Becoming American Express:
150+ Years of Reinvention
and Customer Service
MATTERS OF SURVIVAL
American Express nearly disappeared as an
independent company in 1929. Chase National Bank had been quietly buying up shares of the company for several years. Not until Chase completed
a tender offer for American Express did it come to light that its
prospective buyer already owned 97 percent of the company.
Two unforeseen and unrelated events saved American Express from becoming fully absorbed by Chase. First, the majority of the owners of the remaining 4,702 shares of American Express balked at selling them, either refusing outright or demanding exorbitant prices. Second, in 1933, the U.S. Congress passed the Glass-Steagall Act, which prohibited banks from engaging in nonbanking businesses. Chase was left with no choice but to divest the American Express investment it had acquired just a few years earlier.
Roiled by the Chase incident and battered by the Great Depression American Express struggled through the 1930s. Since it was not a financial institution, per se, the company continued operations during the U.S. bank holiday, and in some respects became a de facto banker for the American people. As in Europe at the outbreak of World War I, American Express offices maintained cash reserves that were sufficient to meet the demands of customers who wanted to encash their travelers cheques or money orders. The company even paid against competing products, many of which were otherwise virtually worthless since the issuing institutions had closed.
During 1938 and 1939, as the prospect of another world war loomed over Europe, there was still a sizable group of longtime American Express managers and employees who had worked for the company 25 years before, during World War I. Their past experiences – and their advance planning, in this instance – helped the company survive World War II.
Even before the official declaration of war, American Express had mounted extensive preparations to protect its financial and real estate assets, including its principal offices in Berlin, London, Paris, Rome and Rotterdam. Throughout Europe, American Express offices continued operating until the last possible moment in countries about to be invaded – often long after American embassies and consulates had been ordered to evacuate. Ultimately, the Berlin office at 3 Unter den Linden was destroyed, and the Rotterdam office sustained extensive damages.
In England, the Liverpool office and the company’s London headquarters in the Haymarket were hit by German bombs during the blitz, as was the Cornhill (London) office, which somehow managed to open the morning after a devastating air raid. Amid the wreckage, local employees posted an “Open for Business” sign and continued to work frantically, making travel arrangements for Allied military leaders and diplomats, and for the evacuation of British children to America and Canada.
Throughout the conflict, company officials feared not only for the safety of employees but also for the very underpinnings of the business. There were predictions that the war might prove to be the death knell for travelers cheques, as sales would plummet when the public ceased to travel. The exact opposite proved to be true. As U.S. soldiers joined the war effort, they were encouraged by the U.S. government to carry their accumulated pay in travelers cheques. Soldiers and sailors used millions of dollars’ worth of cheques; and despite the dire predictions, American Express’ business did not crumble.
Between the end of the war (when the company had 1,500 employees and 50 offices) and 1950, American Express rebuilt its business and enjoyed tremendous growth. By the time of the company’s centennial celebration in 1950, the American Express family had grown to include more than 5,500 employees working in 173 offices worldwide, and reported net income of more than $3 million.
As travel within and beyond the United States blossomed, the company’s volume of travel business grew and set new records.
What could not be overlooked, however, was consumers’ increasing use of a new device – the credit card – for travel and entertainment expenses. Opinions within American Express’ ranks differed about whether or not the company should issue a card. Aware that doing so could cannibalize travelers cheque sales, the company’s leaders eventually agreed that it was a better option than losing cheque sales to competitors’ cards.
The Card Era -->
