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American Express Co.'s announcement yesterday of further layoffs means the company has reduced its total workforce by 15% during the past six months. AmEx's next goal should be to retool its products and business model, one analyst contends. "American Express will probably need more than just cost cutting to come through this economic storm," Brian Riley, research director at TowerGroup, an independent research firm owned by MasterCard Advisors, tells CardLine. "Many of [AmEx's] product fundamentals need to be reconsidered, such as its market focus, its dependence on merchant fees and its monthly settlement (policies)." A key question is whether AmEx's business model is too dependent on transaction fees, which fell sharply in the first quarter as consumer spending slowed (CardLine, 4/24). The company's market positioning is another uncertainty, Riley adds, wondering if AmEx is "too upscale in a downscale economy." Its vaunted—but costly—rewards program also may become a hindrance, as it "does not appear to be an effective weapon against (the growth of) debit cards offered by bank card issuers." AmEx yesterday announced that, to save $800 million this year, it will cut an additional 4,000 jobs, or 6% of its staff, and reduce spending on marketing and business development, consulting, professional services, travel and general overhead. The cuts are in addition to a $1.8 billion reduction in spending AmEx announced last fall, which included eliminating 7,000 jobs (CardLine, 10/30/08).
