Reductions amount to about 7,000 jobs
By Greg Morcroft, MarketWatch
Last update: 1:09 p.m. EDT Oct. 30, 2008
NEW YORK (MarketWatch) - American Express on Thursday became the latest iconic American firm to announce major layoffs triggered by the worst economic crisis in seven decades, unveiling plans to slash 7,000 employees.
Highlighting that even some of the most creditworthy and wealthiest Americans are having trouble paying their bills, American Express said that it is cutting 10% of its staff, suspending management salary increases and instituting a hiring freeze. See related MarketWatch First Take commentary.
American Express, a component in the Dow Jones Industrial average, is following moves by other major firms like Hewlett Packard, Goldman Sachs, Whirlpool, and Yahoo, which have all recently announced layoffs of 5% to 10% of their staff.
So far this month, Goldman has said it would cut 3,200 jobs, Whirlpool dropped the axe on 5,000 staff, Yahoo cut 1,000 positions, and Hewlett unveiled a stunning 24,000 job losses.
And, while full details are unclear, analysts at Keefe Bruyette & Woods said earlier this week that probably about half of Lehman Brothers worldwide staff of about 26,000 employees, 10,000 of whom are inside the U.S., would lose their jobs after the company went bankrupt earlier this year. Barclays has acquired Lehman's U.S. brokerage business, and Nomura acquired parts of Lehman's Europe and Asia operations.
AmEx taking charge
American Express (AXP:
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, , ) said it would take a pre-tax restructuring charge of up to $440 million against fourth-quarter results to cover job-cut expenses.
Shares of American Express traded 2% higher in morning action.
The job cuts will be made across the company's business units, American Express said.
The move comes amid what CEO Ken Chenault called "one of the most challenging economic environments we've seen in many decades."
The credit crunch has made it harder for financial-services companies to package up and sell on, or securitize, the loans they make. That's an important source of funding for American Express, which isn't connected to a large bank, like rival Bank of America (BAC:
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Earlier this month, American Express said third-quarter net income fell 24% as the company set aside more money to cover bad loans. See full story.
The company began allowing more customers to carry a balance on their credit cards in recent years. That was a big change for the company, which traditionally offered cards to well-off customers, the balances of which needed to be paid off every month.
At that time, Chenault cautioned that events in the third quarter and since then have "reinforced our view that consumer and business sentiment is likely to deteriorate further, translating into weaker economies around the globe well into 2009." And he concluded that "cardmember spending is likely to remain soft."
Analysts are growing more and more convinced that the credit-card industry will suffer huge losses as the credit crisis plays out.
According to a report last month from investment research firm Innovest StrategicValue Advisors, banks will charge off $18.6 billion in delinquent credit-card accounts in the first quarter of 2009 and $96 billion in all of 2009 -- more than double the research firm's forecast for all of this year. See full story.
Source: http://www.marketwatch.com/news/story/american-express-cut-10-work/story.aspx?guid=%7BAF32DE3C-5513-475D-B8F5-838F3CD757FA%7D&dist=msr_8
By Greg Morcroft, MarketWatch
Last update: 1:09 p.m. EDT Oct. 30, 2008
NEW YORK (MarketWatch) - American Express on Thursday became the latest iconic American firm to announce major layoffs triggered by the worst economic crisis in seven decades, unveiling plans to slash 7,000 employees.
Highlighting that even some of the most creditworthy and wealthiest Americans are having trouble paying their bills, American Express said that it is cutting 10% of its staff, suspending management salary increases and instituting a hiring freeze. See related MarketWatch First Take commentary.
American Express, a component in the Dow Jones Industrial average, is following moves by other major firms like Hewlett Packard, Goldman Sachs, Whirlpool, and Yahoo, which have all recently announced layoffs of 5% to 10% of their staff.
So far this month, Goldman has said it would cut 3,200 jobs, Whirlpool dropped the axe on 5,000 staff, Yahoo cut 1,000 positions, and Hewlett unveiled a stunning 24,000 job losses.
And, while full details are unclear, analysts at Keefe Bruyette & Woods said earlier this week that probably about half of Lehman Brothers worldwide staff of about 26,000 employees, 10,000 of whom are inside the U.S., would lose their jobs after the company went bankrupt earlier this year. Barclays has acquired Lehman's U.S. brokerage business, and Nomura acquired parts of Lehman's Europe and Asia operations.
AmEx taking charge
American Express (AXP:
AXP
News, chart, profile, more
Last: Delayed quote data
Add to portfolioAnalyst Create alert
InsiderDiscussFinancials
Sponsored by:
, , ) said it would take a pre-tax restructuring charge of up to $440 million against fourth-quarter results to cover job-cut expenses.
Shares of American Express traded 2% higher in morning action.
The job cuts will be made across the company's business units, American Express said.
The move comes amid what CEO Ken Chenault called "one of the most challenging economic environments we've seen in many decades."
The credit crunch has made it harder for financial-services companies to package up and sell on, or securitize, the loans they make. That's an important source of funding for American Express, which isn't connected to a large bank, like rival Bank of America (BAC:
BAC
News, chart, profile, more
Last: Delayed quote data
Add to portfolioAnalyst Create alert
InsiderDiscussFinancials
Sponsored by:
, , ) .
Earlier this month, American Express said third-quarter net income fell 24% as the company set aside more money to cover bad loans. See full story.
The company began allowing more customers to carry a balance on their credit cards in recent years. That was a big change for the company, which traditionally offered cards to well-off customers, the balances of which needed to be paid off every month.
At that time, Chenault cautioned that events in the third quarter and since then have "reinforced our view that consumer and business sentiment is likely to deteriorate further, translating into weaker economies around the globe well into 2009." And he concluded that "cardmember spending is likely to remain soft."
Analysts are growing more and more convinced that the credit-card industry will suffer huge losses as the credit crisis plays out.
According to a report last month from investment research firm Innovest StrategicValue Advisors, banks will charge off $18.6 billion in delinquent credit-card accounts in the first quarter of 2009 and $96 billion in all of 2009 -- more than double the research firm's forecast for all of this year. See full story.
Source: http://www.marketwatch.com/news/story/american-express-cut-10-work/story.aspx?guid=%7BAF32DE3C-5513-475D-B8F5-838F3CD757FA%7D&dist=msr_8