4000 employees to be fired from American Express

American Express Co, the credit card and travel services company, is planning to cut 6% of its workforce, which is amounted to 4000 workplaces. As it explained, the reason for that is higher number of customer defaults due to weakened economy.

This action is one of the steps of company’s plan aimed at saving of $800 million over the rest of 2009. The cuts will be done additionally to 7000 jobs elimination and an expected $1.8 billion of savings from a restructuring it announced in October.

American Express suffers from customers’ non payment of their bills together with rising of US unemployment rate to its highest level since 1983. As American Express declared, the volume of debts, which is not expected to be repaid has risen by 1.3% in the period from March till April.

"We continue to be very cautious about the economic outlook," Chief Executive Kenneth Chenault said in a statement. He said the cost savings "will be reinvested in the business to make sure we can take competitive advantage of opportunities as the economy begins to rebound."

The company expects to take an after-tax charge of $117 million to $163 million in the second quarter. American Express said that it would be saved $175 million thanks to jobs cut. The cuts will occur throughout the company and will take place over several months, according to Michael O'Neill, a company spokesman. The company is also planning to cut such expenses as marketing and business development (by $500 million) and consulting and other services, travel expenses and overhead (by $125 million).

As regulatory filing shows, the company has decrease in net income in first quarter by 56% comparing to the same figure from previous year. Amount set aside for credit losses increased 49%.

American Express is one of 19 banking companies to undergo government "stress tests" of their ability to persist economy deterioration. But it is one of the nine who declared that there is no need of additional capital for it. Additionally the company said it would repay the $3.4 billion it took from government according to Troubled Asset Relief Program.