Drivers Bear the Cost of Uber’s First Profitable Year
Plus sky high prices at McDonald's, profit-sharing at Ford, and more in our business news round-up.
By Eric Gardner, More Perfect Union
Drivers Bear the Cost of Uber’s First Profitable Year: Uber reported its first full-year profit as a public company on Wednesday, but there’s reason to believe the milestone may be generated at the expense of its freelance workforce.
In the year's final quarter, the ride-hailing giant saw the total value of rides completed for its mobility division increase by 29 percent, while Uber’s revenue jumped by 34 percent. That discrepancy, first identified by Columbia Business School professor Len Sherman, suggests that barring some undisclosed efficiency gains at the company, Uber is likely taking more and more from its drivers.
Sherman estimates that Uber’s take-rate, the amount of the fare the company keeps for itself, now nears 40 percent. Research by The Workers’ Algorithm Observatory, reported earlier by More Perfect Union, shows it can exceed 50 percent in some instances. “Uber has never disclosed sufficient data to allow a fully substantiated assessment of its operational and financial performance,” Sherman wrote.
Those caveats haven’t stopped executives from boasting.
“Looking back, 2023 was an inflection point for Uber—proving that we can continue to generate strong, profitable growth at scale,” CEO Dara Khosrowshahi told investors.
Watch our investigation into Uber and Lyft’s policies of not telling drivers the total cost of ridees
McDonald’s Is Getting Too Expensive for Nearly 50 percent of Americans: After McDonald’s raised prices by about 10 percent in 2023, customers making under $45,000 per year (nearly half of Americans) have slowed their purchases at the fast-food chain, CEO Chris Kempczinski told investors on an earnings call this week.
The statement comes nearly half a year after the company went viral for an $18 Big Mac meal in Connecticut and months after Kempczinski told investors consumers were “tolerating” rising prices.
Throughout the pandemic, the world’s largest restaurant chain managed inflation and boosted sales through strategic price increases. After three years of raising prices, consumers are now turning to grocery stores rather than pay more for hamburgers and chicken nuggets.
“I think what you’re going to see as you head into 2024 is probably more attention to what I would describe as affordability,” CEO Chris Kempczinski said in an investor call this week.
McDonald’s said their internal data showed low-income consumers were migrating to packaged foods where major firms have largely stopped increasing prices.
UAW workers at Ford get expanded profit-sharing checks: In 2023, UAW workers struck for 41 days, ultimately winning a historic contract. The deal not only reinstated previously cut benefits but also included the largest general wage increase since 1999 and enhanced profit sharing.
This week, Ford management announced that 58,000 hourly workers are set to receive a median profit-sharing check of nearly $10,500. The new union contract expanded the payment to temporary workers for the first time.
Ford's management reported an expected profit of $4.3 billion for 2023, which would likely be 50 percent higher if not for its investment in electronic vehicles. Consumers have largely balked at purchasing large electronic cars with high price tags; the company plans to focus on smaller, more affordable electric models.
Management previously committed to sending between 40 and 50 percent of the cash the company generates back to investors. In the most recent quarter, the company announced a special dividend, which more than doubled what was paid to investors.
Sales of Mounjaro are expected to push Eli Lilly’s revenue past $40 billion: The Ohio-based pharmaceutical giant forecasts next year’s revenue will top $40 billion, potentially a 40 percent increase in just two years. The boost is largely driven by the company’s groundbreaking but expensive diabetes and obesity drugs, Mounjaro and Zepbound.
These drugs, which carry a monthly list price exceeding $1,000 and need to be taken perpetually, are straining public health budgets, forcing insurers to hike premiums to manage costs. Eli Lilly’s forecast assumes over $11 billion in sales of the two drugs—analysts expect worldwide sales to reach $40 billion by the end of the decade.
The drugs face incredible demand from patients, driven partially by social media. Today, Eli Lilly cannot manufacture enough, and executives are concerned that consolidation in the pharmaceutical industry will worsen matters.
This week, Novo Nordisk, the manufacturer of rival Ozempic, announced plans to purchase pharmaceutical manufacturer Catalent for $16.5 billion. Currently, Catalent helps produce a variety of Eli Lilly diabetes and obesity drugs, and the acquisition raises questions about Lilly’s future production capacity.
“We intend on holding Catalent accountable to their contracts with us,” Lilly’s Chief Financial Officer told investors.
Watch our video about how Mounjaro could wipe out public health budgets: