American Express to Cut 5,000 Jobs in 3rd Quarter
The company also said that as a result of a pre-tax charge stemming from an $826 million write-down on its high-yield bond portfolio, it expects second-quarter earnings to decline 76 percent from $740 million posted in the year-ago period.
The financial services firm said its reorganization is continuing and it expects to achieve its previously announced cost reduction of $500 million this year. In the third quarter, it expects to recognize a restructuring charge of $310 million to $370 million, largely resulting from the elimination of up to 5,000 positions.
The reduction of its workforce is in addition to the 1,600 jobs it cut in the first half of 2001.
Excluding the losses from its high-yield portfolio, American Express said it expects second-quarter net income of $714 million, or 53 cents per share. It said that the economy will remain weak throughout 2002 and that it expects defaults in the corporate bond market to continue at high levels. It will release second-quarter results July 23.
In addition to job cuts, American Express plans to consolidate or outsource certain data processing activities and to reduce its technologies group staff. It also plans to relocate certain finance, operations and customer support functions overseas.
These reorganization efforts are expected to produce savings of $247 million to $300 million in 2002 and $345 million to $370 million on an annual basis thereafter, American Express said.