AmEx to cut 7,000 jobs
The company says it will eliminate 10% of its global workforce to cope with adverse economic conditions.
NEW YORK (CNNMoney.com) -- American Express Co. said Thursday it will cut 7,000 jobs as part of a restructuring plan aimed at cutting costs in difficult economic conditions.
The credit card company said the reductions will amount to about 10% of its worldwide workforce and will result in a pretax charge of up to $440 million in the current quarter. But AmEx said the restructuring will ultimately generate a $1.8 billion cost benefit next year.
American Express said cuts will occur across all of the company's business units, markets and staff groups, but will focus on management positions. The company is also suspending management level salary increases for 2009 and instituting a hiring freeze.
"The reengineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades," said Kenneth Chenault, American Express CEO, in a statement.
In addition to reducing staff levels, AmEx said it will cut expenses on "general overhead," including spending on business consultants, travel and entertainment.
AmEx also said it will "scale back" spending on business development and will "streamline" costs associated with some rewards programs.
"[The plan] will also put us in position to ramp up investment spending as economic conditions improve so that we can take advantage of the substantial opportunities that will be available to us over the medium to long term," Chenault said.
Howard Shapiro, an analyst who follows AmEx for investment bank Fox-Pitt Cochran Caronia, called the move "prudent" and said the goal of saving $1.8 billion is "doable."
"It demonstrates the company's ability to operate in this difficult environment," he said.
Shapiro added that his contacts at AmEx said layoffs have already taken place "over the last few days," and that the company "expects to realize a majority of these savings early in the year."
It was not immediately clear which of the company's global divisions would be affected. But AmEx is headquartered in New York, and Shapiro said it's safe to assume that the majority of the job cuts will take place there, which is "another blow to New York's economy."
Red Gillen, senior analyst at Boston-based financial research and consulting firm Celent, said the cuts are necessary to decrease costs. But he cautioned that they come during the busiest time of the year for credit card companies, when internal resources are in highest demand.
"These job cuts will have to be managed extremely carefully," Gillen said.