Uber is planning to close its subprime vehicle-leasing unit Xchange Leasing in the United States only two years after establishing it due to extremely high losses incurred by the division, sources close to the San Francisco, California-based tech giant said on Tuesday. All assets associated with the struggling business are set to be liquidated by the end of the year and at least some of the 500 employees of the unit are at risk of being laid off, though it's currently unclear how many of them will be offered other positions within the company. While the firm's top management expected the service to incur losses since its inception, the deficits were reportedly found to be 18 times higher than initial estimates and have reached approximately $9,000 per vehicle compared to $500 that Uber initially anticipated.
A board committee responsible for the unit was notified of its mounting losses at some point in July and greenlighted its closure, people familiar with the matter revealed. It remains to be seen how long will Uber take to start liquidating its division, though its first moves to do so may follow shortly if the company is truly adamant to completely get all of the Xchange Leasing's assets off the books by 2018. Uber boasts the title of the most valuable startup in the world largely due to its aggressive expansion strategy that saw it enter dozens of new markets in a span of only a few years and diversifying its portfolio in a significant manner. The Xchange Leasing program was a smaller part of that effort but is now getting discontinued as the firm is striving to reduce its losses that have so far been following its rising revenue. While the company is closer to profitability today than it was half a decade ago, it still recorded a deficit of around $3 billion in 2016, leading it to introduce additional measures to curb that trend in the future. The recent sale of its Russian division to Yandex was likely part of that effort and similar initiatives may be introduced in the future.
Uber's massive losses are also likely making its search for a new CEO who should replace its ousted co-founder Travis Kalanick even more difficult, though the ride-hailing firm may be hoping that its top candidates will be tempted by the potential for a once-in-a-lifetime payout that they would be guaranteed if the startup valued at $70 billion was ever to go public.