American Express to cut 7,000 jobs

by Gill Montia

Story link: American Express to cut 7,000 jobs

US-based credit card provider, American Express, has announced that it is cutting 10% of its workforce as part of a cost reduction strategy aimed at making savings of $1.8 billion in 2009.

Around 7,000 jobs will go in a response to what the group’s chairman, Kenneth Chenault, describes as one of the most challenging economic environments in many decades.

Management will take the brunt of the job cuts and executives remaining with the company could see their pay frozen until conditions improve.

The group will also reduce spending in the areas of technology, marketing, business development and professional services.

The restructuring will create a charge of between $240 million and $290 million in the fourth quarter of 2008.

American Express has seen profitability decline for the fourth consecutive quarter, having last week reported a 24% fall in profit for the three months to the end of September.

Commentators have pointed out that while its customers have a reputation for being affluent, defaults are rising.

At the same time, the group will be finding it difficult to finance its lending through the wholesale money markets, as with other lenders.