Uber Downsizes Again

Morning Report: Uber shaves heft as it works to right its business model.

As Uber’s red ink mounts and the firm heads towards a 2019 IPO, the firm is cutting ties to some of its business efforts. Most famous of this effort was Uber’s divestment of its Chinese operation in exchange for a stake in Didi and cash. The firm has also let go of its Russia-based operations, for example.

This week, the Wall Street Journal (WSJ) reported that Uber is successfully cutting down once again. This time, it has found a buyer for its car leasing business that was torching cash. The division, called Xchange Leasing, was already in mothballs.

(It was losing 18 times as much money as Uber had thought, according to various reports–as much as $9,000 per car.)

But, according to Recode, Uber “had little luck” previously in selling the group. Given that fact, I doubt that the deal that the WSJ wrote about was for a lot of money. Here’s the source:

It couldn’t be learned what price Fair agreed to pay for the division. A Xchange Leasing document compiled for prospective buyers and reviewed by The Wall Street Journal said the net book value of its more than 30,000 vehicles was roughly $400 million. […]
As part of the deal, expected to close early next year, Uber will offer potential drivers in the U.S. access to Fair on its app, an exclusive arrangement, and will take an equity stake in the company, according to one of the people. Fair will offer jobs to some 150 employees of Xchange Leasing, the person said.

So, that’s that. Uber picks up some value for the effective shuttering of a business that was setting fire to its cash position.

As Uber works towards an IPO, the firm needs to curtail its losses. In some back-of-the-envelope scribbling when Uber’s Q3 numbers came out, it appeared that the firm’s net margin was actually still getting worse. That won’t do if it wants to go public.