Food delivery services Gorillas and Getir announced the layoff of hundreds of employees. It is part of a wave of mass layoffs from start-ups and technology companies.
Gorillas says he is laying off 300 employees from his administration, i.e. half of his administrative staff, mainly in his human resources department. Cyclists and warehouse workers are not directly affected, but that will soon change. According to media reports, Gorillas plans to withdraw from several European countries such as Italy, Spain and Belgium and announces that he will target Germany, France, the Netherlands, the United Kingdom and the United States.
Gorillas CEO Kağan Sümer reaffirmed his company’s tough austerity measures. He told Reuters: “When we go public, we want to do it as a profitable business.” The start-up had to “take extra steps to get closer to profitability”. He had said in January that of the company’s 230 warehouses, only 25 to 30 percent were profitable.
The road to profitability is through layoffs, poor wages and deplorable working conditions for the company’s remaining employees.
After numerous protests, the company fired 350 workers in Berlin and Leipzig last October, alleging that unannounced and unorganized strikes were illegal. The message of these layoffs was clear: anyone unwilling to accept slavery-like conditions will be fired. Last month, the Berlin Labor Court gave its blessing to this policy.
Like some of its competitors, Gorillas, founded just two years ago, has grown rapidly. Investors valued it at around 2.5 billion euros at the end of 2021. The company had raised funds from investors last October for a volume of 860 million euros. According to its own information, the expected turnover for 2022 is around 750 million euros.
Competing food delivery service Getir also plans to lay off 4,500 workers worldwide, or about 14 percent of its total workforce. He has not yet provided details, but 400 jobs in Germany could be affected, according to online portal Techcrunch. According to Bloomberg, Getir expects a loss of about $1 billion in 2022.
Getir received even greater sums from investors than Gorillas. In March, Arab sovereign wealth fund Mubadala, Sequoia Capital and Tiger Global, among others, invested nearly EUR 700 million, turning Getir into a so-called ‘decacorn’ company – valued at more than EUR 10 billion.
The two delivery services are not the only service companies announcing massive job losses. Payment service provider Klarna plans to lay off about 10 percent of its 7,000 employees. Although this Swedish company does not give any details, it can be assumed that a large part of the layoffs are in Germany, where it has a thousand employees, including 800 in Berlin.
Klarna CEO Sebastian Siemiatkowski has deliberately sowed doubts about possible further job losses in the near future. Siemiatkowski, whose fortune is estimated at $3.2 billion (Forbes), instead complained about “unfair” criticism of the layoffs.
Industry experts see the layoffs as a sign that the company’s good times are over. Just last year, Klarna had received $1.6 billion (US) from investors and was valued at $46 billion, despite a loss of about €630 million that same year.
Berlin banking start-up Kontist is also laying off 50 employees, a quarter of its workforce; his rival Nuri removes him, 45 jobs. In the UK, delivery service Zapp is laying off 10 percent of its staff.
According to the Techcrunch portal, about 15,000 employees at technology companies and start-ups around the world lost their jobs in May. Dozens of other companies have announced that they will no longer hire new employees. One is food delivery service Instacart, whose valuation has recently fallen nearly 40 percent from $39 billion to $24 billion.
Behind these massive layoffs and austerity measures is the rapid decline in the valuation of companies in the technology and start-up sectors. For example, Gorillas has been looking for investors for a fourth investment round for months. Going forward, the industry expects there to be “flat rounds” or “negatives.” This means that future financing cannot reverse valuations without going up or down.
The war in Ukraine and the rapid rise in inflation are the main factors behind the decline in corporate valuations and prospects. Recent interest rate hikes in response to inflation have slowed the flow of cheap money pouring into less profitable companies in recent years.
With the layoffs, workers must bear the full brunt of the crisis. They are confronted on the one hand with rising food and energy prices and on the other hand with layoffs and unbearable working conditions. According to a recent study by Allianz Trade, retail food prices in Germany could rise by more than 10 percent by 2022.
In 2021, delivery drivers staged a series of strikes and protests against their starvation wages and poor and dangerous working conditions. Businesses, governments and unions are alarmed by the growing militancy of a predominantly young and well-educated layer of workers. They fear such protests will be accompanied by growing opposition to mass layoffs and wage cuts in other major industries, transportation companies and government services.
To counter such a development, every effort is being made to form “works councils” led by the unions, whose aim is to prevent strikes and wider mobilization. Such a works council was set up at Gorillas last year, but it turned out not to be fully capable of preventing layoffs or improving the appalling working conditions.
Martin Bechert, who worked as a lawyer for the Gorillas works council, explained his role in the pending layoffs as follows: “It will probably be up to the works council to try to negotiate a social plan for the affected workers in Berlin”, which This means that the works council has long since accepted the dismissals.
To prevent further demonstrations, the works council and the trade unions are working closely with the Senate [gouvernement du Land] of Berlin (Social Democrats, Left Party and Greens). Recently, members of the Gorillas works council met with Berlin’s Social Affairs Minister Katja Kipping (Left Party).
While Kipping has shed crocodile tears over Gorillas layoffs, his party, along with the SPD and the Greens, are implementing a sweeping austerity budget. It is therefore not surprising that after this conversation, Kipping has just promised to start more regular checks in the field of health and safety.
To defend jobs, workers must set up independent action committees that network nationally and internationally and remain independent of unions. These committees must resume the struggle for a socialist program in the interests of the working class.
(Article first published in English on June 4, 2022)