Carvana’s plan to cut 2,500 jobs sparks social media and market backlash
Carvana Co.’s revelation on Tuesday that it laid off 2,500 employees sparked a flurry of backlash in the stock market and among social media users who said they were employees included in the layoffs.
On Twitter and Reddit, several people who said they worked at Carvana wrote that they had received little or no warning from the company that they would be laid off on Tuesday. Some have posted screenshots of an apparent email from Carvana CEO Ernie Garcia III sent early Tuesday morning, before formal layoffs occurred later in the day.
The email, which Carvana neither confirmed nor denied, Automotive Newssaid the layoffs come as the company grapples with the financial fallout of high inflation and interest rates, declining consumer and investor confidence and supply chain disruption.
“The impact of all of these forces on our industry has been severe,” Garcia said in the email. “Record car prices are slowing sales to recessionary levels. We managed to grow despite declining sales across the industry, but grew much less than expected.”
The Wall Street Journal flagged the email as genuine.
Due to all of these factors, Carvana finds himself off balance, the email states.
“Our team is bigger than we need and we can’t be sure growth will rebound fast enough to bring us back to break even,” he said.
Some social media users expressed their frustration.
“I doubt Ernie 3 will lose any sleep over it,” @ocelot11teas wrote in a lengthy Twitter thread. “To him, we are just 2,500 replaceable numbers in his little castle of car cash machines.”
Others said they were now looking for a new job. Some have begun offering career resources, job postings and mental health counseling to affected employees. On LinkedIn, former Carvana employees circulated a document to which other terminated employees could add their information in the hope that potential new employers would see it.
News of the layoffs dealt another blow to Carvana’s stock performance, which has been on a downward spiral in recent months.
Carvana’s share price fell below $40 at the start of the week. It fell to $30 at market close on Wednesday before recovering a bit on Thursday morning.
In August, the company’s stock price topped $370, a high point amid a pandemic-fueled frenzy for vehicles that can be purchased online. But customer demand has plummeted since then.
Carvana has chosen to cut costs by laying off employees because it knows the drop in demand could persist, analysts said.
Bloomberg estimated that Garcia and her father – Ernie Garcia II, a major Carvana shareholder – had a combined personal wealth of $32 billion in August, when business was booming and Carvana’s stock price hit the $370 mark.
But in the months that followed, the Garcias lost nearly 80% of that wealth, according to Bloomberg.
In January, the young Garcia said he would give employees 23 shares of his personal stock once they reached their second anniversary of employment. The gesture, Carvana said, was to recognize and reward employees because the company sold its millionth vehicle.
Twenty-three shares were valued at more than $5,000 on the day the donation was announced, while Carvana’s opening stock price was still above $200.
Terminated employees who had reached the two-year milestone will still receive those shares — which are now worth less than $1,000 — according to the email.