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American Express Plans to Lay Off 7000 Employees

We all knew that the current credit crisis extended well past the mortgage industry, and we are starting to see the beginning of what looks to be a very rocky ride in the credit card industry. Just yesterday American Express announced that it will be reducing the size of their workforce by approximately 10%. That adds up to 7000 employees losing their jobs.

In an interesting twist, most job cuts will be coming from management positions. Usually it is the front line workers that see the ax first. Amex announced that they will place a freeze on hiring and be giving no raises to current employees in 2009. American Express believes that these measures will save the company around $1.8 billion next year.

In further cost cutting measures, American Express said it will be streamlining its operations and cutting expenses across the board. Cost cutting will be felt in the marketing and investments area, along with a deep scaling back on consulting, travel, entertainment and other typical corporate expenditures.

American Express chairman and CEO Kenneth Chenault said in a recently released statement, “We’ve been engaged for the past few months in an intensive company review of priorities and staffing levels.” This statement came on the heels of Amex reporting a 24% decline in third quarter profits. The 24% decline sounds pretty bad but was actually better than anticipated.

I give American Express credit for being pro-active and showing foresight. While we never want to see people lose their jobs, it is quite obvious that the credit card industry is struggling along with the rest of the U.S. and world economies. In fact, it is this author’s view that the real problems facing the credit card industry have yet to bubble to the surface.

Credit card giants J.P. Morgan Chase, Capital One and Citigroup all reported substantial quarterly loses recently. It’s a bit of a nasty belnd of cardholders taking on more debt, the inability for some account holders to pay their current bills and consumers cutting back on spending that is at the heart of the credit card companies current fiscal woes. We will know quite a bit more with the Christmas shopping season fast approaching. Economists are projecting however, that purchases may be way down across the board.

Related Information:

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