American Express To Cut 7,000 Jobs

NEW YORK — In a stark acknowledgment of the tough times ahead in the credit card industry, American Express Co. said Thursday that it plans to cut 7,000 jobs, or about 10 percent of its worldwide work force, in an effort to slash costs by $1.8 billion in 2009.

The New York-based credit card issuer _ which has reported four straight quarters of profit declines as an increasing number of consumers struggle to pay off debt _ said it is also suspending management-level salary increases next year and instituting a hiring freeze.

The job cuts will be across various business units, but will primarily focus on management positions, the company said.

Additionally, American Express said it plans to scale back investments in technology and marketing and business development, and streamline costs associated with some rewards programs. The company also expects to cut expenses for consulting and other professional services, travel and entertainment and general overhead.

As a result, American Express plans to take a restructuring charge of between $240 million and $290 million in the fourth quarter.

The company has been gearing up for a big restructuring for some time, first announcing in July that it planned to reduce overall costs and staffing levels, and take a related charge during the second half of the year.

"We've been engaged for the past few months in an intensive, companywide review of priorities and staffing levels," said Kenneth I. Chenault, chairman and chief executive, in a statement. "The re-engineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades. It 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."

Last week, American Express reported a 24 percent decline in third-quarter profit. The report echoed recent results from JPMorgan Chase & Co., Citigroup Inc. and Capital One Financial Corp. showing that the credit card environment is worsening as cardholders have trouble paying off debt and pull back their spending.

Even a company like American Express, which prides itself on catering to a more well-heeled clientele, is not immune.

The company's customers tend to be more affluent than those of other card companies, but they are more heavily concentrated in California and Florida, where the slumping housing market is taking a toll. American Express also has a higher percentage of small-business customers, and small businesses tend to miss payments more than individuals, executives have said.

"Cardmember spending is likely to remain soft," Chenault said in a statement last week. "Loan growth will be restrained, in part because of the steps we are taking to reduce credit risks, and credit indicators are likely to reflect the continued downturn in the economy and throughout the housing sector."

American Express has been able to finance its operations amid the tight credit markets, but the efforts have been tougher and more costly.

Shares rose 85 cents, or 3.4 percent, to close at $26.06. Shares have traded between $20.50 and $61.55 in the past 12 months.

Comments

[bamabusiness]

Don't leave home with checking your credit limit! American Express is cutting your limit without notice. we have used AMEX for business for 12 years without a late payment and have had our card limit go from unlimited to $3,300 in less than six months. We average around $12,000 per month of charges. Apparently this has happened to three of the businesses in my building all of which have excellent credit. I don't think American small businesses will be able to weather this storm. This may be the next big story in America! Look out kids AMEX may cut Santa's limit too.

[cfargo]

I was upset with American Express because they had lowered my limit by 75% over the past 3 months and had flat out lied to me trying to justify their actions. As a small business I have used American Express as my working capital over the past 10 years, so their reduction in my working capital was a real slap in the face and really hurt. At first I took it real personal and thought they were picking on me but have since learned that they are doing this to most of their customers. In September alone they lowered the credit limits of 20% of their card holders and day by day they are doing it to more and more. If you have some extra time and want to be stunned, Google "American Express credit limit" and you too can read horror story after horror story.

Just last night my sister went to use her AMX card at CostCo and it was denied. She got home and called American Express (1/2 hour on hold) to find out that her cards limit was dropped to $600 (just above her balance) from $16,200. This girl has impeccable credit and they did this to her. The customer service rep told her that it was lowered because of a "Public Record" input on her credit report. She immediately pulled her credit reports and found no such entry on any of the credit reports.

[MIKEBC]

OUT OF A GOOD JOB YET? -KEEP VOTING REPUBLICAN, LAST DECADE UNDER A DEMOCRAT IN THE WHITE HOUSE, WE DID NOT HAVE STORIES LIKE THIS ONE.

[whatsthatsound]

Owch! This is sure to have an economic impact.....in Delhi.

[rpr]

Why are they losing money when customers are slow to pay off their card charges with the exorbitant interest rates they charge plus the highest surcharge of any credit card? I don't get it.

[2sleepy]

wow..I figured something was wrong with American Express, after 20 years with them and perfect credit, I received a letter yesterday that they were reducing my credit limit, they cited a number of reasons which were truly shocking 'late payments, recent mortgage, too many credit inquries' they cited Experian as their 'source' so I pulled an Experian report and verfied what i already knew, no late pays EVER, 6 year old mortgage, and 1 credit inquiry in 12 months- I have been calling American Express about this all day but no one seems to know how to put me in touch with the 'department' that generated this letter. I told them I don't give a crap about a lowered credit limit but I want and explanation and an apology for citing false data as a reason for their action.

[bethel1974]

Next time you call ask to speak to the Adverse Action Department (which is NCO). They will talk with you there. But they will not increase your credit limit until the next review which is 6 months. I know I use to work for them. But remember to ask for the Adverse Action department (credit line reduction)

[joemescher]

Don't Leave Home Without It:

http://www.firstcollegenowwhat.com/?p=394