Watchmakers wallow in the doldrums

Switzerland's watchmakers are under increasing pressure Keystone

Switzerland’s watchmakers are suffering from the global downturn along with the rest of the economy, with more than 200 jobs disappearing in recent weeks.

International sales have been sluggish since the beginning of the year, but analysts believe some markets still have growth potential.

At the beginning of June, Cartier shed 180 jobs, while Ebel, a maker of middle- to high-end watches slashed 24 jobs at the end of the month.

And nobody seems sure whether the job cuts will end there for the watchmaking industry.

Watchmakers hope the situation will improve in the second half of the year, but they fear the weak economy, especially in Germany, will delay any improvement.

The decrease in watch sales has also highlighted structural weaknesses within the industry.

“The distribution circuits are currently clogged up,” said Jean-Claude Rennwald, the secretary of the watchmakers’ union.

Rennwald also pointed out that the weak economy and a strong Swiss franc have done nothing to help improve the situation.

Sars virus

The Sars epidemic has also had an impact on the Swiss watch industry. Fearing the disease might spread to Switzerland, the Federal Health Office banned Asian exhibitors from attending the Basel watch fair last April.

“The ban has contributed to the drop in Swiss watch exports,” Rennwald told swissinfo, adding that Asia was an important market.

Overall, exports dropped 6.3 per cent – or by SFr244.3 million ($177.32 million) – during the first six months of the year.

The export value of finished watches in May stood at SFr701.4 million, down 13.3 per cent on the same period last year.

The number of actual watches made so far this year has fallen by 900,000 units, down a third on 2002. Companies have used this decrease of their output to justify job cuts.

Subcontractors have been the worst hit by the drop-off in business in the past few months.

“Orders have often been cut or delayed,” said Jean-Daniel Pasche of the Federation of the Swiss Watch Industry.

Potential markets

Analysts say, though, that the industry’s current difficulties are a far cry from the turbulence it faced in the 1970s and 1980s.

“Swiss watchmakers had missed the introduction of quartz movements at the time, but such a quantum leap in technology is unlikely in the near future,” said Marc Gemoets of the Ferrier Lullin private bank.

Gemoets added that the troubles faced by the tourism industry, caused by the war in Iraq and the Sars epidemic have also had an effect on watch sales.

But he believes that some countries with emerging markets, such as India, China and Eastern Europe, still have plenty of potential.

These nations have a better economic growth rate than the European Union and the United States, and watchmakers have yet to make their mark on these markets according to the analyst.

Gemoets says there are also untapped markets in North America.

“Swiss and foreign watchmakers have concentrated until now on the big cities,” he told swissinfo.

“The rest of the market is relatively untouched, which means there is a strong growth potential in a weekend economic context.”

Gemoets says the situation shouldn’t get any worse, but does warn that job cuts in the sector will continue, as the industry adapts itself to the new economic outlook.

swissinfo Jean-Didier Revoin (translation: Scott Capper)

Key facts

Watchmakers Cartier and Ebel cut more than 200 jobs in June.
Watch exports were down 6.3 per cent during the first six months of the year.
Exports dropped 13.3 per cent in May.
Around 900,000 fewer watches were produced from January to June, over a third down on 2002.

In brief

Swiss watchmakers are being hit by the global downturn, with sales dropping.

Some of them are considering job cuts or have already begun reducing their workforce.

Observers are also blaming the Sars epidemic and the war in Iraq for poor sales.

The decision to ban Asian exhibitors from the Basel watch fair has also damaged sales.

But analysts say the situation is not as bad as the crisis in the 1970s and 1980s.

They add that many markets still have untapped potential and could grow significantly.