Uber to sell its troubled car leasing division to Fair.com
Uber Technologies Inc. is doing some end-of-year restructuring under its new chief operating officer.
The Wall Street Journal reported today that the ride-hailing company has signed an agreement to sell its Xchange Leasing subsidiary to Fair.com, the startup behind the digital auto marketplace of the same name. The anonymous insiders who leaked the acquisition didn’t share the value of the transaction.
Uber originally launched Xchange Leasing about three years ago to make vehicles available for drivers who may be wish to join its ride-sharing network, but don’t have regular access to a car. The company assembled an inventory of 40,000 automobiles and set up 14 showrooms throughout the U.S. The reason why Uber eventually decided to pull the plug is that it severely underestimated the associated costs.
In August, news broke that the company had started winding down Xchange Leasing after learning that the division was losing an average of $9,000 per car. That was 18 times more than expected. The move to discontinue the program reportedly affected as many as 500 employees, or about 3 percent of Uber’s total workforce at the time.
The sale of Xchange Leasing could enable the company to recover a potentially significant portion of the capital that it sunk into the group. Citing an internal Uber document compiled for prospective buyers, the Journal reported that the net book value of the division’s cars is about $400 million. This was no doubt reflected in the acquisition price.
The deal comes as Uber struggles with mounting operating expenses. The company lost $1.46 billion in the third quarter, up from $1.06 billion three months earlier. Expedia Inc. veteran Barney Harford was hired as COO last week to help put Uber on a path to profitability.
The executive will oversee the company’s ride-hailing, marketing and customer support operations, plus its Uber Eats food delivery division. The group seems to be faring much better than Xchange Leasing. According to sources who spoke with the Financial Times in October, the service was at the time on track to record gross sales more than $3 billion for 2017.