Business

WeWork warns of job cuts after Softbank rescue

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WeWork leaders have warned staff to expect major job cuts after a shake-up at the struggling co-working company.

Softbank, the firm’s biggest outside investor, has agreed to invest billions in the firm after the collapse of WeWork’s flotation plans and ouster of co-founder Adam Neumann.

Its chief operating officer said WeWork must now “right-size” the business to stem its losses.

Media reports say the firm would cut thousands of workers.

The Financial Times put the figure at as many as 4,000 – about a third of its staff, which numbered more than 12,500 as of June.

WeWork did not respond to a request for comment on the figures.

Major cuts had been expected but postponed, as the cash-strapped company, which lost $900m in the six months to June, needed money to pay severance, the Wall Street Journal has reported.

On Tuesday, WeWork’s board accepted a financing offer from Softbank that includes $5bn in debt.

As part of the deal, Mr Neumann is to receive an exit package worth nearly $1.7bn – a move that had spurred anger among workers fearing for their jobs.

‘Right-size the business’

In a memo to staff posted by CNBC, Softbank’s chief operating officer Marcelo Claure, who was named to lead WeWork’s board, said those affected by the cuts would be “treated with respect, dignity and fairness”.

“I am totally committed to open and transparent communication with you,” he wrote. “Yes, there will be layoffs – I don’t know how many – and yes, we have to right-size the business to achieve positive free cash flow and profitability. But I will promise you that those that leave us will be treated with respect, dignity and fairness.”

People work at tables inside of the 'WeWork' co-operative co-working space on March 13, 2013 in Washington, DCImage copyrightAFP/GETTY
Image captionNew York-based WeWork has more than 500 locations around the world

WeWork, which rents office space on flexible terms to companies and freelancers, grew rapidly from its founding in New York City in 2010 to more than 500 locations around the world.

For years, the focus on growth overrode concerns about profitability and led the company to experiment beyond office rentals, opening apartments and schools. Those businesses are among the units expected to be sold.

WeWork is also likely to focus on the US, Europe and Japan, pulling back from regions that include China and much of Latin America, the Financial Times reported.

“To be candid, what we are lacking is focus on our core business,” Mr Claure wrote.

“The past two months have been challenging, and I am not going to minimize those challenges,” he wrote. “Fortunately, we have all the necessary ingredients to make this one of the most amazing comeback stories ever, and prove our detractors wrong.”

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