The expert's view Tuesday, April 27th 2010
Nicolas G. Hayek, Chairman of the Swatch Group © Swatch Group
While 2009 took some of the heat off the battle that rages around supplies of watch parts, this was no doubt just a break in the hostilities that are building up between the Swatch Group and its clients. Fighting talk from Nicolas G. Hayek, Chairman of Swatch, and Jean-Christophe Babin, CEO of TAG Heuer.
Nicolas G. Hayek, Chairman of the Swatch Group, in L'Agefi:
"Swatch Group intends ending production and deliveries to third-party firms. The process is in preparation. An entire team has been set up specifically to discuss the matter with Comco [the Swiss competition commission]. We mean business. We want to see under what conditions we can, in the future, cease delivery of movements, regulating organs and other components, such as escapement parts - pallet levers, escape wheels and rollers – and oscillating parts such as balances and springs. Basically, everything our industrial branch produces."
Jean-Christophe Babin, CEO TAG Heuer, at wwd.com, quoted by Merrill Lynch:
"Swatch fairly supported TAG Heuer’s growth between 2000 and 2008, allowing it to shift production from around 99% of quartz watches in the 90s to more than 50% mechanical watches. TAG remains one of the biggest clients of ETA (the Swatch subsidiary specialising in movements). But in the past five years, seeing how quickly we developed mechanicals, Swatch has been very openly informing us since 2002 that we should really envision other sources of supply, including internal. So we decided to start our own project, but in parallel, we decided also to develop new partners, including Sellita, Soprod and Dubois Depraz. I think we are the only watchmaking company in Switzerland relying upon six different suppliers. ETA is still our main supplier but from close to 100% of our mechanical movements just five years back, this year they will probably still represent the majority, but probably no more than 60%. But then it’s more up to them than up to us. We could pretty quickly substitute their volumes between ourselves, Sellita, Dubois Depraz and Soprod, not in 12 months, but not in 10 years either. We hope we won’t be forced to do it because there are some products, namely the Valjoux, which play a very important role in our assortment, so if we can still have the privilege of buying it, we will happily buy it from Swatch. From the 50,000 capacity we have built for that caliber, we’ll step it up to 100,000. It’s just a matter of money. TAG Heuer is a very profitable company that generates cash, so investments are not a big issue for us." (CR) ■