American Express Will Slash 4,000 Jobs

By Hugh Son and Ari Levy
May 18 (Bloomberg) -- American Express Co., the largest U.S. credit-card company by purchases, will cut about 6 percent of its workforce as cardholders squeezed by rising unemployment fail to pay debts.

American Express will take a charge of $180 million to $250 million in the second quarter, mostly tied to severance and other costs from eliminating 4,000 positions, the New York-based company said today in a statement. Additional reductions will be made in marketing and travel costs and consulting services.

The cuts, in addition to 7,000 job eliminations announced in October, may save about $2 billion in expenses this year, the company said. American Express has had to set aside more reserves for failed loans as surging U.S. unemployment makes it harder for customers to pay debt. The jobless rate reached 8.9 percent in April, a 25-year high.

“Credit is a big issue and the spending volume on the cards is a concern as well,” said Jason Arnold, an analyst at RBC Capital Markets in San Francisco, who recommends selling American Express shares. “They’re taking the right steps in this environment.”

American Express rose $1.90, or 7.8 percent, to $26.13 at 4 p.m. on the New York Stock Exchange today, trimming its loss for the past year to 46 percent. The stock dropped 13 cents to $26 in extended trading after the announcement.
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