If a company has problems with sales and as a result cash flow problems normally they reduce costs, reduce their products prices or find new markets. However for ETA (Swatch Group) their only solution is unbelievably to hike up their prices. Why ? well this is parts of an article from this month,s BHI mag. that explains their tale of woe.
In 2002 COMCO/Weko ruled that if ETA (part of the Swatch group) wanted to withdraw supply of movements and parts it would be an abuse of it,s market dominance. It then took 10 years to finally agree a gradual reduction of third party supples & by 2016/17 it was authorised to deliver no more than 65% 2009-2011 average production. This agreement also bound ETA not to sell to new customers.
However with the decline of Swiss sales in general ETA have found themselves with cash flow issues. It therefore is in a dilemma it can not sell to new markets so it needed to sell more units & to achieve this it was going to flood the market reduced price units. COMCO/Weko was then again approached because companies such as Breitling, Sellita, Felsa & Vaucher have re-tooled to manufacture their own movements. Ronda have invested 25 million francs. Technotime’s (who supplied 100,000 balance springs to the industry in 2016) sales director Sebastien Gigonales stated “you can not take legal action to reduce deliveries, call for alternative solutions then change your position according to market conditions”. COMCO/Weko agreed with this and stated on 26th October it would not entertain the application by Swatch to increase it,s upper limit of delivery of movements.
The board at Swatch is therefore in trouble it has dug itself a hole with what seems no way out. It is hoping to resolve its cash flow issue by
a massive price hike of movements & parts.
Swatch has certainly taken steps to protect its business,but its actions have left it alienated and wrong - footed by a fed up horological community . Little solace,perhaps,the old saying:
“Be careful what you wish for,you might just get it”