August 8, 2018

Uber poised to double investment in freight unit after making it independent

Otto founder returns to run new stand-alone business. Move underscores Uber CEO's bullishness on model, company says.

By Mark B. Solomon

Uber Technologies Inc.'s decision to operate its freight brokerage division, UberFreight, as a stand-alone business unit is part of a strategy to double the parent's investment in the new unit over the next year, the ride-hailing company said.

Under the restructuring, which was announced late yesterday, San Francisco-based Uber Freight will no longer be part of the parent's Advanced Technologies Group. In addition, Uber will close a deal to buy Otto Trucking, one of the two units that had been controlled by Otto, a company that Uber acquired in August 2016 for a reported $680 million.

The unit to be acquired by Uber develops technology to support logistics services for companies like Uber Freight, whose mobile app connects driver capacity to shippers' loads. The other unit, called "Ottomoto," provided technology to support autonomous truck operations. That unit was acquired in the deal reached two years ago.

As part of the closing of the Otto Trucking deal, Otto Founder Lior Ron will return to run the newly created Uber unit. Ron, who joined Uber after the 2016 acquisition, left the freight unit in March. William Dreigert, who was named Uber Freight's interim CEO after Ron's departure, will return to the new unit in his prior position as head of operations.

The restructuring validates Uber CEOs Dara Khosrowshahi's optimism about the prospects for the Uber Freight business and his decision to prioritize it within the company, an Uber Freight spokeswoman said today. The spokeswoman declined to comment on the amount of the doubled investment, nor would she specify how the funds would be used.

The parent is still targeting next year for its long-awaited IPO, which is expected to be one of the largest in U.S. history.

On July 30, Uber said it would close its autonomous truck business, and would instead devote its resources to supporting self-driving car operations. The shuttering of the self-driving truck operation was unrelated to yesterday's announcements, the spokeswoman said. The parent may eventually return to self-driving truck technology, she added.

The Uber brokerage unit, which launched in May 2017 in Texas, now operates nationwide, the spokeswoman said. Load volume is doubling every quarter, she added. It has offices in San Francisco and Chicago.

However, an industry source said at time of the closing the unit is generating only 3 percent gross margins on annual revenue of about $500 million, an unsustainable ratio. The source, who works for a logistics technology company, said that more than a dozen Uber Freight employees, including executives, have applied for jobs there in the past two weeks. The Uber Freight spokeswoman would not comment on the unit's profitability position.

 

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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