WeWork faces job cuts after SoftBank bail out

WeWork faces job cuts after SoftBank bail out

25 October 2019

WeWork is planning to cut as many as 4000 jobs as part of an aggressive turnround plan put in place by Japan’s SoftBank after it took control of the co-working business this week.

SoftBank has implemented a $US6.5 billion ($9.5 billion) rescue plan that helped WeWork avoid bankruptcy and included terms that will hand up to $US1.7 billion to Adam Neumann, the crisis-hit group’s cofounder.

Despite the cash injection, SoftBank will not take full control of WeWork. It plans to redirect voting rights acquired from founder Adam Neumann to an expanded WeWork board and will classify WeWork as an associate rather than a subsidiary.

The job cuts will amount to just under 30 per cent of WeWork’s global workforce of around 14000 people, according to people with direct knowledge of its plans. About 1000 of the cuts will hit employees such as cleaners, which WeWork is looking to move to an outsourcing company.

Marcelo Claure, the SoftBank executive who has been named executive chairman of the office space provider, told WeWork staff on Wednesday that the company would have to “right-size” its business to reach profitability and that would include job cuts.

“Yes, there will be lay-offs — I don’t know how many — and yes, we have to right-size the business to achieve positive free cash flow and profitability,” he wrote in a memo seen by the Financial Times.

Mr Claure added: “But I will promise you that those that leave us will be treated with respect, dignity and fairness. And for those that stay, we will ensure everyone is aligned and shares in future value creation.”

One former employee told the FT that there was “a lot of anger” inside the company, with staff venting their frustrations about the sums Mr Neumann stood to collect under the SoftBank deal, including a $US185m “consulting fee”.

Bloomberg reports that serious questions remain about its business model of renting and renovating office space that it leases to individuals and companies. It has some $US47 billion of future rent payments due and some $US1 billion in renovation costs.

Landlords and tenants have become cautious when dealing with the firm. Google has walked away from a potential Toronto lease and landlords are reaching out to WeWork rivals to see if they will take over WeWork leases or buildings if it becomes necessary.