Online automotive retailer Carvana Co. has announced it’s letting go of 2,500 employees — nearly 12% of its workforce — as they look to “better align staffing and expense levels with sales volumes.” Additionally, executives will forgo their pay for the remainder of the year in order to help pay the severances for departing employees.
In a filing with the Securities and Exchange Commission, the Tempe, Arizona-based company referred to the moves as “right-sizing initiatives,” while noting most of the jobs expected to be terminated over the next several weeks are in Ohio and other logistical hubs.
The announcement of the layoffs came the same morning Carvana announced their acquisition of Adesa U.S.’s used vehicle auction — which totals around 56 sites and 6.5 million square feet of buildings — for $2.2 billion.
“We believe these decisions, while extremely difficult, will result in Carvana restoring a better balance between its sales volumes and staffing levels and facilitate Carvana returning to efficient growth on its mission to change the way people buy and sell cars,” the filing stated.
CEO Ernie Garcia expanded upon the targeting of the company’s operational employees in an email. “I wish the burden were shared more evenly across the company, but our operations teams have grown the most over the last several months and are therefore furthest out of balance with the sales we are seeing,” Garcia — who possesses a net worth of $1.4 billion — said.
Carvana assured they’re looking to provide assistance, resources, and support for those laid off, which includes recruiting and resume assistance, extended healthcare coverage, and continued participation in company programs.
The move has received backlash, with some employees stating on social media they were fired over Zoom, a practice other companies have adopted during the pandemic times. A Carvana spokesperson explained “less than half” of the layoffs were done over Zoom, and they conducted as many in-person conversations as they could.
In the first quarter of 2022, Carvana saw a revenue of $3.497 billion, a year-over-year increase of 56%. The company also sold 105,185 units, a year-over-year increase of 14%. Beyond those numbers reveal a bleaker outlook for Carvana as they posted their first-ever sales decline of $506 million despite a time when car demand and sales are at record highs.
Carvana, known for its hard-to-miss “car vending machines,” sells only used cars online and delivers them to buyers. As Jalopnik explained, the company’s first quarter collapse could be chalked up to Carvana purchasing a large quantity of used cars in anticipation for rising demand.
However, it’s bet to capitalize on the vehicle surge didn’t pay off when demand swiftly fell due to “rising interest rates, rising fuel prices and macroeconomic uncertainty.” In April, the consumer price index (CPI) for new cars rose 1.1%, while used cars and trucks fell -0.4%.
Supply chain issues have also contributed to the overall downturn of not just Carvana, but countless other companies in multiple industries. Carvana has also seen their stock fallen mightily, as they’re down -256.51 (-86.03%) throughout the last six months. At the time of the news Tuesday, shares fell 5.4% to $36.68.
Andrew Rhoades is a Contributing Reporter at The National Digest based in New York. A Saint Joseph’s University graduate, Rhoades’ reporting includes sports, U.S., and entertainment. You can reach him at email@example.com.