Thursday, June 20, 2024
Opinion/ColumnTaxi industry newsTrucking

Maybe Uber will be able to accomplish in Trucking what it’s failed to do in Taxi: turn a profit while drivers earn a fair living

Is there good reason to be enthusiastic about watching Uber enter the trucking industry? Is the logistics industry overdue for some “creative disruption?”

If you read only the thousands of glowing words being written about operational excellence and transformation, maybe.

If you’ve witnessed the actual business results of that kind of transformation and creative disruption out on the road since 2010, maybe not so much.

Here are some nice new sample glowing words:

“SAN FRANCISCO AND FRISCO, TEXAS – July 22, 2021 – Uber Freight and Transplace have entered into a definitive agreement for Uber Freight to acquire Transplace for approximately $2.25 billion, consisting of up to $750 million in common stock of Uber Freight’s parent company, Uber Technologies, Inc. and the remainder in cash…

“This is a significant step forward, not just for Uber Freight but for the entire logistics ecosystem,” said Uber Freight topper Lior Ron. “This is an opportunity to bring together complementary best-in-class technology solutions and operational excellence from two premier companies to create an industry-first shipper-to-carrier platform that will transform shippers’ entire supply chains, delivering operational resilience and reducing costs at a time when it matters most.”

Transforming entire supply chains, delivering operational resilience and reducing costs – what’s not to like?

(As a professional reader* of Uber press releases for a decade now, I’m still waiting for the flying cars delivering free puppies and ice cream with sexy hot drivers in Valentine’s Day bras, so forgive me for being a little skeptical.)

Assuming any of the benefits being predicted by those involved in the latest mergers actually occur, AND are the result of improved technologies and management systems (as opposed to forcing drivers and operators to bear the burden of cost reductions) it’ll be great.

Maybe Uber will be able to accomplish in Trucking what it has never yet accomplished in Taxi: turn a profit while drivers earn a fair living.

Reading coverage of the Transplace purchase and other recent Uber-themed articles in logistics media, you could almost get the impression that Uber is a profitable, efficient company generously looking to share its success with outdated trucking and logistics industries that have somehow struggled along without its help for a century.

In fact, none of the cold, hard data supports this idea.

If your reading has been limited exclusively to media and politicians left breathless and transfixed by Uber’s machine-gun-spray public relations strategy, you may wish to add some of these works to your reading list for context:

“Uber is currently a staggeringly unprofitable company.”

Hubert Horan, “Can Uber Ever Deliver?”

First, to really understand how fully politicians, regulators and investors have been hypnotized by Uber’s fanciful narrative that it is a successful technology company, not a money-losing transportation company, read Hubert Horan’s incredible series of articles “Can Uber Ever Deliver?”

“Uber is currently a staggeringly unprofitable company. Aside from the imposition of unilateral cuts in driver compensation, there is no evidence of any progress towards breakeven, and no one can provide a credible explanation of how Uber could achieve the billions in profit and loss improvements needed to achieve sustainable profits and investor returns.

“Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance. But this financial evidence, while highly suggestive, cannot completely answer the question of how an Uber-dominated industry would impact overall economic welfare.”

Horan’s bio notes that “Hubert Horan has 40 years of experience in the management and regulation of transportation companies (primarily airlines). Horan has no financial links with any urban car service industry competitors, investors or regulators, or any firms that work on behalf of industry participants.”

This would stand in stark contrast to most of the business and technology media that cover Uber and reprint its press releases virtually as provided by Uber’s very creative writers.

Horan’s first piece in the series was published in 2016, subtitled “Understanding Uber’s Bleak Operating Economics,” and lays out clearly how unlikely it is that Uber can ever be profitable:

“Published financial data shows that Uber is losing more money than any start-up in history and that its ability to capture customers and drivers from incumbent operators is entirely due to $2 billion in annual investor subsidies. The vast majority of media coverage presumes Uber is following the path of prominent digitally-based start-ups whose large initial losses transformed into strong profits within a few years.

This presumption is contradicted by Uber’s actual financial results….”

In the most recent piece, #24 published in early 2021, Horan writes bluntly: “Press reports emphasized rational sounding (but highly implausible) explanations for the ongoing increase in Uber’s value…No one in the business press suggested the possibility that $100 billion valuations could be manufactured out of thin air, or that the business press played a major role in promulgating the narratives used to manufacture those artificial valuations.”

Second, in July the Toronto Star’s David Olive asked “What is wrong with Uber?” and answered his own question: “Everything.”

“Uber operates in one of the most fiercely competitive of all industries and is therefore chronically unprofitable. And it has worsened rather than improved traffic congestion in the nearly 10,000 cities it serves.

“And so, Uber has lost more than $27 billion in the past four years. It is one of the least successful big companies on Earth,” Olive wrote on July 15th, 2021.

“Uber, which helped create and legitimize the gig-economy underclass, is obliged to nickel-and-dime its workforce of more than five million drivers. With a ceiling on prices, Uber’s only hope of making its business model work is by operating a sweatshop on wheels.”

Olive’s observations came as some small comfort to Taxi operators who noted a decade ago that drivers have to make enough money to live in order for an industry to survive and provide safe service.

Third: in all of the many years’ worth of media covering Uber I have read, the one piece I felt really nailed the challenge of working with Uber, or for Uber, or competing against Uber, was its unbridled enthusiasm for ignoring the law. Who needs the Highway Traffic Act, when you have Creative Disruption?

In his June, 2017 article entitled “Uber can’t be fixed; it’s time for regulators to shut it down,” Benjamin Edelman wrote in the Harvard Business Review: “The company’s cultural dysfunction, it seems to me, stems from the very nature of the company’s competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules.”

“Having built a corporate culture that celebrates breaking the law, it is surely no accident that Uber then faced scandal after scandal. How is an Uber manager to know which laws should be followed and which ignored?” Edelman asks.

How indeed?

It appears the trucking industry is about to enjoy the same Uber experience the taxi industry encountered a decade ago.

Fasten your seatbelts; it’s gonna be a bumpy ride.

*As a professional writer, I have to admit it’s fun to read the entire Uber media release, including this gem of a disclaimer at the bottom:

Forward-Looking Statements

This communication contains forward-looking statements regarding Uber Freight Holding Corporation (“Freight,” “we” or “our”) future business expectations which involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors relate to, among others: risks and uncertainties related to our pending acquisition of Transplace, including the failure to obtain, or delays in obtaining, required regulatory approvals, any reverse termination fee that may be payable by us in connection with any failure to obtain regulatory approvals, the risk that such approvals may result in the imposition of conditions that could adversely affect us or the expected benefits of the proposed transaction, or the failure to satisfy any of the closing conditions to the proposed transaction on a timely basis or at all; costs, expenses or difficulties related to the acquisition of Transplace, including the integration of the Transplace business; failure to realize the expected benefits and synergies of the proposed transaction in the expected timeframes or at all; failure to accelerate Freight’s profitability in the expected timeframes or at all; the potential impact of the announcement, pendency or consummation of the proposed transaction on relationships with our and/or Transplace’s employees, customers, suppliers and other business partners; the risk of litigation or regulatory actions to us and/or Transplace; inability to retain key personnel; changes in legislation or government regulations affecting us or Transplace; developments in the COVID-19 pandemic and resulting business and operational impacts on us and/or Transplace; and economic financial, social or political conditions that could adversely affect us, Transplace or the proposed transaction. All information provided in this communication is as of the date of this communication and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable, and information available to us, as of such date. We undertake no duty to update this information unless required by law.

The forward-looking statements in this communication may also relate to the business and expectations of Freight’s parent company, Uber Technologies, Inc. (“Uber”). In addition to the risks related to the proposed transaction and the business of Freight and/or Transplace, for additional information on other potential risks and uncertainties that could cause actual results of Uber to differ from the results predicted, please see its Annual Report on Form 10-K for the year ended December 31, 2020 and subsequent Form 10-Qs and Form 8-Ks filed with the Securities and Exchange Commission (the “SEC”). Uber undertakes no duty to update this information unless required by law.