American Express Co., ratcheting up the reengineering initiated under chief executive Kenneth Chenault, is intensifying efforts to contain costs in a move that will include pushing more customers to the Internet.
The move is a small part of broad changes at Amex and is limited to corporate travel customers - who will continue to have access to service people. Still, it is noteworthy if only because the New York company's image is synonymous with high-touch customer service.
But corporate customers, facing weak operating environments of their own, have slashed travel expenses, forcing Amex to find ways to adjust its own operation. Mr. Chenault said Wednesday that it would speed the implementation of a plan that now calls for eliminating up to 5,000 jobs this quarter, or 5% of its global workforce.
Such a shift might not fly on the consumer side, but analysts said the corporate client base might actually welcome it if they can share in the savings.
"Amex's strategy is to help companies manage expenses," said Michael Freudenstein, an analyst at J.P. Morgan. "Corporate customers are also looking for ways to save money."
The effects of corporate cost-cutting are just one factor at play in what is looking to be a dismal quarter for American Express. The cuts were announced Wednesday in the context of a warning from the company to Wall Street that its second-quarter earnings will probably have fallen 76% from year-earlier levels by the time it reports on Monday.
The report will include additional writedowns of high-yield securities in its American Express Financial Advisors investment portfolio - which is surprising, because it was an area of weakness the company tried to address in the first quarter - where it will take an $826 million charge. American Express had posted earnings of $740 million, or 54 cents a share, for the second quarter last year.
Separately, the company said it will take an additional charge of between $310 million and $370 million in the current quarter to pay the cost of terminating staff.
Amex had already announced 1,600 layoffs as part of its reengineering, which earmarked $500 million in cost cuts for this year. Some of these will be borne by travel sales departments because of a decline in corporate spending.
Addressing the second part of Amex's two-pronged tale of woe Wednesday, Mr. Chenault said the company is "making substantial progress in the reengineering efforts announced earlier this year." However, in light of what he described as "our more negative view of the economic environment," it will expand the restructuring, resulting in job cuts in a number of areas.
"We're moving some stuff to the Internet to reduce support staff. We'll also be moving more rapidly to scale back American Express Bank's infrastructure in overseas markets," he said. The company also plans to eliminate jobs in its technology unit and move certain finance, operations, and customer support functions to lower-cost overseas locations.
All told, Mr. Chenault said he anticipates cutting up to 6,000 jobs by yearend. American Express joins a list of financial services companies - spanning investment and commercial banking, brokerage and asset management - that have thinned their ranks to deal with the economic slowdown.
But unlike other financial services companies, American Express has not introduced a total hiring freeze, and has added staff in some areas since announcing the first round of layoffs, said spokeswoman Molly Faust.
One unit in which Amex is hiring is American Express Financial Advisors, where it suffered the high-yield losses. According to James M. Cracchiolo, its president and chief executive officer, the advisory unit is "actively looking for a new chief investment officer and stronger analytical staff."
Mr. Chenault, speaking about the high-yield writedowns, said that American Express has "decided to change our investment philosophy and change our investment strategy. We were not at that point in the first quarter." During the first quarter, the company took a $182 million charge after it wrote down high-yield securities in the portfolio and most on Wall Street thought the company was in the clear.
However, said Mr. Chenault, "During the second quarter the default rate went to an historically high level."
Analysts said they were taken aback by the severity of American Express' two-pronged announcement Wednesday.
"I was surprised by the magnitude of the high-yield loss," said Bruce Harting, an equity analyst at Lehman Brothers in New York.
"Especially after saying that they cleaned that out in the first quarter there is a little bit of a credibility issue here," he said. Mr. Harting said he was also somewhat surprised at the level of job cuts announced for this quarter.
American Express has been rumored as a takeover target in recent months, with Citigroup listed as possible suitor, but Lehman's Mr. Harting said that even despite Wednesday's news, a deal probably will not happen imminently.
Jennifer Kingson contributed to this article.
