Clock ticking as Swiss watchmakers await market recovery

Thu Apr 14, 2016 6:25am EDT
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By Silke Koltrowitz

LA CHAUX-DE-FONDS/LE LOCLE, Switzerland (Reuters) - In two small Swiss towns, watchmakers are trying to strike a balance as delicate as the mechanisms in their precision-engineered watches - squeezing suppliers to cope with an industry crisis while preserving the skills that drove past successes.

La Chaux-de-Fonds, home to just 39,000 people, and even smaller neighbor Le Locle have been at the heart of the Swiss watchmaking industry since the 19th century.

But after the boom years earlier this century, life has got much harder. Demand for traditional luxury watches has been hammered by a Chinese government crackdown on bribery, a drop in tourist shoppers to Europe and, at lower price points, the rise of smartwatches.

Top manufacturers such as Swatch Group (UHR.S: Quote), Richemont (CFR.S: Quote) and LVMH (LVMH.PA: Quote) have responded by demanding price cuts from suppliers and taking more production in-house.

That has hit hard in La Chaux-de-Fonds and Le Locle, home to a network of industry subcontractors.

"Some brands asked us to lower prices by 15 percent," said Alain Marietta, co-owner of Le Locle-based watch dial maker Metalem which employs around 250 people.

"That was not justified, but we did lower prices a bit and are taking a hit on our margin," he said, adding he expected sales to fall 10 percent this year, in line with 2015, and staff would likely have to work short hours in the second half.

Francois Matile, secretary general of the watch industry employers' association, said about 1,000 jobs had been lost in about a year from the more than 59,000 in the Swiss watch industry. The actual figure was higher including temporary contracts not being renewed and staff attrition, he added.   Continued...

A worker holds a 4047 movement at Swiss watch company Zenith, part of LVMH, in Le Locle, Switzerland, April 6, 2016. REUTERS/Denis Balibouse