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Uber Technologies Inc. is trying to unload its costly U.S. subprime car-leasing program.
The ride-hailing company’s board determined Xchange Leasing, a wholly owned subsidiary, is unsustainable and should be sold or consolidated into a smaller unit within Uber, according to a person familiar with the plans. The board decided last month to wind down the program, which provides subprime car leases to drivers in its service, after discovering it was significantly more expensive than originally thought.
Xchange had been estimating losses of about $500 per car, but they are actually closer to $9,000 per car, the person said, asking not to be identified discussing private information.
The move is a sharp departure for Uber, which launched the program two years ago, buoyed by a $1 billion credit facility provided by Goldman Sachs Group. Xchange currently offers 40,000 vehicles for lease through 14 showrooms throughout in the U.S. As many as 500 jobs could be affected by the sale of the company, according to the Wall Street Journal, which reported the news earlier Tuesday. Uber aims to make a sale or downsize the leasing company by the end of the year, the person said.
Uber declined to comment.
Following a stream of controversies earlier this year, investors have urged San Francisco-based Uber to consolidate its business and cut costs in preparation for an eventual public offering. Last year, losses at Uber totaled almost $3 billion, excluding the China business which it sold last summer.
The leasing unit has had some difficulties. While conceived as a way to help new drivers get started, the program also left some drivers shackled with commitments they were unable to meet, Bloomberg reported last year. In January, Uber paid $20 million to settle a U.S. Federal Trade Commission lawsuit which said Uber made false or misleading claims about its leasing program.
And last week, the Wall Street Journal reported that Uber knowingly leased unsafe cars in Singapore that were prone to set fire.
Uber’s board, which is acting in the absence of a chief executive officer, decided to close out the Xchange program before they had been briefed on the safety matter in Singapore, according to the person familiar with the discussions. The board’s decision to remove the leasing unit has been strictly financial, the person said.
©2017 Bloomberg L.P.