Job Cuts

American Express will slash 7,000 jobs, take charge

American Express Co., the largest U.S. credit-card company by purchases, will slash 7,000 jobs, or about 10 percent of its staff, and may take a charge of as much as $290 million in the fourth quarter tied to the cuts.

American Express plans to save as much as $1.8 billion next year with a freeze on hiring and management raises, and less spending for technology and marketing, the New York-based company said today in a statement. The job cuts are concentrated on managers and other people who don't deal directly with customers, the company said.

American Express lost about half its market value in the past year as rising U.S. unemployment forces consumers to spend less and default on loans more. The economy suffered its biggest decline since 2001 in the third quarter, with gross domestic product contracting at a 0.3 percent annual pace, the Commerce Department said today.

The cuts “will help us to manage through one of the most challenging economic environments we've seen in many decades,” said Chief Executive Officer Kenneth Chenault in the statement.

The company had said in July it was reviewing its operations, and Chenault said Oct. 21 during a conference call that cuts were likely. American Express said the same day that third-quarter profit from continuing operations declined 23 percent.

Cardholders failed to repay loans in the third quarter at almost twice the rate of a year earlier, and the company set aside $1.4 billion for loan losses.

Commercial Paper

American Express added 98 cents, or 3.9 percent, to $26.19 at 10:56 a.m. in New York Stock Exchange composite trading.

American Express used the Federal Reserve's commercial paper facility for the first time on Oct. 29, joining a growing list of borrowers that have sold tens of billions of dollars of the short-term debt to the central bank as credit became more difficult to obtain.

Companies use commercial paper to finance daily expenses such as payroll and rent. The commercial paper market seized up on Sept. 15, when Lehman Brothers Holdings Inc. filed for bankruptcy. General Electric Co., the biggest buyer of commercial paper, and New York-based Morgan Stanley have also signed up for the program, which was announced on Oct. 7.

(Published by Bloomberg - October 30, 2008)