Carvana, the used car dealer founded a decade ago whose meteoric growth was met with a fair number of problems, said Tuesday that it would lay off 2,500 employees, with executives going unpaid for the rest of 2022.
In a filing with the Securities and Exchange Commission, Carvana called the move a “right-sizing” initiative.
On May 10, 2022, Carvana Co. (“Carvana”) announced a workforce reduction of approximately 2,500 employees primarily in operational groups in connection with its previously announced plans to better align staffing and expense levels with sales volumes.
All impacted team members will have the opportunity to receive four weeks of pay plus an additional week for every year they have been with Carvana. Impacted team members will also have the opportunity to receive extended healthcare coverage, pay equal to early vesting of certain previously granted equity awards, recruiting and résumé support, and continuing participation in certain other company programs. The executive team is foregoing their salaries for the remainder of the year to help contribute to the severance pay for departing team members.
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We believe these decisions, while extremely difficult, will result in Carvana restoring a better balance between its sales volumes and staffing levels and facilitate Carvana returning to efficient growth on its mission to change the way people buy and sell cars.
Separately on Tuesday, a Redditor posted what they said was an email sent to Carvana’s employees, which says that various industry stresses — supply chain problems, higher interest rates and inflation, and slower car sales because of “all-time high car prices” — meant that Carvana’s growth was slower than expected. The email, which we have not verified but seems legitimate, also says the layoffs add up to roughly 12 percent of Carvana’s employees, and offered the same information about severance for the affected employees contained in the SEC filing.
Layoffs were probably an inevitability given that Carvana reported its first-ever sales decline in April of this year—a year when used-car prices and demand are still at unprecedented highs. It’s worth noting that, simultaneous with the revelation of these mass layoffs and executive pay cuts, Carvana announced this morning it will pay $2.2 billion to acquire vehicle wholesaler Adesa U.S., which operates 56 auction locations across the country.