Uber has shut down Xchange Leasing after discovering it’s seriously in the red

It’s no secret that Uber has always had trouble hanging onto money, but now that it’s being kicked out of a major market, the transportation giant is doing everything it can to cut costs. The latest casualty at Uber is Xchange Leasing, its American auto-leasing business. And given that the venture was losing 18 times more money on each vehicle than previously believed, it seems like the wise choice in this situation.

As initially reported by the Wall Street Journal, Uber was thinking about shuttering the business for months now, though the company previously seemed to be hoping for a buyout rather than a closure. Unfortunately, that did not come to fruition, and now, 500 folks are said to be affected by the decision (around 3 percent of Uber’s overall team).

“We have decided to stop operating Xchange Leasing and move toward a less capital-intensive approach,” a spokesman confirmed to the Journal. Originally begun in 2015 under ex-CEO Travis Kalanick’s leadership, the leasing program was bolstered by an investment of around $600 million. Uber hoped that this initiative would make it easier for the company to recruit drivers who would otherwise be unable to provide their own vehicles.

Unfortunately, this didn’t work quite as planned, as the Journal reported many drivers returning the leased cars in “poor shape, damaging their resale value.” Ultimately, the company was forced to place drivers in increasingly expensive leased vehicles, which meant that the drivers had to work longer hours in order to pay back the lease, thereby creating more wear and tear, and perpetuating a vicious, net-loss cycle.

By July, Uber realized that Xchange was in the red by about $9,000 for every vehicle in the fleet (previous estimates suggested this figure was just $500). There were a total of about 40,000 cars in the fleet, which represents a whole lot of debt.

Now that the unit is closing, Uber will still honor existing leases, but it’s unclear what the company will do with the other vehicles it currently holds. Of course, this is all just one of the company’s many problems. Over the last year and a half, the company has lost at least $4.4 billion, and has suffered a series of PR setbacks as well. Of course, the addition of Dara Khosrowshahi to the team as Uber’s new leader could improve the company’s position, but to say that the executive has his work cut out for him seems like something of an understatement.