is cutting roughly 10% of its workforce as part of company-wide restructuring plan expected to save $1.8 billion in the face of the difficult economic environment.
Through the initiative the New York travel and card services giant said it is reducing staffing levels by roughly 7,000 employees and related compensation expenses, cutting operating costs and scaling back investment spending.
The company is also suspending management-level salary increases for next year and instituting a hiring freeze for open positions. American Express expects to save around $700 million from the staffing and compensation reductions.
American Express expects to take a fourth-quarter restructuring charge of between $370 million and $440 million before taxes, or $240 million to $290 million after taxes. The job cuts will be primarily in areas "focusing on management and other position that do not interact directly with customers," it said.
The company had a difficult third quarter as its U.S. card business struggles in the face of a deteriorating economic environment.
profit fell by 25%, despite beating analysts' estimates. The firm first announced in July that it expected to implement the cost-cutting initiative in the fourth quarter.
"We've been engaged for the past few months in an intensive, companywide review of priorities and staffing levels," Chairman and CEO Ken Chenault said in a statement. "The re-engineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades. It will also put us in position to ramp-up investment spending as economic conditions improve so that we can take advantage of the substantial opportunities that will be available to us over the medium- to long-term."
In other areas, American Express expects to realize another $125 million in savings through cutting expenses for consulting and other professional services, travel and entertainment and general overhead. It is also scaling back investment spending on technology, marketing and business development, and streamlining costs associated with some rewards programs, which is expected to save the company $1 billion next year. In addition, American Express is raising fees through "pricing initiatives" to generate additional revenues next year.
Shares rose 4.1% to $26.24 after the announcement.
American Express faces a difficult landscape for credit.
on late Wednesday reported a fiscal fourth-quarter loss, primarily related to a $1.1 billion litigation reserve to settle a lawsuit brought against the company and rival
Discover Financial Services
. The lawsuit alleged Visa and MasterCard has conspired to keep Discover out of the bank-issued credit card space. American Express reached a similar settlement with the two companies last year.