Uber's new CEO faces daunting fix-it list as crises abound

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Uber chose Dara Khosrowshahi, the chief executive of Expedia, as its new CEO, handing him the challenge of leading the ride-services company out of a nearly year-long crisis.
Uber's incoming CEO and Expedia head Dara Khosrowshahi. PHOTO: BT

SAN FRANCISCO (BLOOMBERG) - Uber Technologies' incoming chief executive officer Dara Khosrowshahi inherits an embattled global business with crises sprawling across continents.

Since Uber's founding in 2009, the San Francisco-based company has tested the world's tolerance for disruption and rule-breaking. The company's toe-stepping ways, overseen by co-founder and former CEO Travis Kalanick, helped the ride-hailing company grow to more than 600 cities and a US$69 billion private valuation.

But the startup's aggressive approach left a trail of self-inflicted wounds along the way. Those controversies - including raising doubts about a passenger's rape, the use of software meant to evade law enforcement officials, an intense human resources investigation sparked by sexual harassment charges, and a fierce legal battle with Alphabet Inc - ultimately felled Kalanick after some of Uber's largest investors asked for his resignation in June.

Below are some of the raging fires that Uber's new CEO will need to put out.

1) Fill the executive ranks with experienced leaders

A new chief executive is just the start for Uber. The company doesn't have a chief operating officer, chief marketing officer, chief financial officer, president, general counsel, or senior vice president for engineering. Khosrowshahi will need to fill those jobs with the help of his board.

Since Kalanick's resignation, Uber has been led by a committee of 14 executives, several of whom were promoted after their bosses left the company. Much of the company's business is run by three 30-somethings Rachel Holt, Andrew Macdonald and Pierre-Dimitri Gore-Coty who have climbed Uber's ranks and now divvy up the world into three geographic regions. That trio once reported to Jeff Jones, who joined Uber as president from Target Corp., but left in March after just six months on the job. Now they're without a manager.

2) Repair employee morale and Uber's culture

Khosrowshahi will need to rally Uber's global workforce. While many employees had grown tired of their former CEO's regular public missteps, he was also beloved by some inside the company's headquarters. More than 1,400 employees signed a petition showing their support for Kalanick after his resignation.

The rank-and-file has undergone an extended soul-searching process as former US Attorney General Eric Holder investigated the company's corporate culture. That company-commissioned inquiry began after ex-Uber software engineer Susan Fowler wrote a blog post in February alleging that her former manager had propositioned her for sex and that the HR department hadn't taken action.

Holder's public recommendations were approved by the board. Uber made a number of reforms, including scrapping the company's cultural values. The new CEO might need to help draft some new ones.

3) Turn a profit and parry competitors

Uber's investors celebrated when the startup lost $645 million in the second quarter of 2017. For any other company that would have been a blood-red bottom line, but for Uber it was a marked improvement over the US$991 million in losses in the final quarter of 2016.

While the company's ride-hailing business contributes more and more to the bottom line, Uber is spending hundreds of millions, if not billions, on food delivery and autonomous vehicles. The company also runs money-losing businesses in much of Asia, where it remains in a fierce battle with Ola and Grab, two SoftBank Group-backed startups.

On the home front, Uber faces a reinvigorated competitor in Lyft, which raised US$600 million in April. Lyft, which has been gaining US market share while Uber's brand has taken a major hit, is said to have reported more than US$1 billion in gross bookings in the second quarter. Insiders believe that Uber needs a chief marketing officer and a powerful brand-building campaign to help turn things around.

4) Improve relations with drivers

Kalanick had long resisted allowing riders to tip drivers within the ride-hailer's smartphone app. Soon after Kalanick began a leave of absence (which then became a resignation), Uber said it would reverse course and allow tips. The company launched a 180-day campaign meant to rehabilitate its image with drivers in the U.S.

Meanwhile, in India, Uber has slashed drivers' pay by cutting incentives. That's left many already poor full-time drivers with even less money.

5) Fend off lawsuits, legal risk and regulators Uber is in the middle of a legal fight with Alphabet's self-driving car company Waymo. Waymo claims that Uber purchased Anthony Levandowski's startup, Otto, and along with it came 14,000 files worth of Alphabet's trade secrets.

Uber is also dealing with a lawsuit brought by a woman who was raped by her Uber driver in India. While the driver was convicted of the assault in India in 2015, that lawsuit was filed after Kalanick and two other Uber executives privately floated an outlandish conspiracy theory that the woman had never been raped and that Uber had been framed by its competitor Ola. Uber is currently investigating how the company's former president of its Asia business obtained a copy of the woman's medical report from her rape.

Justice Department officials and other regulators are also investigating Uber's practice of "greyballing" government officials. That software hid Uber drivers from officials who might have ticketed them for driving in areas where Uber hasn't been authorized to operate.

6) Land the SoftBank deal, then prepare for an exit

SoftBank, the Chinese ride-hailing company Didi Chuxing, and equity firms Dragoneer Investment Group and General Atlantic are negotiating a major investment in Uber. The foursome plan to invest US$1 billion to US$1.5 billion directly into Uber at a US$69 billion valuation and then buy as much as US$10 billion worth of Uber shares from existing stakeholders.

That humongous potential secondary round would give Uber an even longer runway until it needs to go public. (The company had US$6.6 billion cash on hand at the end of the second quarter.) Eventually employees and other shareholders will want to be able to sell their stock on the public markets.

7) Figure out what to do about Kalanick and the troubled board

Kalanick wants at least an advisory role going forward, people familiar with the matter have said. But the former CEO is in the middle of a legal battle with venture capital firm Benchmark, which also sits on the board. Directors have said they need an independent chair. Uber found a new CEO, but it hasn't named a board chair.

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