Grab is on track to hit profitability. Why cut 1,000 employees?
Grab has resisted mass layoffs that have plagued the rest of the tech industry – until now
Ng Wei Kai
What happened?
AT 9 pm on Tuesday (Jun 20), the ride-hailing and delivery tech giant Grab sent an e-mail to all employees saying it was cutting more than 1,000 staff, or about 11 per cent of its workforce.
The cuts hit workers across the region in countries such as Grab’s home market of Singapore, as well as Indonesia and the Philippines.
The layoffs included staff from its software engineering, marketing, recruitment and risk teams.
One employee said rumours first spread around lunchtime on Tuesday.
“It was a few hours of anxiety, wondering if we were affected. Then eventually, at 9 pm, those that were affected got the e-mail,” she said, speaking on condition of anonymity.
In the e-mail, Grab CEO Anthony Tan said fundamental changes in Grab’s operating model and cost structure were needed to build its long-term “competitive moat” – industry speak for a competitive advantage.
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“The primary goal of this exercise is to strategically reorganise ourselves, so that we can move faster, work smarter, and rebalance our resources across our portfolio in line with our longer-term strategies,” he said.
Why now?
Grab’s move reflects a trend across the tech industry, where large companies have cut staff or rescinded job offers. They have been doing this in the wake of rising costs and new technology, in what many say is a correction of over-hiring during the pandemic – when most were flush with cheap cash.
Tan referenced this shifting landscape in his e-mail, saying: “We must adapt to the environment in which we operate. Change has never been this fast.”
He added that technology, such as generative artificial intelligence, is evolving at breakneck speed. The rising cost of capital has impacted the competitive landscape, he said.
The company seemed on track to hit its financial targets even without factoring in the staff cuts.
What targets?
Grab wants to hit a crucial metric called “adjusted Ebitda” by the end of 2023. Ebitda refers to earnings before interest, taxes, depreciation and amortisation.
Grab and other tech companies often prefer to use an adjusted form of Ebitda, adjusted for what the management thinks would give a better reflection of the company’s operations. Achieving adjusted Ebitda is, however, not equivalent to turning in a net profit. It appears Grab is planning for life beyond its year-end adjusted Ebitda goal. “While important, our profitability milestone is only a step in a longer journey. Our focus is on what comes after,” said Tan.
He was explicit in addressing talk that the layoffs were a cost-cutting measure to turn a quick profit. “I want to be clear that we are not doing this as a shortcut to profitability,” he said in the e-mail to staff.
Analysts said Grab’s reining in of regional costs is overdue. Bloomberg Intelligence’s Nathan Naidu compared the company to Uber, and pointed out that Grab’s regional costs were disproportionately high compared to its profitability.
How did the market react to the cuts?
Grab’s shares were up 4.7 per cent pre-market after Tan’s announcement to staff. The shares then pared gains and closed 1.2 per cent down at US$3.38 on Tuesday.
The tech industry as a whole has experienced widespread job cuts, and Grab seemed to be the last holdout.
In March, Indonesia’s GoTo, which owns Grab’s ride-hailing competitor Gojek, announced it was laying off 600 employees to boost profitability, adding to the 1,300 staff it cut last year. Singapore-based tech group Sea cut more than 7,000 jobs in the last six months of 2022.
How are employees reacting?
Most seem shaken. Some were caught off-guard, having been previously reassured by bosses that layoffs were unlikely.
One Grab employee BT spoke to said he had braced himself for possible layoffs, given the recent cuts across the industry.
One recruiter, who identified himself online as among the 1,000 who had been retrenched, said: “(I am) a little lost for words at the moment, as it felt like (only) yesterday when I was reaching out to passive candidates in the market about a potential opportunity at Grab. And here I am today, seeking one myself.”
Grab held a company-wide town hall on Wednesday morning for the survivors of the layoffs, where Tan fielded questions about the possibility of a second round of cuts.
The mood among the remaining “Grabbers”, as the company refers to them, was sombre.
How is Grab supporting them?
Grab said it would try its best to “cushion the impact” for those who lost their jobs. Those affected were offered severance payouts adjusted to their length of service with the company, along with free, year-long LinkedIn Premium accounts.
Tan said: “We recognise that change can be incredibly challenging, and the decisions made have been weighed with great care and consideration with all our leaders.
“Our priority is to support impacted Grabbers throughout this transition, and as per above, we are committed to providing resources and assistance to help ease the process.”
With additional reporting by Benjamin Cher, Claudia Chong and Wu Xinyi
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