Amex to cut 7,000 jobs amidst rising defaults

31 October 2008

The largest credit card company in the US in terms of purchases, American Express, has said that it will cut around 10 per cent of its global workforce in a bid to cut costs in the face of rising defaults.

Defaults on credit cards have been increasing as consumers bear the brunt of higher unemployment.

In a statement, the New York-based Amex said it will take a charge in the fourth-quarter of almost $290 million as the cost of eliminating 7,000 jobs that will save the company almost $1.8 billion during 2009. Other measures include a freeze on hiring and management raises, and shortened budgets for technology and marketing.

The American Express ''reengineering plan'' includes reducing staffing levels and compensation expenses, cutting operating costs and scaling back investment spending.

The card company said that other measures include a restructuring charge of approximately $370 to $440 million pre-tax, which translates as approximately $240 to $290 million after-tax, in the fourth quarter, associated primarily with severance and other costs related to the elimination of approximately 7,000 jobs or about 10 per cent of the company's worldwide workforce.

It said that the staff reductions would occur across business units, markets and staff groups primarily focusing on management and other positions that do not interact directly with customers.