quarter. The number of users also decreased by 70% during the same period. However, the number of orders for Uber Eats, a food and beverage delivery service, increased by 50% compared to the same period last year. As a result, Uber's revenue reached $3.54 billion, up 14% year-on-year.

Dara Khosrowshahi, Uber CEO, said, "We have decided to reorganize our business portfolio in response to the COVID-19 pandemic," adding, "We will focus on additional support for Uber Eats and take swift action to prepare for any scenario."

Earlier, Uber announced it would lay off about 3,700 full-time employees to cut costs. This accounts for about 14% of Uber's total workforce of approximately 26,900 employees. CEO Khosrowshahi also said he would forgo his base salary of about $1 million this year, stating, "This layoff is to adjust the company's cost structure, and additional measures will be taken within the next two weeks," hinting at the possibility of further layoffs. Wall Street expects Uber's April user numbers to have dropped by 80%, forecasting that second-quarter results will be worse than those of the first quarter.

This content was produced with the assistance of AI translation services.