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Amex, Motorola to cut work force

In a stark acknowledgment of the tough times ahead, US credit card issuer American Express Co and mobile phone manufacturer Motorola Inc announced plans to cut their work force by 10 percent and 4.5 percent respectively.

New York-based American Express (Amex) said on Thursday it planned to cut 7,000 jobs, or about 10 percent of its worldwide work force, in an effort to slash costs by US$1.8 billion next year.

The credit card issuer — which has reported four straight quarters of profit declines as an increasing number of consumers struggle to pay off debt — said it was also suspending management-level salary increases next year and instituting a hiring freeze.

The job cuts will be across various business units, but will primarily focus on management positions, the company said.

The company also plans to scale back investments in technology and marketing and business development, streamline costs associated with some rewards programs and cut expenses for consulting and other professional services, travel and entertainment and general overhead.

RESTRUCTURING

As a result, Amex plans to take a restructuring charge of between US$240 million and US$290 million in the fourth quarter.

The company has been gearing up for a big restructuring for some time, first announcing in July that it planned to reduce overall costs and staffing levels, and take a related charge during the second half of the year.

“We’ve been engaged for the past few months in an intensive, companywide review of priorities and staffing levels,” Amex chairman and CEO Kenneth Chenault said in a statement.

“The reengineering 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.”

Motorola, based in Schaumburg, Illinois, also announced on Thursday it was cutting its global work force by 4.5 percent, or some 3,000 employees, and delaying the spinoff of its troubled cellphone unit.

HANDSET LAYOFFS

The US’ largest mobile phone manufacturer announced the job cuts just hours after reporting a quarterly net loss of nearly US$400 million and said more than two-thirds of the layoffs would be in the handset division.

The company said it suffered a net loss of US$397 million in the third quarter of the year after reporting a net profit of US$60 million for the same period last year.

Motorola lowered its forecast for the remainder of the year but said its cost-cutting moves would result in annual savings of some US$800 million next year.

The ailing company had 66,000 employees worldwide at the end of last year and the latest job cuts bring the total number of layoffs since January last year to 13,000.

It said separation of the struggling mobile phone unit from the rest of the company was now “targeted beyond 2009.”

“While our strategic intent to separate the company remains intact, we are no longer targeting the third quarter of 2009,” Sanjay Jha, Motorola co-chief executive and head of its mobile devices division, said in a statement.

Jha, who took over the mobile devices unit in August, attributed the delay to “the macroeconomic environment, stresses in the financial markets and the changes underway in Mobile Devices.

Jha said the company would undertake significant actions to accelerate consolidation of its product platforms, resulting in a “leaner organization with a more competitive and cost-effective product portfolio.
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