What Makes Them Tick?
The Swiss watchmakers who saved their craft from extinction in the 1970s are getting ready to retire. As the next generation prepares to take over, it's as concerned with creating art as with keeping time
By Sarah Raper Larenaudie
Winter 2004 Style & Design
"You want to talk about stepping into somebody's shoes?" asks Nicolas
Hayek Jr. slyly as he rummages in the drawers of his fourth-floor corner
office. Nick Jr., as he's known around the company, is the only son and
namesake of the legendary Swatch Group founder. At 50, he is also the
heir apparent at the world's largest watch group, with $3.1 billion in
sales in 2003. The company includes 18 brands, ranging from such luxe
watches as Omega, Breguet and Blancpain to more accessibly priced lines
like Tissot, Calvin Klein and Swatch, plus industrial watch components
and microelectronics divisions. Wearing jeans, a shirt, no tie and
sneakers, his thick gray hair swept back from his face, Nick Jr.
suddenly finds what he has been looking for: an enormous leather
sneaker. "My Shaq shoe," he says grinning, referring to 7-ft. 1 in.
basketball star Shaquille O'Neal.
From Swatch headquarters in Biel, at the foot of the Jura mountain
range, to the nearby valleys where most Swiss watches are made, to
watchmaking's emotional center in Geneva, all eyes are on a new
generation of executives taking over at key companies. At Chopard, Karl
Scheufele—who acquired the business from the grandson of founder
Louis-Ulysse Chopard in 1963—and his wife are turning operations over
to their son and daughter. A hand-off is being prepared at
Girard-Perregaux and at Patek Philippe, where Thierry Stern, 34, has
rotated through various posts and is now vice president, reporting to
his father Philippe Stern. The companies hope to pull it off as
successfully as did Rolex, where Patrick Heiniger replaced his father
André as managing director in 1992 in only the second management change
since the business was founded in 1905.
Generational change is nothing new, since many watchmakers have been in
business for more than a century, but this time around, the transition
is particularly poignant. The executives stepping down are heroes in
Switzerland, company leaders who watched in horror in the early 1970s as
Japanese manufacturers flooded the world market with inexpensive
mass-produced quartz timepieces. Philippe Stern, 66, remembers how
families who had been involved in watchmaking for generations panicked
and began to dump their tooling. "In Switzerland you had about 100,000
people working in the watch industry at that time, and in just a few
years, it dropped to 30,000," he says. "We didn't know what to do, but I
took a decision to stick to mechanical movements."
For Patek, a private company that produces 30,000 watches a year and is
said to have revenues of $407 million, maintaining independence in the
face of rising marketing costs and bigger competitors is the priority.
"It's my obsession to keep Patek Philippe in the family," says Philippe
Stern in a joint interview with his son at the company's workshops on
the outskirts of Geneva. "The growth potential is fantastic. It's a
question of keeping the know-how alive." And Thierry says, "We must be
very wise in our choices and very aware about costs."
Swiss watch exports were up 10.9% over 2003 in the first eight months of
this year, collectors are paying record prices at auction for vintage
pieces, and luxury-goods conglomerates are eager to expand their watch
and jewelry businesses. In this environment it's hard to remember how
uncertain things looked three decades ago, says Joe Thompson, a senior
writer at the trade magazine WatchTime. "It was worse than Detroit in
the '70s. Today there are new challenges, but the challenges faced by
Hayek Sr. and Stern Sr. were infinitely tougher."
Of all the handovers, the most scrutiny—and gossip—is reserved for
Swatch Group, a publicly traded company that produces 55% of Swiss
watches. Hayek Sr., 76, is an entrepreneurial pistol, a
career-management consultant who became a billionaire by merging two
failing Swiss watch concerns. The son of a Christian Lebanese mother and
a dentist father from Chicago, the elder Hayek passionately defends an
economic view in which the world is composed of two categories of
people—entrepreneurs and others—and developed economies can
successfully compete in manufacturing with low-wage producers as long as
they play their trump cards of technology and creativity and apply
extreme cost controls. And he waves his Swatch as proof. To avoid
layoffs at his merged company, he began mass-producing the plastic
watch, which retailed for $35 at its 1982 launch. At a stroke, he
snatched back market share from the Japanese and revived enthusiasm for
Swiss-made watches.
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