At a valuation approaching $70 billion, Uber Technologies Inc. is the largest of the so-called unicorn companies, attracting enormous attention to everything it does, both good and bad.
In the past few weeks, it's been more bad than good for the ride-sharing firm. On Tuesday, Bloomberg published a video of CEO Travis Kalanick berating an Uber driver after the latter complained of falling fare prices. Some are beginning to wonder whether Uber needs new leadership, or at least a significant change at the top.
"The video that surfaced this week of him [Kalanick] talking with a driver just served to reinforce people’s perceptions of who he is as a human being – combative, aggressive, and dismissive of the concerns of others," said Jan Dawson, chief analyst at Jackdaw Research in an email. "That attitude has served Uber well in many ways as it’s become the world’s largest ride sharing service, but it’s those same qualities that have allowed harassment and mistreatment of drivers to go unchecked at Uber." (See also: Sexism Charges Bring Uber's Toxic Culture to Fore)
Following the release of the story, Kalanick penned a "profound apology" post on the company's blog, writing he needs to "fundamentally change as a leader and grow up." Kalanick added he needs "leadership help" and intends to seek it.
Some have pointed out that Alphabet Inc. (GOOG) was in a similar situation before it went public and appointed Eric Schmidt as CEO, overseeing Google co-founders Larry Page and Sergey Brin. That could be used as a model for Uber, with someone from the outside overseeing Kalanick and the company, but that may not help to change old habits.
"But it’s not yet clear whether appointing another executive or mentor to work alongside him and temper some of his baser instincts will be enough, or whether he will eventually have to step aside and let someone else provide the leadership Uber needs," Dawson added. (See also: Uber Technologies Inc.)
A Series of Unfortunate Events
Taken at face value, the video alone would be enough to raise doubts about the integrity of the firm. Since it's the latest in a series of negative stories, some are wondering if an immediate change in leadership is required.
Susan Fowler Rigetti, a former Uber engineer, recently penned a lengthy blog post talking about sexual harassment that had gone unchecked at the company for some time. Fowler Rigetti noted that she spoke with Uber's HR personnel about the incidents, but the person in question was "a high performer" who was not disciplined for a long time despite his repeated indiscretions.
Uber board member Arianna Huffington issued a statement after the harassment claims came to light saying that change is coming and the company discussed next steps at an all-hands meeting to address the concerns.
In addition, Uber was recently sued by Waymo, Google's self-driving car unit, for patent infringement. Anthony Levandowski, a former Google employee and chief of Uber's self-driving division, is accused of illegally downloading 14,000 “highly confidential” files to an external hard drive. (See also: Google's Self-Driving Car Division Sues Uber)
San Francisco-based Uber was working on self-driving car technology in its hometown, despite not being issued a permit to do so by the city. It has since stopped testing in its hometown after the city revoked the vehicle's registrations. It has since started testing in Arizona, which has looser regulations than Uber's home state.
Uber may be going public within the next 18 months, but negative behavior and mounting losses may alter the time frame for the 8-year old company.
Backed by Goldman Sachs, Benchmark Capital, Menlo Ventures and several others, Uber has raised $11.46 billion in funding, according to Bloomberg. (See also: How do Ridesharing Companies Like Uber Make Money?)
Since inception, it’s lost nearly $4 billion, despite expanding into more than 60 countries and 500 cities around the globe. It left China after a bloody battle with Didi Chuxing in the second half of 2016, as losses surpassed $1 billion in the country. In the first quarter of 2016, for example, Uber generated a profit in the U.S. but slipped to a loss in the second, according to a Bloomberg report. Its $520 million EBITDA loss in the first quarter expanded to $750 million in the second quarter.
Uber does not generate profits, instead reinvests everything back into its business. With losses continuing to rise and concerns about Kalanick's behavior, this could raise doubts as it weighs an initial public offering in the next couple of years.
"The act of Kalanick arguing with an Uber driver is like a CEO arguing with an assembly line worker," said Seton Hall University professor of management, Dr. A.D. Amar. "This clearly shows a lack of ability to discern what is needed for corporate success. Behavior like that will definitely delay profits at Uber."