By Adam Lashinsky. Source: Fortune.
Uber has always been controversial. Combine a business plan based on upending an entrenched industry with a CEO as aggressive as Travis Kalanick, and conflict is a given.
The sheer volume and severity of the company’s woes in the first few months of 2017, however, have altered the tenor of the Uber tale entirely. For the first time, real existential questions began popping up as roadblocks along its narrative journey: Could Uber’s wild ride grind to a halt just as rapidly as it revved up in the first place? Could the company survive without its enigmatic lightning rod of a leader? Can it survive with him?
Once a juggernaut that seemed impervious to criticism, bad press, and political opposition, suddenly Uber appears vulnerable. Indeed, it’s difficult to find anything that has gone right for the company. At every turn and on multiple fronts, Uber seems to be losing battles, whether in court, in the public’s perception, over the loyalty of riders and drivers, even among its own rapidly departing executive team. What’s worse, Uber’s woes have played out in plain view—despite the fact that it’s a privately held company supposedly free from the embarrassing need to disclose its activities.
Already this year the startup has lost a president and embarked on a public quest for a new one. (Rumored names to be Travis Kalanick’s deputy: AOL CEO Tim Armstrong; Tom Staggs, formerly Bob Iger’s No. 2 at Disney; and Nikesh Arora, the former Google (GOOGL, +0.89%) and SoftBank executive.) The Justice Department is investigating Uber’s “Greyball” program to deceive taxi regulators. Uber denies any wrongdoing.
A fraud lawsuit recently brought against Uber by Waymo, the Alphabet (previously Google) self-driving car unit, got worse in May when a federal judge referred the case to the Justice Department for review and possible criminal charges. Waymo alleges that Anthony Levandowski, a former Google engineer, stole its technology and that Uber is now using it. Uber denies the allegation. Not surprisingly, Uber’s competition has become emboldened. In the midst of Uber’s woes, U.S. ride-hailing second banana Lyft raised money from KKR and joined up with Waymo to deploy self-driving cars.
Uber is quite obviously in a precarious position. It has a global brand and legions of habitual customers. But both the company and Kalanick are suffering near-daily hits to their reputation. Here’s a breakdown of Uber’s biggest challenges:
Jeff Jones, Uber’s short-tenured president of ride sharing who arrived from Target (TGT, +1.44%) and exited mere months later, isn’t the only top Uber executive to leave this year. Amit Singh, a star technologist from Google; Ed Baker, the “growth” guru from Facebook (FB, +1.94%); and Rachel Whetstone, another ex-Googler, who handled communications and policy, were among the most prominent departures.
Hiring a No. 2 to Kalanick—who acknowledged the need after an embarrassing video surfaced of him berating an Uber driver—is the most pressing position to fill. It’s also the most difficult, predicated as it is on the candidate having meaningful influence over a CEO who has shown little interest in sharing power.
Uber rose to prominence by astutely marshaling the public against its own elected officials and regulators, who sometimes stood in the way of the easy-to-use new service. The political winds have since turned against the company. In the span of a week beginning shortly after Donald Trump’s inauguration, Uber suffered mass defections for appearing to thwart a taxi boycott at John F. Kennedy Airport that protested Trump’s controversial travel ban. Then Kalanick, who had agreed to serve on a Trump economic advisory council, dropped off before the first meeting—but still incurred backlash for engaging with the new administration.
Uber had hoped a federal judge would send the litigation by Waymo to arbitration. He did nothing of the sort, instead ordering a jury trial. He also banned Anthony Levandowski, the ex–Google engineer at the center of the dispute, from working on Uber’s self-driving project. At least Uber gets to continue pursuing the technology while the litigation continues—contrary to Waymo’s request. Elsewhere, published reports say the feds are investigating Uber’s scheme to deny rides to regulators by obscuring the availability of cars; the company says it originally used the technology to protect drivers from phony riders.
Bro Culture Backlash
There were rumblings about sexism at Uber before 2017. Many were repulsed by objectionable comments attributed to Kalanick over the years as well as the “brogrammer” milieu that nurtured him. A February blog post by an ex–Uber engineer tipped the scales of outside opinion decisively against Kalanick & Co. by alleging rampant gender discrimination in Uber’s ranks. Now the company is bracing for an independent report on its culture it commissioned from former U.S. Attorney General Eric Holder. Results are expected imminently.