American Express has announced companywide reengineering initiatives expected to produce cost benefits of approximately $1.8 billion in 2009, including the elimination of an estimated 7,000 jobs, primarily at the management level. The reengineering plan includes reducing compensation expenses, cutting operating costs and scaling back investment spending.

Elements of the program include a restructuring charge of approximately $370 million to $440 million pre-tax (approximately $240 million to $290 million after-tax) in the fourth quarter. The charge is primarily associated with severance and other costs related to the elimination of approximately 7,000 jobs or about 10 percent of the company’s worldwide workforce.

The reductions will occur across business units, markets and staff groups primarily focusing on management and other positions that do not interact directly with customers. The company is also suspending management level salary increases for 2009 and instituting a hiring freeze for open positions.

The total benefit from these staffing and compensation-related decisions is expected to be approximately $700 million in 2009. The company will reduce operating costs by cutting expenses for consulting and other professional services, travel and entertainment, and general overhead.

These steps are expected to realize benefits of approximately $125 million next year. It will scale back investment spending on technology, marketing and business development, and streamlining costs associated with some rewards programs. The anticipated cost benefit is approximately $1 billion in 2009.

Despite these cutbacks, the company said it plans to continue to make substantial investments in selective growth opportunities during the next year. The aggregate benefit of $1.8 billion detailed above represents reductions from previously anticipated 2009 spending levels.