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FutureStarrCarvana Layoffs 1,500 Employees
Carvana, the online used-car retailer renowned for its "vending machines," has announced the elimination of 1,500 employees - its second major job cut this year.
On Friday morning, the company informed employees via email that it was letting go of approximately 8% of its workforce. This affects primarily corporate and technology teams as well as some operations positions.
Carvana has announced the layoff of another round of employees as it struggles to make payments on its $7 billion debt load. Its stock has fallen 97% since January 1, 2022 and this trend is likely to continue as consumers look for alternative transportation options amid cooling trends in the used-car market.
Carvana recently informed the Securities and Exchange Commission (SEC) of their plan to reduce approximately 2,500 employees, or 12%, as part of an ongoing cost-cutting initiative that CEO Ernie Garcia hopes will keep them profitable as used-car sales decline and higher financing expenses mount.
Carvana sent out a letter alerting workers of their impending layoffs across all operations. These individuals will receive separation and severance pay, extended health-care coverage for up to three months, as well as four weeks' salary plus an additional week for every year they've been employed by the company.
King, who worked at the car dealership for about two and a half years before she was laid off, received an email on Tuesday morning indicating she would meet with her manager the following day. However, she didn't hear back from anyone until they gave her a Zoom call around 40 minutes later, according to CBS MoneyWatch.
She felt this wasn't the proper method of notifying employees about their job losses and was shocked that employees didn't receive a warning from their managers before being let go. Additionally, she didn't get to say goodbye to any friends who worked at the dealership.
Many former employees who spoke to The Copper Courier expressed disappointment in how Carvana laid them off. They pointed out that the company had purchased a vehicle auction business only days before, so they received news over Zoom instead of in person. Furthermore, they felt the dismissals were carried out too quickly and there was no time for them to discuss their grievances with the CEO.
Carvana announced the loss of 2,500 employees this week, representing about 12% of its workforce. The company said the cuts were necessary to align staffing and expense levels with sales volume. Furthermore, they provided affected employees with severance pay, three months' health-care coverage and job search assistance.
Ernie Garcia III, the company's CEO, informed employees via email of a company-wide cost cutting effort. According to an 8-K filing with the Securities and Exchange Commission, these cuts mainly impact corporate, technology and operations departments.
However, some former Carvana employees felt left out by the layoffs. Nicole King from Phoenix, who worked there for two and a half years, told The Copper Courier she was shocked when she learned about her termination; after having planned to take time off after having knee surgery, King felt left out.
She was on medical leave when she received the email from Carvana, and had not previously received any notification from her manager or anyone else at the company. Her layoff occurred during a Zoom meeting and she didn't hear anything from her supervisor until she received notice of termination.
Other workers interviewed by CBS News reported not being informed of their layoffs until they arrived at Carvana's office. Many had worked there for some time prior to being laid off, and many felt as if they had been treated with disrespect.
Some workers who were laid off through Zoom described the experience as "disappointing" and "demeaning," with some complaining about not receiving compensation for their time at Carvana. Others expressed anxiety over how to manage relocating and finding new jobs.
Many employees are questioning Carvana's decision to let so many employees go. The company has struggled to maintain its early-pandemic success and its financial performance has been dismal; even on a highly-adjusted profit metric, its first-quarter loss was $260 million - significantly worse than Carvana's average earnings per share during its most profitable periods.
Carvana (CVNA) began to experience rapid growth due to its unique business model. Capitalizing on consumers' desire for used cars online instead of visiting dealerships during the pandemic, Carvana quickly expanded.
Unfortunately, recent months haven't been kind to Carvana. The used-car market is slowing and interest rates continue to climb; this has resulted in reduced sales volume and forced the company to make layoffs across its business divisions.
According to Carvana's finance department, they provide financing loans for used vehicles purchased through its platform. Furthermore, they offer credit scores and assist customers in finding financing options based on their personal budgets.
In addition to financing, the finance team is accountable for ensuring all vehicles are safe and legal. This includes inspecting and recertifying them prior to sale to consumers, as well as checking them for mechanical or cosmetic issues.
It also manages insurance, titling and registration. While this can be a tedious task, it's necessary for the business to remain compliant with regulations and keep customers contented.
The company provides its employees with a range of financial benefits, such as health-care coverage and paid time off. Furthermore, employees are eligible for discounts on car insurance policies.
Due to rising costs and interest rates, companies are looking for ways to cut expenses. Carvana has been no exception with the loss of over 4,000 workers since last year.
Many of the cuts will impact its operations department, which includes its technology team and corporate office. In a letter to employees, CEO Ernie Garcia III indicated that most of the job losses would occur within this division.
The layoffs are due to a slowdown in growth and an increase in vehicle prices. Furthermore, it has had legal battles over titles and registrations with consumers which may explain why its stock has dropped recently.
On Friday, Carvana revealed a second round of layoffs, affecting about 1,500 employees or 8% of its workforce. This marks another in a long line of companies to reduce their staffs due to rising costs and an uncertain economy.
The company acknowledged it had experienced "strong economic headwinds" from rising financing costs, and management failed to accurately anticipate how these changes would impact its business. The layoffs are expected to affect employees in Carvana's corporate, operations and technology departments.
Shares of the company have suffered this year, falling nearly 97% from their 52-week high. Investors have become increasingly worried about its profitability after its third-quarter earnings missed estimates.
Ernie Garcia reportedly informed employees of the company's plans to reduce staff and leave positions unfilled as it restructures its business, according to FOX Business. He explained that these changes would enable them to better align expenses with sales volume.
In a memo to employees, he announced that those affected by the situation will receive separation and severance pay as well as extended health-care coverage for three months. Furthermore, he mentioned that when the company begins hiring again, they would be given priority consideration.
An anonymous former Carvana employee reported receiving an email from the company's HR department in the morning regarding layoffs and then participating in a Zoom call to discuss it. She described her experience as "upsetting" upon learning of her departure via Zoom.
Another woman who was let go from the company called ABC 15 to express her dissatisfaction and explain that her family and she were devastated by their decision. Although she said she was content in her job, she was shocked to learn of her termination.
The woman said she felt let go too soon after working at Carvana for six years, and believed the company should have given her more time to adjust. Additionally, she expressed surprise that they would let her leave so soon after starting in her new position.