In a recent book of interviews with the journalist Friedemann Bartu ‘Au-delà de la saga Swatch’ Nicolas Hayek laid a few cards on the table concerning the episode in the Swatch Group’s history when ETA announced a “suspension of ébauche deliveries” as of 2006. This decision was later delayed by the Swiss Competition Commission, COMCO.
First of all, let’s look at a few numbers. Nicolas Hayek plays down the decision, affirming that with “all that,” the Swatch Group registered “a turnover of hardly 40 million francs, or in other words, 1 percent of our total annual revenue. This is really not very much, but it costs us a lot of money because, behind all of that, there is a lot of manual work, and labour costs continue to rise year after year.”




Photo: Zenith


When Nicolas Hayek speaks about “all that,” is he alluding only to the numbers for the mechanical ébauches (movement blanks) or to the group’s overall operations in terms of ‘movements’? This is not so clear. If we look at the Swatch Group’s 2005 balance sheet, we see that production as a whole, generated a gross turnover of 1,304 million CHF, for an operational profit of 47 million CHF.
Where, then, does the truth lie in these figures? Let’s consider, for a moment, that it is indeed the sales of ébauches that generated a turnover of 40 million CHF, and not “all that.” But, the essential point is not so much here, in the numbers that are more or less accurate, but rather in the Swatch Group’s strategy of an offensive defence. When the group makes the decision to no longer sell ébauches, it is not so much Sellita or the other firms that modify ETA’s products that are directly in the firing line. Behind them, the real targets are the Swatch Group’s competitors that buy from Sellita, et al., since these brands realize extraordinary added-value ‘on the back’ of ETA.
In the above-mentioned book, the journalist asked Nicolas Hayek this question. And, what was his answer? “By being willing to deliver ébauches to all the clients when they want them, and in the quantities that they desire, we are slowing down the development of new movements in the sector. This is the real reason. And you see: thanks to our decision, in the last few months, other firms are finally developing new movements.”
Ah, Nicolas Hayek is decidedly very skilled. He succeeds in turning the question to his benefit, setting himself up as a ‘saviour of watchmaking’ for the second time. But, if you think about it, he is not all that wrong. By taking the decision to no longer sell ébauches to the competition – and there is definitely competition out there – Hayek accomplished two things. First, he succeeded in weakening his competitors by forcing them to invest heavily in making their own movements (and, with the advance that ETA has in this domain, it will take them some time to develop their own ‘tractors’ that are not only as reliable as ETA’s, but also that have a global after-sales service network – and this is watchmaking’s next war). And secondly, Hayek paints himself in a favourable light as the one who has given a stimulus to the entire watch industry, an industry that has been lulling about, living a ‘life of leisure’. And there is quite a bit of truth in what he says.
As Europa Star was able to observe during its investigation (in this regard, see the following pages), never has the number of new initiatives involved in developing movements been so high. There is a mad rush among the new players to the game, and the number to have mastered the fabrication of the balance-spring has grown from one in 2002 to five or six today. Yet, there remains the incompressible factor of ‘time’ that will still play in the Swatch Group’s favour for the next several years to come, because, like it or not, it is impossible to take shortcuts in developing an industrial production of reliable movements, movements that are the mechanical – and financial – heart of watchmaking.


Source: Europa Star December-January 2007 Magazine Issue