Swatch fire seen affecting other watchmakers

Mon Dec 30, 2013 11:28am EST
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By Alice Baghdjian

ZURICH (Reuters) - A fire that destroyed a workshop at a Swatch Group UHR.VX factory will affect other watchmakers it supplies more than the Swiss firm itself, as a break in production is likely to cut the availability of parts to an industry already facing bottlenecks.

Sunday's fire at a part of the plant that treats metals to protect them from rust could stop production of some components for several weeks, Swatch's chief executive said on Monday.

Swatch chief Nick Hayek said watchmakers that buy watch parts from its ETA Manufacture Horlogere unit, based in Grenchen, western Switzerland, would be most affected, rather than Swatch itself.

"It is a bigger problem for them than for us," Hayek told Reuters by phone.

Swatch, the world's biggest watch parts supplier has a near-monopoly on "movements", the mechanisms that drive the moving parts of a watch, and counts rival luxury groups Richemont CFR.VX and LVMH (LVMH.PA: Quote) among its customers.

The world's biggest luxury group, LVMH, which owns the Tag Heuer, Hublot and Zenith watch brands, said it had no immediate comment, while a spokesman for Richemont could not be reached on Monday.

"ETA is by far the most important production site," said Kepler Cheuvreux analyst Jon Cox. "The structure of the building will have to be inspected for safety reasons, which means the whole complex will be out of action for a while, so there could be shortages of components."

Tired of its role as the industry's "supermarket", Swatch was granted the go-ahead by the Swiss antitrust authority WEKO in October gradually to reduce its deliveries to rivals.   Continued...

Swatch Group Chief Executive Officer Nick Hayek Jr addresses the company's annual general meeting in Biel some 45 kilometres north of Bern May 29, 2013. REUTERS/Arnd Wiegmann