Even employees at American Express are going to be worried about debt next year. Apparently, AMEX is going to fire a lot of people and this isn’t the best time for hunting down a new job in the financial services sector.
NEW YORK, October 30, 2008 — American Express announced today companywide reengineering initiatives expected to produce cost benefits of approximately $1.8 billion in 2009. The reengineering plan includes: reducing staffing levels and compensation expenses, cutting operating costs and scaling back investment spending. Elements of the program include:
A restructuring charge of approximately $370 to $440 million pre-tax (approximately $240 to $290 million after-tax) in the fourth quarter. 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 workforce. The reductions will occur across business units, markets and staff groups primarily focusing on management and other positions that do not interact directly with customers. The Company is also suspending management level salary increases for 2009 and instituting a hiring freeze for open positions. The total benefit from these staffing and compensation-related decisions is expected to be approximately $700 million in 2009.
Reducing operating costs by cutting expenses for consulting and other professional services, travel and entertainment, and general overhead. These steps are expected to realize benefits of approximately $125 million next year.
Scaling-back investment spending on technology, marketing and business development, and streamlining costs associated with some rewards programs. The anticipated cost benefit is approximately $1.0 billion in 2009. Despite these cutbacks, the Company plans to continue to make substantial investments in selective growth opportunities during the next year.
The aggregate benefit of $1.8 billion detailed above represents reductions from previously anticipated 2009 spending levels. In addition, the Company plans to move forward with pricing initiatives designed to generate significant additional revenue next 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 Officer of American Express. “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. 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.”
American Express first announced in July 2008 its plans to complete a companywide reengineering initiative in the fourth quarter 2008.