Grab to Cut 5% of Employees in Another Setback for SoftBank
(Bloomberg) -- Grab Holdings Inc., the leading ride-hailing company in Southeast Asia, said it will cut 360 employees, or just under 5% of its total, as it reduces expenses to deal with an economic downturn and slow recovery from the coronavirus pandemic.
Chief Executive Officer Anthony Tan said the virus has had a broad impact on businesses and the economy, and it is taking steps to adjust to the challenges. In addition to the job cuts, the Singapore-based company plans to eliminate some non-core projects, consolidate functions and reallocate staff to newer initiatives, like delivery.
“It has become clear that the pandemic will likely result in a prolonged recession and we have to prepare for what may be a long recovery period,” Tan said in a blog post. “Over the past few months, we reviewed all costs, cut back on discretionary spending, and implemented pay cuts for senior management. In spite of all this, we recognize that we still have to become leaner as an organization in order to tackle the challenges of the post-pandemic economy.”
The cuts are the latest sign of troubles among the portfolio companies of SoftBank Group Corp. Founder Masayoshi Son had been perhaps the most enthusiastic backer of ride-hailing companies, investing about $3 billion in Grab and billions more in Uber Technologies Inc. and China’s Didi Chuxing.
Grab had become the most valuable startup in Southeast Asia as it expanded beyond ride-hailing into food delivery and other services. SoftBank booked profits as the valuations for such startups surged.
But demand for ride-hailing services collapsed this year as countries around the world went into lockdown. SoftBank reported a record operating loss of 1.36 trillion yen ($12.7 billion) for the latest fiscal year as it wrote down the value of Uber and WeWork.
Tan told employees about the layoffs at a virtual townhall Tuesday morning, after initially asking employees to go on voluntary no-pay leave to avoid such cuts. It is not planning to shut any offices, according to a spokesperson.
In April, Tan said that Covid-19 presented the “single biggest crisis” Grab had faced in the eight years since its founding. He warned at the time that the startup would have to make “tough decisions” about cutting costs and managing capital. The company had more than 7,000 employees before the layoffs.
As ride-hailing demand declined in Southeast Asia, Grab has tried to replace some of that lost business with food delivery, which is experiencing a surge in demand as people stay at home. In February, Grab raised more than $850 million to fund its push into financial services in the region.
In Tan’s post, he said employees would be notified via email by 1 p.m. Singapore time on Tuesday if they are part of the cuts. He also detailed severance packages, equity vesting and insurance coverage.
“I assure you that this will be the last organization-wide layoff this year and I am confident as we execute against our refreshed plans to meet our targets, we will not have to go through this painful exercise again in the foreseeable future,” he said.
Though SoftBank has been a generous supporter of Grab for years, the Japanese company has signaled it will have to pull back. Last year after WeWork’s spectacular implosion, Son agreed to bail out the company with more capital -- but he vowed he wouldn’t rescue any other troubled startups. In part to reassure his own investors, spooked about the stability of the SoftBank empire, he urged founders to rein in excesses and focus on the bottom line.
In his blog post, Tan suggested that Son and SoftBank still stand behind Grab.
“Our board and leaders continue to be bullish on our business outlook,” he wrote. “We will focus on adapting our core verticals such as ride-hailing, deliveries, payments and financial services to address the challenges and opportunities of the new normal.”
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