American Express said Tuesday it would cut about 4,000 jobs, or 6 percent of its worldwide workforce, along with other reductions in spending, as the company said it was taking a “cautious outlook” as the economy moves toward a recovery.
The New York-based credit card and travel services company, which the government recently said did not need any additional capital buffer for the remainder of the current economic downturn, announced its cutbacks would yield cost benefits of $800 million during the remainder of the year.
As one of the healthier financial institutions among the 19 major banks which the government analyzed recently the latest moves come on top of a move to sell $3 billion in debt to investors as part of a plan to repurchase preferred shares owned by the Federal government. As a show of health, firms participating in the government program to were required to demonstrate they could issue unsecured senior debt before repurchasing preferred shares.
Last month American express reported a profit of $437 million during the first quarter of the year.
“We believe these efforts will put us in a better position to remain profitable and free up some additional resources that will be reinvested in the business to make sure we can take competitive advantage of opportunities as the economy begins to rebound,” Chairman and Chief Executive Officer Kenneth Chenault said in a statement.
The firm announced it would take up to a $250 million pre-tax charge associated with the job cuts which includes severance pay and other related costs. The cuts would be companywide among its business, markets and staff groups. The firm expects to benefit by about $175 million from that move.
The firm also said it would be cutting back on investment spending on marketing and business development to yield a cost benefit of $500 million. The firm said it would continue to make investments in some growth opportunities, initiatives to build business and customer service support.
The cost benefits announced today are in addition to a previous $1.8 billion cost cutting plan announced in October of 2008.