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Remember the almost settled Uber lawsuit from 2016? It looks like things have changed a little, and not necessarily in drivers’ favor. Senior RSG contributor John Ince covers that news, plus Uber’s unsustainable spending and more in this week’s round up.
Uber settles driver classification lawsuit for $20 million [The Verge]
Sum and Substance: The fight over the classification of ride-sharing drivers as independent contractors appears to be over after Uber announced that it settled a pair of long-gestating lawsuits for $20 million. The resolution is a boon to Uber, which is preparing its initial public offering for later this year.
The initial case, O’Connor v. Uber, was first brought by a group of Uber drivers in 2013 who argued they should be categorized as employees rather than freelancers. By classifying drivers as contractors, Uber avoids providing benefits of traditional employment such as health insurance, paid sick time, and workers’ compensation, the drivers argued.
THE LAWSUIT WAS ALMOST SETTLED IN 2016 – O’Connor v. Uber has been winding its way through the courts for over six years. It was almost settled in 2016, when Uber agreed to pay as much as $100 million to the roughly 385,000 drivers represented in the class action lawsuit and one other case, so long as it could continue to classify them as freelancers. But the settlement was later rejected by a federal judge, who argued that the amount was insufficient.
My Take: Looks like Uber got a bargain in this settlement. They were set to pay upwards of $100 million just a few years ago when a series of favorable rulings in the courts gave them a much stronger hand. But as Shannon Liss-Riordan points out, this independent contractor/employee issue is far from being settled. Yes, Uber has put this lawsuit to bed (assuming the judges approval) but what’s to stop another lawyer from filing a similar lawsuit over the same issue?
What it does buy Uber is a window in which it appears they’ve got control over what former Uber CEO Travis Kalanick once called an “existential issue” for Uber, in advance of their IPO. That’s really what Uber wanted. As for the drivers, we didn’t get much. Yes, I’m looking forward to my share of the settlement, but I’d much rather have true justice be served sooner rather than later.
In the run up to its IPO, court filing reveals new details of Uber’s huge spending and equally huge ambitions [Techcrunch]
Sum and Substance: Uber thought it would have 75,000 autonomous vehicles on the roads this year and be operating driverless taxi services in 13 cities by 2022, according to court documents unsealed last week. To reach those ambitious goals, the ridesharing company, which hopes to go public later this year, was spending $20 million a month on developing self-driving technologies.
The figures, dating back to 2016, paint a picture of a company desperate to meet over-ambitious autonomy targets and one that is willing to spend freely, even recklessly, to get there. As Uber prepares for its IPO later this year, the new details could prove an embarrassing reminder that the company is still trailing in its efforts to develop technology that founder Travis Kalanick called “existential” to Uber’s future.
My Take: Here we get an inside look at the operations of the division of Uber that was charged with solving the existential issue – driverless cars. From hindsight, Uber’s projections for how soon and how many driverless cars would be on the road look fanciful if not reckless. There appear to have been no cost controls. It was a division that was burning through cash like they had an unlimited investment pool of capital.
Come to think of it, that’s almost what they had. Uber has raised upwards of $25 billion since its inception and here we have a clear example of how the company was burning it with little or nothing to show for $20 million a month. But wait, now we hear that Uber is interested in selling it driverless car division, and they many have willing buyer in Softbank, the very same Softbank that already invested $10 billion into the company. See: Uber reportedly raising $1B in deal that values self-driving car unit at up to $10B.
Uber and Lyft are losing money. At some point, we’ll pay for it. [Chicago Tribune/Washington Post Writers Group]
Sum and Substance: … Uber and Lyft are functionally taxicabs — better dispatched and more convenient but, still, taxicabs, pretty much. There’s a reason that, before the Uber/Lyft revolution, almost no one said, “I’m going to sell my car and take taxis everywhere!” Unless you are a hermit or live in a dense urban core, a month of taking cabs costs more than a month of Corolla ownership.
Boosters of the ride-share revolution like to point out that most of the nation’s cars spend most of their time parked; there ought to be money in liberating all that unused capital. True enough — except that someone has to drive the car, including the time spent circling as they wait for rides.
In 2014, journalist Timothy B. Lee spent a week driving for Lyft. He drove for 50 hours but spent only 14 of those hours actually ferrying passengers. All that circling wears out the car and burns both gas and the driver’s valuable time.
My Take: It’s good to see major media outlets taking a hard look at the finances of Uber and Lyft in advance of their IPOs. Megan McArdle, the author of this article, is one of the most astute commentators on this sector. She makes two key points here. First, the entire industry has been built on investor subsidies. Second, the companies can’t continue to price their services below cost forever. Whether potential investors pay any attention to these points are the questions of the hour.
In a short while we’ll get the answers, just as soon as that IPO bell rings on the floor of the stock exchange. I suspect the hype surrounding these companies will be enough to get a good pop in stock price for a short while. Then reality will sink in and many investors will be hit with a case of buyer’s remorse.
Readers, what do you think of this week’s round up?
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-John @ RSG
Latest posts by John Ince (see all)
- What Lyft’s IPO is Telling Us About Rideshare - March 23, 2019
- Uber’s Ambitious and Expensive Plan to Get Self-Driving Technology - March 16, 2019
- Does Uber and Lyft Value New or Experienced Drivers More? - March 13, 2019