CORPORATIONS: New Life at Elgin

No U.S. watchmaker has a prouder name than Elgin. But in recent years Elgin had led the industry in a field it was not one bit proud of—losses. In 1957-58 the company fell nearly $8,500,000 into the red. For management the problem was: How could an honored old company be saved from bankruptcy?

Elgin's troubles began in the mid-'50s, when imported watches began to cut into the sales of its expensive ($35-$150) watches, and a sudden surge in the sales of lower-priced pin-lever (i.e., non-jeweled ) watches captured 45% of the market. At first, Elgin tried to offset its watch losses by diversifying into electronics and abrasives. That failing. President James Shennan called bright, aggressive Sylvester Moorman, 46, to Elgin's aid.

The Competitive Edge. Moorman, former vice president for sales and advertising at Schick, candidly admitted that when it came to watches, "I'm a moron." He set out to learn about watches—and what was wrong with Elgin—by paying $50,000 for market surveys. The surveys showed that Elgin simply was not making what buyers wanted. Men were found to prefer round watches (most of Elgin's were rectangular), to like functional stainless steel water-and shockproof cases (Elgin's were mostly yellow gold), to want sweep second hands (only 15% of Elgin's models had them). Elgin had always prided itself on its high-priced watches for lifetime use, but Moorman argued that what consumers wanted was cheaper watches.

Elgin traditionalists objected, argued that they had tried a low-priced line under the Wadsworth label, and that it did not sell. Of course not, countered Moorman—nobody knew the name. "Use your competitive edge." said he. "An Elgin selling for $20 has an advantage over any other $20 watch—the name."

Road to Recovery. As company losses mounted, Elgin finally had no choice except to follow Moorman's advice. Employees agreed to work for 15% less on the new line. Breakthroughs in automated production methods, e.g., a drilling and cutting machine that performs in less than one hour what used to take four workers seven or eight weeks to do, helped to trim costs. By last June the first new Sportsman and Starlite watches, priced at $19.95 to $29.95, were on the market. They sold well—400,000 by year's end.

Last week Elgin seemed well on the road to recovery. For the company year that ended March 1, Elgin reported earnings of $815,000. more than three-quarters of it in the fourth quarter, the best quarter for watch sales. This week Elgin is introducing two more watches: the wafer-thin Self-Winder, which sells for $49.95, and the water-and shockproof Yachtsman, which is priced at $39.95. With bulging back orders. Elgin's plant is running at full speed, and the workers who took a pay cut in 1958 are now making 15% to 20% more than before.