After SNB shock, 'Swiss Made' may mean more expensive

Fri Jan 16, 2015 12:39pm EST
 
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By Caroline Copley and Joshua Franklin

ZURICH (Reuters) - "Swiss Made" has traditionally stood for quality, precision and reliability. But after a shock move to scrap the cap on the franc, it could convey a less attractive message: Made more expensive.

The decision by the Swiss National Bank, after three years of holding down the franc's value, was met with indignation by many small-to-mid size companies which now face lower revenue from exports.

Unlike bigger multinationals based in the country, smaller companies tend to produce a higher proportion of their goods in Switzerland, meaning they lack the spread of costs in other currencies that could mitigate the franc's surge.

Many face the prospect of cost and price cuts to stay competitive.

"I trust you have a strong plan that will help all of us in the long run," Edouard Meylan, chief executive of watchmaker H. Moser & Cie wrote in a scathing open letter to the SNB President Thomas Jordan, saying he had already received calls from retailers cancelling orders.

Small and medium-sized companies were responsible for around a fifth of all Swiss exports in 2012, according to a survey by Credit Suisse. They employ 2.3 million of the country's 8 million people, a separate study by consultancy OBT estimated.

This means any fallout from the franc's new strength could have serious consequences for the economy.

Watchmakers will be among the hardest hit, since under new legislation passed by parliament in 2013 at least 60 percent of the value of industrial products, including watches, has to be manufactured in Switzerland to carry the coveted "Swiss Made" label.   Continued...

 
Swiss 100 franc bank notes are withdrawn from an ATM in the northern Swiss town of Kreuzlingen in this picture illustration, January 16, 2015. REUTERS/Arnd Wiegmann