Tag Heuer to use Seiko parts

Sorry for this very long post and this may be “old news” to many of you but some readers may not know about this and the monopoly Swatch has is a major bugbear of mine.

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ZURICH, March 21, 2014 (Reuters) – Watchmaker Tag Heuer, squeezed by a cut in supplies from Swiss rival Swatch, said on Wednesday sourcing parts from Japanese peer Seiko will not tarnish its prized “Swiss made” tag.

The move by Swatch, for decades the main supplier to the Swiss industry, has sent watch companies scrambling to build in-house production or form alliances with alternative makers of movements, dials and cases.

Swatch has said repeatedly it wants to concentrate on its own brands and encourage rivals to build their own production capacity.
Tag Heuer, a unit of French luxury group LVMH said a deal it announced on Wednesday to use parts from Seiko Instruments Inc. would not hurt its “Swiss made” image as the company is a member of the Swiss Chronometry Society.

“We are the first company to announce in a transparent way that we are going to fit our movements with parts from Seiko, which are known as among the best,” Chief Executive Jean-Christophe Babin told Reuters.

“The Swiss brand guarantees quality and reliability but not necessarily the fact that 100 percent of the components come from Switzerland,” he said, adding no-one worries that Switzerland imports millions of cases and dials.

The Seiko components will be used in Tag Heuer’s Calibre 1887 mechanical chronograph. “This seems like a good thing. Given the need for an alternative supplier, of course competitors will highlight that Seiko is Japanese even if the parts and movements are made in Switzerland,” Kepler analyst Jon Cox said.

But Cox said the reduction in supply would benefit Swatch’s margin as it will be able to charge what it likes for its components, while rivals are forced to invest in production.

The Swiss parliament is currently debating whether to tighten rules on what constitutes a “Swiss made” product, in a bid to stop competitors knocking off poorer imitations which dent the country’s reputation for quality.

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To me this is just further damage control by Tag Heuer.

As far back as 2009, there was some uproar on watch forums and in the press about Tag basing its Cal 1887 movement on an older Seiko movement it had bought the rights for.

I think there is nothing wrong with doing this. Seiko makes great movements and many watch manufacturers buy standard ETA movements and up grade them. Some even buy Chinese movements and do the same thing.

What I think ticked people off – aside from the fact that everyone loves a good scandal – is the fact that Tag Heuer was not as forthcoming about this fact as they could have been.

In all their marketing material they even gave the impression that the movement was developed 100% in house.

Like the Reuters article says, by the current Swiss definitions, this is not very well defined so Tag (like many other brands) take full advantage of this.

The Federation of the Swiss Watch Industry backs more stringent rules, saying they will help protect jobs but smaller manufacturers, most at threat from Swatch’s cuts, argue this could be another nail in the coffin.

Many Swiss exporters hurt by the surge in the Swiss franc are moving production abroad. Switzerland’s third most important export sector, the watch industry, is however tied to keeping production in the country.

The lower house of parliament a fortnight ago proposed at least 60 percent of a watch’s value should be produced in Switzerland, up from a current law that requires 50 percent of movements to be manufactured domestically. The motion must still be passed by the upper house.

What happens next in this ongoing saga that has been caused by Swatch is anyone’s guess. If you do have a genuine, 100% Made in Switzerland watch though, I would hang on to it! 🙂

 

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