Carvana job cuts trigger market sell-off, staff backlash

Carvana Co.'s disclosure last week that it shed 2,500 employees set off a ripple of reactions in the stock market and among social media users who said they were employees included in the job cuts.

On Twitter and Reddit, several people who said they worked at Carvana wrote that they received little or no heads-up from the company that they would be let go Tuesday, May 11. Some posted screenshots of an apparent companywide email Carvana CEO Ernie Garcia III sent early that morning, before job cuts occurred later in the day.

The email, which Carvana did not confirm or deny to Automotive News, said the job cuts come as the company is grappling with financial fallout from high inflation and interest rates, dwindling consumer and investor confidence and supply chain disruption.

"The impact of all of these forces on our industry has been severe," Garcia said in the email. "All-time-high car prices are slowing sales to recession levels. We have managed to grow despite sales being down industry wide, but we have grown a lot less than we planned for."

As a result of all those factors, Carvana finds itself out of balance, the email said. "Our team is bigger than we need and we can't be certain growth will rebound quickly enough to bring us back into balance," it said.

The Wall Street Journal reported the email as genuine.

Some social media users voiced their frustrations.

"I doubt Ernie 3 will lose sleep over it," @ocelot11teas wrote on Twitter. "To him, we are merely 2,500 replaceable numbers in his little vending machine castle of car money."

Some users took to offering career resources, job postings and mental health advice to affected employees. On LinkedIn, former Carvana employees circulated a document to which other laid-off employees could add their information in the hopes potential new employers will see it.

A number of large dealership companies went into hiring mode after hearing about the job cuts amid a labor shortage.

"We are sorry to hear about those impacted by the #carvanalayoff and would like to help however we can! The industry is here for you and ready to assist in your next career move," Chelsey Smith, a senior recruiter at Lithia Motors Inc., said in a LinkedIn post.

Smith pointed Carvana's former employees to Lithia's careers website and said the company's Driveway team has openings in several cities: Atlanta, Dallas, Las Vegas, Phoenix, Pittsburgh, Tampa, Troy, Mich., Sherman Oaks, Calif. and Temecula, Calif.

"To all 2,500 Carvana employees who have unfortunately been delivered the terrible news and were laid off, my heart goes out to you," Foundation Automotive Corp. Recruiting Manager Marisa Canales said on LinkedIn. "I would like to say, stay positive, and please reach out when you are ready for your next adventure in automotive."

News of the job cuts dealt another blow to Carvana's stock performance, which has been on a downward spiral over the last several months.

Carvana's stock price fell under $40 early last week. It sank below $30 Wednesday before rebounding somewhat. In August, the company's stock price rose above $370, a high point amid a pandemic-fueled frenzy for vehicles that could be purchased online. Customer demand has fallen since then.

Carvana chose to cut costs by reducing its employee count because it knows that waning demand could stick around, according to analysts.

Bloomberg estimated that Garcia and his father, Ernie Garcia II, had in August a combined personal wealth of $32 billion . But in the months since, the Garcias have lost almost 80 percent of that wealth, according to Bloomberg.

In January, the younger Garcia said he would give employees 23 shares of his personal stock once they reached their two-year employment anniversary. The gesture, Carvana said, was to recognize and reward employees because the company sold its 1 millionth vehicle.

Twenty-three shares were valued at more than $5,000 the day the gift was announced — when Carvana's opening stock price was still above $200.

Affected employees who had reached the two-year milestone will still get those shares, which are now worth less than $1,000 — according to the email.