The American Express Co., a big credit card lender, said Thursday that it would cut 10 percent of its work force, or about 7,000 jobs, as the company braced for an economic slowdown.
Amex said it expected the reorganization to save $1.8 billion in 2009 as it anticipates a wave of new losses and a decline in consumer credit card spending.
“Card-member spending in such an environment is likely to be very slow. Loan growth will be restrained and some of that will reflect the steps we're taking to lower credit risk” as the economy weakens, the chairman and chief executive, Kenneth Chenault, said during a conference call earlier this month. “To prepare for this difficult environment, we are moving ahead with plans” to reorganize the business.
American Express said Thursday that the reductions would occur across business units, markets and staff groups primarily focusing on management and other positions that do not interact directly with customers. As part of the overhaul, American Express could take an after-tax charge of as much as $290 million in the fourth quarter.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
“The charge is primarily associated with severance and other costs related to the elimination of approximately 7,000 jobs or about 10 percent of the company's worldwide work force,” American Express said.
In addition, a hiring freeze has been imposed, and the company said that it was suspending management-level raises next year. The company also plans to reduce investments in technology, marketing and business development.
American Express, which recently reported a 24 percent drop in third-quarter profit, is the latest company to report job cuts in the financial sector, which has been rapidly contracting. Moody's Economy .com raised its projection of job losses in financial services by two-thirds this month, to 100,000 from 60,000.