Under mounting pressure, founder of struggling driving service steps down
DETROIT – Under Travis Kalanick's leadership, Uber's "Animal House"-style business plan was to grow as quickly as possible, steamrolling regulators while flouting the rules of workplace conduct.
Behavior at the male-dominated company didn't seem to matter. Riders embraced the app-based ride-hailing system as an inexpensive, easy-to-use alternative to taxis, and still do today.
But now Kalanick is out as CEO, resigning under pressure as the company he co-founded eight years ago tries to clean up its act and deal with a federal investigation and widespread claims of sexual harassment inside its offices.
In stepping down Tuesday night, Kalanick, 40, said in a statement that his departure would help Uber return to growth "rather than be distracted by another fight." That referred to efforts by the board and investors to oust him despite his outsized ownership stake. He will remain on the board.
A successor was not immediately announced.
By some measures, Uber was performing pretty well. While it's losing billions, the quarterly red ink is shrinking, and ridership and driver numbers keep growing in New York City, one of the few places that collect such statistics.
But outside experts said the CEO had to go.
"Even though Kalanick was driving performance, the company is not sustainable in this form," said Jennifer Chatman, a business professor at the University of California at Berkeley. "The company is quite vulnerable to very, very expensive lawsuits. He couldn't stay."
The move comes as the world's largest ride-hailing company struggles to morph from a freewheeling start-up into a mature company.
Uber made a series of costly missteps under Kalanick that damaged its reputation, including the harassment claims and allegations of stolen trade secrets.
Also, federal authorities are investigating Uber's use of a phony app that thwarted efforts by city inspectors to see if the company was operating illegally.
To help Uber grow fast, Kalanick seemed to pick fights just about everywhere. He sparred with drivers over whether they were employees or contractors and got into a videotaped, profanity-laced screaming match with a driver over pay. A corporate mantra was "Principled Confrontation."
The company's unruly "brogrammer" culture came to light after a female engineer wrote a blog in February about being propositioned by her manager.
Two outside investigations found sexual harassment, bullying and retaliation against those who complained. Twenty people were fired after one investigation unearthed 215 complaints. Former Attorney General Eric Holder made a series of recommendations that the board pledged to adopt.
Kalanick apparently realized that his battle to hang on at the company was one fight too many.
"When you're at war with customers, employees, service suppliers, you can't build up a business model, and Kalanick was at war with everyone," said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen in Germany.
On the streets of New York on Wednesday, drivers and riders seemed unfazed by the shakeup, and business continued as usual.
Customer Pat Mastandrea said Uber's service is as good as ever. "I would say that one person doesn't make a company. I think the Uber organization as a whole is doing a good job," Mastandrea said.
Kalanick said earlier this month he was taking an indefinite leave of absence, in part to deal with a personal tragedy. In May, his mother was killed and his father hurt in a boating accident on a California lake.
Michael Ramsey, an analyst with the technology consulting firm Gartner, suggested this may not be the best time for Kalanick to leave.
The company, he said, could still thrive under the right CEO — a visionary like Kalanick but someone who can also bring a more grown-up work culture.
"But the company is still really just stretching its legs and becoming the mammoth that he envisioned," Ramsey said. "Is this the time to take away the leader whose ideas are behind a lot of the progress?"
During the past year, several senior managers left the company, including the president and chief financial and business officers.
Uber posted a $708 million loss in the most recent quarter on revenue of $3.4 billion. The loss narrowed from $991 million the previous quarter. Uber lost $2.8 billion last year.
As for what lies ahead, investors have talked about taking Uber public on the stock market. The company was valued near $70 billion the last time it sought capital.