Monday, 5 September 2011

Doing it right at Roger Dubuis

In August I had the pleasure of spending a few days at the Roger Dubuis factory and had essentially unfettered access to the place and the staff. 

If we are honest, RD have previously been known for three things: phenomenally designed movements, over the top case & dial designs and a reliability record only rivalled by the TU 144 'Konkordski'.

The new management are truly determined to change the final point, but you hear these sort of things from PR people all the time, so I learn to take them with the proverbial grain of salt. 

Probably the most complex movement that Roger Dubuis make is the RD 01, a double flying tourbillon with 319 parts. 



In parallel with developing the brand new movement for the new Monagasque line 


their design department also undertook a detailed analysis of all the current movements. 


In the course of this analysis, they diagnosed several inherent areas in the RD 01 movement which could prove to be problematic. So, they redesigned the movement; this wasn't just a quick fix, it involved redesigning 32 individual components, including the main plate and changing the watch from having the two tourbillons rotating in opposite directions to having them move in the same one. 

That was a good idea, redesigning the movement so that it was less likely to present problems down the line. But it was what they did next that signaled that the firm were truly committed to quality. They then contacted all their distributors and asked them to return any watches still in stock and they retro fitted them with the new movements and returned them. Then they went to the retailers and asked them to send back any watches they had and finally, they had the retailers contact all the original owners of the watches, and they were all brought back to the factory, no matter if they were out of warranty, and brought right up to date. 

In all, around 100 watches were revised, not exactly an insignificant operation. I don't know if any other firm has done this, but I have to say it certainly shows a commitment to quality I haven't previously encountered.

Monday, 8 August 2011

Some thoughts on the Changing of the Guard at Rolex

Recently the abrupt departure of the CEO of Rolex, Bruno Meier, after a short time running the firm, caused some consternation in the Blogosphere, however (as normal) I choose to disagree.

I believe that the big news is not the departure of Mr. Meier after such a short period at the helm, neither is it the arrival of his replacement, Mr. Marini (until recently, the head of Rolex Italy); rather it is the creation of a new post; that of Head of Overseas Sales.

The new job will be taken by Daniel Neidhart (until recently based in HK, where he ran the China market for the firm); what is important is that Mr. Marini is 64 years old, and therefore unlikely to be in the job for long, whilst Mr. Neidhart is a stripling of 48. Mr. Neidhart was born in Hong Kong & will now move to Geneva, insiders see this move as the appointment of heir apparent.

In probably his best play "The Importance of Being Ernest", WIlde has Lady Bracknell say "To lose one parent, Mr Worthing, may be regarded as a misfortune; to lose both looks like carelessness."

Pretty much what you could say about Rolex right now; for a company who prided themselves on having only three CEOs in 103 years, to lose two CEOs in a couple of years seems to be almost anarchic.

What is important is that the changes indicate a reversion to type at Rolex; historically the CEO has been a lifetime Rolex person & (crucially, in my opinion) has come from the marketing side of the company. Whilst some might like to think of Hans Wilsdorf as an inventor or watchmaker, he was neither, in all his official documents Wilsdorf described himself as a "Merchant"; the nearest word in his days to what we would now call a Marketer. His successor Andre Heiniger, although trained as a lawyer, spent most of his early life as the head of sales for Rolex South America. During the dark days of WWII, South America was the only profitable area for Rolex (and other Swiss watch companies), being both peaceful & working flat out to supply the combatants with raw materials.

Andre's son, Patrick, who succeeded him; was a major marketer who will be remembered for his far sighted ideas of linking Rolex in with major sporting events but whose lasting legacy will be his decision to consolidate the 27 factories around Geneva into three huge plants and in so doing, become almost 100% self sufficient.

What joined all three was that they were all lifetime Rolex marketing guys, and so steeped in the culture & ideology of the company.

Bruno Meier, was a banker by training & spent almost all his life working in that field, his appointment as Finance Director at Rolex lasted only three years until he was promoted to CEO. The two new guys at the top of the company are both long time Rolex employees and, interestingly, both marketers. In essence, what we are seeing at Rolex is a reversion to type, with one marketer with 40 years experience at the company being brought in as a 'safe pair of hands' to smooth the transition to younger guy who can be expected to be at the helm of the firm for a decade or more.

Tuesday, 2 August 2011

Major changes at Roger Dubuis

Next week I am spending a few days at the Roger Dubuis atelier near Geneva airport; so, before I write the report on that visit, I thought that you might like to read this piece I wrote about the major changes at the company earlier this year.

If this year's SIHH salon was characterized by any one thing, it was conservatism, most brands played it very, very safe.

But one brand stood apart from all this conservatism and introduced a whole new line and a brand new complicated movement; this was Roger Dubuis, a brand with whom I have had a long complicated relationship. Let me explain, I have long held that their movements are some of the most interesting, stunningly designed and beautifully finished being made in any factory in Switzerland. Have a look at these: 



Let’s be honest here, if you wanted a perpetual calendar, wouldn’t this be the perfect way of displaying the day, date & month? 


You might not like the rest of the dial (and I don’t) but isn’t that the perfect perpetual calendar display, how come no-one else does it & no-one has done it since Patek did a few pocket watches with that display, but even they haven’t made one in over 50 years and they never made a wristwatch version. 

But before we look at what is happening with Roger Dubuis now, it is important to understand the short history of the firm. Roger Dubuis (who was a real person); like Laurent Ferrier, Peter Speke-Marin and F-P Journe worked for many years restoring classic wrist & pocket watches from the great names & built up a reputation as one of the finest watchmakers of his generation. 
In the early 1990s he set out on his own and with some investors built a brand new factory near Geneva airport and in 1995 began to produce the first watches to bear his own name. The factory was the first brand new one to be built in Geneva since the ‘quartz crash’ of the 1970s and was equipped with the latest equipment; spark & wire erosion machines and the newest CNC borers and lathes. The great advantage of this equipment is that it is inherently very flexible and the new firm took advantage of this flexibility to do something no-one else had ever done, they announced that ALL their watches would be limited editions, with precious metal watches in runs of just 28 units for each metal. The number chosen ended in 8, because it was considered a lucky number in Chinese numerology. 

The limited edition idea was brilliant, but in implementing it, the firm built a rod for their own backs. If you only make a few dozen of a piece, it isn’t enough to allow all the problems to be worked out and the firm developed a reputation as a company with exciting designs but very bad reliability. The initial watches were amazingly complex; this early perpetual calendar from RD was one of the first watches to use double retrograde indication and was housed in their signature case design, known as ‘Sympathie’. It was a combination of cushion & round shapes and utilised one of the most complex sapphire crystals of its time. 


Not long after the company ramped up to full production, M. Dubuis left the company, the circumstances of his departure are not known, but after his departure two things happened; firstly the company began to launch much more extreme case and dial designs and the service problems became even more prevalent. The introduction of new models & movements increased at an exponential rate, resulting in the introduction of 30 new movements in the first 15 years of the firm’s existence, most of these movements were complicated ones, ranging from split second chronographs to the world’s first watch with twin tourbillons. For comparison, this was during the time when the long established (and much larger) Patek Philippe had introduced less than a quarter of that number of new movements. 

Not only was the company introducing new models and movements at a ferocious rate, the firm also became increasingly embroiled in litigation; it was involved in lawsuits filed by everyone from its US distributor to the minority shareholder, all the while trying to placate the Swiss Bank Credit Suisse who held a mortgage on the factory and who was becoming increasingly uncomfortable with the potential of its investment. This period of conflict came to a head in October 2006, when what I call ‘The war of the Press Releases’ began; like most watch writers outside Switzerland I knew nothing about this until I got a press release from RD in my inbox on the afternoon of 2nd October, this release stated that the firm “...would like to make a formal denial of the rumours that a large Group, active in the watch domain, has recently acquired his company. 
This information, which is totally unfounded, is particularly inopportune, coming at a time when, backed by an extremely effective industrial infrastructure, the ROGER DUBUIS Manufacture is completely independent, designing, developing and manufacturing all the components of its own movements, including the regulating organ (the sprung balance). 
Finally, the numerous development projects currently under way, most notably the increase in production, testify to the growing demand of international markets and the Brand’s excellent prospects for the future.” 

What this release did was to alert those of us outside Switzerland that there were some problems at RD and so I began to keep a closer eye on the firm & this was rewarded the following year when on 5th March I received another bizarre press release from the company. This lengthy document denied a report published earlier that day, in the Swiss business publication ‘L Aegifi’, the release made public to a much wider audience just how deep the rift within the company had become and that there were several legal matters still outstanding. 

Less than a year after I got the release categorically denying “the rumours that a large Group, active in the watch domain, has recently acquired his company”; I received one from Richemont stating that they had acquired the manufacturing facility of Roger Dubuis. They took over the factory, the machines and most of the employees; as part of the deal, RD & Richemont signed an agreement that RD watches would still be made in the factory and that RD would design, distribute & service these watches. But anyone who could read between the lines could see that the days of an independent Roger Dubuis company were numbered; and so it came to pass that on the 11th of August that Richemont took over RD totally. 

The question that we all asked was ‘Why?’; in many ways, Richemont had bought a ‘poisoned chalice’; the firm’s reputation was in tatters, it was engaged in legal turmoil on two continents and as the world’s economies staggered in the wake of the failure of Lehmann Brothers, the market for expensive ostentatious watches (which was all the firm made) shrank quicker than any other. The smart money assumed that what Richemont wanted was the factory, its equipment and its staff; of all the watch factories in Switzerland, the RD one was probably the best equipped and most modern after Greubel Forsey and Renaud et Papi, but unlike those two it had the great advantage of being based in the canton of Geneva, enabling its movements to qualify for the coveted ‘Geneva Seal’ certification. The smart money seemed to be proved right when Cartier (without a doubt Richemont’s most important brand) introduced its first watch with the Geneva Seal at the SIHH in March 2008. At the following year’s SIHH Cartier launched several watches with the seal, meaning that they were made at the Meyrin factory, particularly notable was the Santos skeleton which quite evidently drew on RD’s massive experience with skeletonised plate design. 


Most observers looked at the new Geneva Seal Cartier watches being introduced and compared that to the paucity of introductions by RD at the 2009 SIHH and made the assumption that RD was on its way out. But Richemont seemed to not be one of those, and towards the end of 2010, made two important appointments to the firm; firstly it was announced that Georges Kern was taking on the position of CEO on 1st October, Kern is currently head of IWC and seen as one of the heirs apparent to take over the helm of Richemont, so this appointment was seen as Richemont’s affirmation that it had faith in the long term future of the brand. The second appointment was perhaps more extraordinary, within weeks of Kern’s joining RD the firm announced that Dominique Tadion was coming on board as Director of Communications. The role of ‘PR Girl’ is often thought of as someone only peripherally involved in the horological industry; but that cannot be said of Ms. Tadion, she was a dominant force in her field during her 15 year career heading the communication department at Rolex. 

What these two appointments said to me was that Richemont was not only not giving up on RD; rather that they were prepared to commit serious resources into rebuilding the brand, this theory gained traction when just before the end of last year I heard that RD would be launching an entirely new movement aimed at a more affordable price point. 

So, it was with my curiosity truly piqued that I walked into the RD press briefing first thing on Tuesday morning. Interestingly the place was laid out like a casino, with a large Roulette table dominating the space. 


The rumours of a new movement were confirmed within minutes of the presentation starting, called the RD 680, this new movement signalled a return to the values and designs of the company when M. Dubuis was involved. The automatic chronograph movement with microrotor was (for an RD movement) quite conservative, with no skeletonising, 30 minute register only, classic column wheel operation, 30mm diameter, 5.6mm high, 28,800 bph and with a 50 hour power reserve. 


It was housed in a case called the ‘Monegasque’, although those who have followed the brand will know it as a simplified version of the original ‘Sympathie’ case. 


I used the word ‘conservative’ above to describe the movement, the same word could also be used to describe the watch, and it could well be the least flamboyant watch ever to come out of the factory, even down to the size, it is a normal sized 42mm case with the standard 2 lug strap fitting. 

Earlier in this piece I have written a lot about the quality control problems that the firm has faced, I did so because the presentation also talked about these self same problems and what the firm has now done to solve them. Like an alcoholic; if you want to be cured, the first step is to admit that there is a problem; at the presentation RD did this and went on to explain the three step programme that all their watches will now go through. I mentioned earlier that all RD movements qualified for the Geneva Seal, but this only covers the location where they are made and the levels of hand-finishing but not timekeeping nor quality control. This is where RD have been smart, they have outsourced the entire verification and final QC processes, the watches now go to an independent organisation called Timelab set up by the Canton of Geneva where watches are checked for Geneva Seal qualification, timed to see if they meet COSC standards and inspected for quality control issues; all of these tests are under one roof. When the testing is complete, Timelab can issue both the Geneva Seal qualifications and the COSC certificates. 


The La Monegasque line will be more than just the chronograph shown above, also in the range will be a limited edition version with a dial which has the appearance of varnished wood, with a most unusual strap and powered by one of the earlier RD chronograph calibres. 



The second image shows the difference between the new movement & the older style RD calibre, the dial shown on the watch on the left is very much inspired by the Roulette table iconography. 

The range is topped & tailed by a simple time only piece, shown below: 


And a gorgeous perpetual calendar with a most unusual dial layout, shown here: 


There are two major shifts from the RD philosophy of old, these will be regular production models, not limited in any way (other than the specific limited editions) and the pricing will be similar to or slightly below other high end brands for watches with similar complications with prices ranging between 24,000 Swiss Francs for the time only watches to 67,000 Swiss Francs for the perpetual calendar. Remembering that the Swiss Franc and the US Dollar are pretty much equivalent nowadays, I consider 67,000 CHF a fair price for a rose gold perpetual calendar with an in house Geneva Seal movement. 

Of course, it wouldn’t be Roger Dubuis if there wasn’t an exotic version, and the other limited edition in the La Monegasque range is this platinum cased flying tourbillion: 




I think that the La Monegasque range has a good chance of reviving the brand, but it all depends on the support of the dealers and I think that when they see the new watches and when they understand that the deep pockets of Richemont are fully committed to the brand, then they will become as enthusiastic as I am. 

One of the most extravagant signature lines of Roger Dubuis was the Excalibur range, oversized, with exploding roman numerals and a castellated case with triple lugs, it was the basis for many of the firm’s most complicated watches, and here it is housing a split seconds chronograph. 


I had always assumed that this was a watch specifically aimed at Oil Sheikhs and Russian Oligarchs, as its flamboyant styling was never designed to appeal to your normal haute horlogerie client. However, there is a large group of people who like colourful watches and have no problem with pieces which have extravagant styling; this group is called ‘women’. So RD have taken the simple path of reducing the size of the Excalibur to a more reasonable 36mm, retained all of the other signature Excalibur features and equipped it with a 11½”’ self winding movement. Available as a simple unadorned timepiece all the way up to fully pavé versions, they make a lot more sense than the more ostentatious models they previously aimed at the feminine market. 




The ladies’ versions of the Excalibur will run from a very affordable 12,000 Swiss Francs up to around twice that 

The truth is that no-one knows if Roger Dubuis will make it in the long term, Richemont has always looked at their corporate plans 5 to 10 years ahead, if they see no future role for RD in their portfolio, they would have no problems with disposing of the brand, either selling it or just closing it down. They have sold other brands in the past, and if they ever did sell the brand, they would (of course) keep the factory which is now fulfilling the role they had in mind when they bought it; making Cartier’s high end movements. But, if I had to make a bet, I would say that RD will survive, I base my judgement on one simple fact; they now make a watch I would like to wear and one that I can (just about) afford. 

Many thanks to Tony P. for his outstanding photography.

(One update) Since I wrote this piece, earlier this year, Dominique Tadion has left RD & now runs the press department at the Federation d' Haute Horlogerie; the folks who run the SIHH.

Monday, 25 July 2011

How Richemont acquired Lange, IWC & JLC

It is now a little over a decade since Richemont acquired three of their main brands and most folk are unaware of how this came about. The piece below is an updated version of an article I wrote at the time.

In October 1999 one of the richest men in Hong Kong decided to sell one of his UK based companies. This decision was to have far reaching ramifications, including the world’s largest contested take-over, interventions by the German Chancellor, the British Prime Minister and the head of Mercedes Benz. When the dust finally settled, almost a year later, three of the greatest names in watchmaking found themselves controlled by a secretive South African family corporation whose headquarters are in Zug, Switzerland & Lichtenstein.

The Hong Kong Billionaire was Li Ka-Shing, owner of huge real estate holdings in the former colony, most of the worlds’ container terminals and a significant player in the international telecommunication field. He remained the largest shareholder in a UK cellular telephone company named Orange, but as the prices for these companies rocketed, he decided it would be time to cash in. He had sold under 5% of the company in February of 1999 and taken a profit of over HK$5 Billion (around $600 Million US) and still retained almost 45% of the shares.

The European cellular telephone market was “hot” because there were usually less than half a dozen companies in each country and as they all used the same technology, it was easy to “plug” someone’s clients & company into yours (if you could afford to buy a company). The new word was “seamless integration” and all the major players were trying. The leading proponents of this strategy in Europe were Mannesmann’s D2 German network and the UK’s Vodaphone, which was in the final stage of absorbing a major US network, Air Touch. The two companies (D2 & Vodaphone) had become allies, each buying minority shareholdings in the many smaller European networks and attempting to build a seamless pan European network.

However this strategy was overturned when Mannesmann approached Li Ka-Shing’s emissaries and proposed their deal. Mannesmann had made the decision to dump the Vodaphone relationship and buy their own UK operator instead because they saw that they would no longer be an equal partner with Vodaphone once it completed its Air Touch acquisition. They feared being swamped by the new giant and Orange was attractive for 2 reasons; firstly, although the smallest of the 4 UK operators; it had the highest income per customer and secondly, almost 45% of the shares were owned by (effectively) one man. So a deal could be done quickly without alerting the stock market, also whilst Vodaphone were in the throes of going through US regulatory hearings, it was hoped that their attention would be diverted.

Mannesmann had one other reason for wanting to put the Orange deal together, the head of the company, Klaus Esser, had worked for years to transform the firm from a heavy engineering company with its roots in steel pipe making into a twenty first century company based in telecoms & computers. As part of his strategy he announced that by the end of 2000 he would have split the company into two, one part the “old economy” the other the new one. Mannesmann’s bid of £20 Billion (approx $33 Billion US) was a significant premium over the market valuation and was intended to do three things; show that Mannesmann had the corporate “cojones” to play in the “big leagues”, also to frighten away other bidders but most importantly to render Mannesmann bid proof from a newly enlarged Vodaphone Air Touch (hereinafter referred to as VA/T). Because the cellular market in the UK is tightly regulated, VA/T would not be able to buy Mannesmann as they would then own two UK networks, if you included Orange and the government regulators do not allow this. Mannesmann’s bid may have demonstrated its self-confidence but that confidence was badly dented when the bid was made public and Mannesmann’s shares fell by 8%, whilst the rest of the market rose.

VA/T did not immediately make an announcement; they played their cards close to their chest and made a private approach to Mannesmann. Mannesmann declined the offer in public and VA/T had no option but to make their bid public. On November 19th, less than 4 weeks after the Mannesmann/Orange deal; they made a bid for the enlarged group, offering a 67% premium over Mannesmann’s share price AFTER the Orange deal. VA/T avoided the Orange “poison pill” by making an almost immediate disposal of Orange an integral part of its offer. The bid was unusual for two reasons, it was the largest merger/bid ever seen in Europe (it was considerably bigger that the Time-Warner/AOL deal for example) and it was, unbelievably to Anglo-Saxons, the FIRST contested takeover in German business history. Klaus Esser, head of Mannesmann disapproved of the bid and made comments to the press along the lines of “This is not the way we do business in Germany” and approached the German Chancellor (Prime Minister) Gerhard Schroeder asking him to intervene. Within days Schroeder gave an interview to a French newspaper saying; "Hostile takeovers destroy corporate culture," he said. "They harm the target but they also, over the medium term, harm the predator." He also decried the culture of “aggressive Anglo-American capitalism”. This was just one of the inept moves made by Esser who consistently misread the market. Vodaphone approached Tony Blair, Britain’s Prime Minister; who called the German Chancellor and intervened on the English company’s side.

However the most important intervention came not from a politician but from a man who could be called the most important man in Germany, Jurgen Schremp, chairman of Daimler Chrysler; Germany’s largest company. He called Klaus Esser and emphasised the fact that his resistance would erode the value that the market now placed on his company. He was also reminded of the fact that at the end of 1999 Esser had claimed that the Mannesmann shares were worth 300DM, he was universally ridiculed for this claim. Now the VA/T offer valued the firm at 375DM, Esser was rapidly running out of options.

The only prospective “White Knight” was the French industrial giant, Vivendi with whom Mannesmann had a couple of joint enterprises. Vivendi was a company, like Mannesmann, also in the process of re-inventing itself, transforming itself from its roots in water treatment & waste management into a communications giant owning advertising agencies, cable & satellite TV companies and internet providers.

The ground was suddenly pulled from under Mannesmann’s feet when suddenly Vivendi & VA/T announced a joint company, Vivazzi, designed to be an Internet portal for the new generation of mobile phones. Mannesmann then did the only thing possible and quietly acquiesced to the takeover. When the dust finally settled VA/T paid £113 Billion (approx $186 Billion US); obviously VA/T had to recoup some of this money very soon. Before the ink was dry on the agreement VA/T and their advisers were knee deep in offers, major European engineering giants such as Thyssen Krupp & Seimens were making unsolicited offers. For example Thyssen Krupp offered €9 Billion (approx $8.7 Billion US) for Mannesmann’s engineering & automotive operations. However VA/T were not interested in running a “fire sale” on the assets of the newly acquired Mannesmann; they chose their bidders carefully; firstly they sold the most highly priced (and prized) asset, Orange. Despite the fact that Mannesmann was widely considered to have overpaid at £20 Billion, VA/T were able to sell the firm to France Telecom for £26 Billion, making a quick profit of £6 Billion (approx $9 Billion US).

The bidding for the tiny segment of the VDO group known as LMH (Les Manufactures Horologères) was opened and initial offers were received from the “usual suspects”; PPR (sometimes known as the Gucci Group) & LMVH. These two French firms had been bitter rivals in the luxury brand market over the last few years, and as both had very deep pockets, it was expected that the bidding would be lengthy & protracted. The other expected bidder was the Richemont group, owner of the Cartier, Montblanc & Dunhill brands; however, as is their traditional way, Richemont said nothing. Nevertheless they were working in the background, and they had one major ace in their hand. They were major shareholders in the French group Vivendi, which they had acquired in September 1999 in exchange for their shares in Canal+ (a French cable operator). The acquisition contained a clause in which Richemont agreed not to sell any of their shares for a year, so they hedged the shares in December, effectively locking in a guaranteed sale price for the following September. This had two effects; they retained their good working relationship with Vivendi and they now had a huge pile of cash arriving in September 2000. Whilst all the other bidders were “sniffing” around LMH, Richemont made an oblique attack; they negotiated with Audemars Piguet, who were the owners of the 40% of Jaeger le Coultre not owned by LMH. These negotiations came to fruit on Thursday 8th June when the two companies announced that they has reached an agreement to co-ordinate their respective positions with respect to the sale of LMH. To all intents and purposes, the game was now over; although there were 7 more weeks to run before the “coup de grace”.

On Thursday 20th July LMH announced that they were in discussion with Richemont as exclusive bidders and the following day the agreement was signed. Richemont would buy LMH for 2,800 Million Swiss Francs and the remaining 40% of Jaeger le Coultre from Audemars Piguet for 280 Million Swiss Francs. Meaning they had paid a total of 3,080 Million Swiss Francs (approx $1.84 Billion US). Richemont were able to pay for the whole deal with cash from its war chest raised from the sale of its Vivendi shares and from the profits on share dealings in one of its tobacco companies.

Looked at dispassionately, it could be said that Richemont seriously overpaid for LMH, who sold 91,000 watches and 3,300 clocks in 1999 and had less than 1,500 retailers worldwide. They paid over $1.2 million per retail outlet, none of whom were LMH exclusive. But Richemont did not get to its towering position by overpaying for anything; I think that this is a very long-term proposition and certainly it is one of the last chances for anyone to buy major watch brands.

The strange thing about this whole enterprise is that no-one ever asks; “Who is Richemont?” I find this very interesting as this is what Richemont wants. All of the attention is focussed on the brands themselves and not on the holding company, in stark contrast to the Swatch group for example. Even the breadth of their holdings is not widely known; sure everyone knows about Cartier, Dunhill, Baume & Mercier, Montblanc and Panerai but how many know of their ownership of Van Cleef & Arpels, Chloe (the fashion house), the Italian fountain pen maker Montegrappa, Piaget, Hackett, Purdey (Gunmakers to the Queen) and Vacheron et Constantin?

The company’s tradition of secrecy began because it was originally South African and during the Apartheid era, South African companies traditionally kept a very low profile. The firm’s roots are in the tobacco business and began when its founder, Dr Anton Rupert, began manufacture of pipe tobacco in his garage (see, it is not just high tech firms which start in them!). In 1943 he was able to buy the South African arm of the giant British drinks firm Distillers and soon after started producing cigarettes. Before long he controlled most of the South African tobacco business and decided to form his divergent holdings into one company, Rembrandt in 1948. Seven years later he set up Richemont in Switzerland to handle all of his operations outside South Africa, leaving Rembrandt to handle the domestic operations. For several years Richemont’s main asset was the Peter Stuyvesant cigarette brand; named after the first mayor of New York (like Rupert, of Dutch ancestry). This was a cigarette packaged to look and smoke like an American cigarette at a time when imported American cigarettes were very expensive in Europe. They followed this with a new brand, Rothman’s, and then began to position the company further upmarket by buying the rights to famous names. This continued the strategy already established by Rothman’s when they bought the licence to make Dunhill cigarettes. In the 1960s and 70s, the profits from cigarettes enabled them to embark upon the acquisition of major companies. . Dunhill was the first company to be bought, in the late 1960s and in 1972 they bought a major shareholding in Cartier Paris (at this time Cartier was composed of 3 separate companies; Paris, London & NYC). Two years later, they bought the London operation and in 1979 the NYC one, giving them complete control of the name & the brand. Their masterstroke was to produce a “diffusion” line for Cartier, Must de Cartier, which became available at a much lower price point and in a much wider distribution network. In so doing, initially with cigarette lighters and then with sunglasses and watches, they increased the value of the company many times over.

So there we have it, a secretive South African owned corporation now controls three of the top brands in horology; but in the end does it really matter who owns the brands? Did anybody care that a giant German engineering corporation used to own them?

In conclusion I think it fair to say that the fate of Jaeger, IWC & Lange was probably the thing farthest from the mind of Li Ka-Shing, when he decided to dispose of his Orange Telecom shares, but the smallest stone sends its ripples to the edge of the lake.

So, where are the major players now when the game finally ends; Li Ka-Shing became one of the largest shareholders in Mannesmann and stayed there until V.A/T took over, when his shares were worth almost 3 times their original price. He “cashed out” and bought a major stake in VoiceStream the leading US cellular operator using the GSM technology used by V.A/T and most of the rest of the world. He subsequently sold VoiceStream to Deutsche Telekom, who then renamed the brand ‘T-Mobile’. He then went on to found the ‘3’ cellular networks across Europe & Asia. V.A/T merged its US operations with one of the “Baby Bells” to become Verizon Wireless, one of the largest cellular operators in the US; thereby giving it major coverage in the one continent it lacked. Vivendi went out and bought MCA, the owners of Universal studios and MCA Music; but, in so doing, outreached themselves and were later forced to sell Universal to General Electric and Dr Anton Rupert lived on in South Africa in contented retirement with his wife in the same house that they have lived in for forty years, until his death in 2006.

Tuesday, 12 July 2011

Swiss Competition Commission allows Swatch Group to reduce shipments to independents.

Smaller Swiss watch brands are angry with the announcement from the Competition Commission (known as ‘Comco’) that the Swatch Group can reduce its shipments of components by between 5% and 30% based on 2010 order levels. The actual levels of decrease will be 15% to those firms who buy completely finished movements from Swatch and the 30% level will be to those firms who buy just parts from Swatch and use them to build competing calibres, people like Soprod and Sellita.

Most of the firms declined to speak about this publicly, for fear of retaliation from Swatch, but Miguel Garcia (head of Sellita) is one who has spoken out against the decision and who plans to file an appeal against the decision on Monday, according to the Swiss newspaper ‘Le Temps’. But he will not be alone, the firms Frederic Constant and the movement company Lajoux-Perret will also be filing appeals as will numerous other firms once these leading lights have made the first step.

Peter Stas, Frederic Constant’s CEO says that “this could have a significant impact on jobs in the independent companies”, whilst Miguel Garcia goes further, saying that this will have a much wider impact; “as there will be fewer movements, there will be fewer orders for cases, dials etc.”

The firms anger is concentrated on the year chosen as the base year to decide the cuts upon, these orders were placed in 2009, at the depth of the crisis in Swiss watchmaking; so, being 30% below their 2009 plans will prove a real problem for the independents.

The reduced supply will mean that the independents will be forced to reduce their output, meaning fewer of their watches will be in the stores at a time when the market is expanding rapidly and so customers will most likely turn to brands from the Swatch Group.

There is also anger about where the 2009 base figures used actually came from; the Swatch Group, with only informal contacts with the firms involved, say the Comco, adding that the independents should have looked harder for alternatives, even during the period of Comco's investigation. Although I have to say turning to an alternative movement maker is not going to help if these makers are also being forced to limit their production due to reduced supplies.

But the brands should remember that the late Nicholas G. Hayek had proclaimed that he wanted to end the era of the “supermarket watchmaker” in 2009, but this was just a repetition of his intent stated a decade earlier to suspend the delivery of unfinished movements. They should have realised that these statements were serious and that the Comco was not guaranteed to be 100% on the side of the independents. “But there is no alternative to ETA or to Nivarox (hairspring maker), both members of the Swatch Group. While Sellita, Technotime, Soprod, Vaucher Manufacture, Lajoux-Perret or Dubois Dépraz supply parts but in insufficient volumes to meet our requirements," retorted one independent watchmaker. "They need more time," he concluded, like most of his colleagues.

This piece is based on reports from Bastien Buss, Le Temps de Geneve

Wednesday, 6 July 2011

Montblanc/Villeret The Toughest Review I have ever written

SIHH 2009 Montblanc/Villeret The Toughest Review I have ever written Feb 04, 2009 - 01:44 PM Go to previous message

This is a really tough report to write for a number of reasons; firstly it involves me saying that I am wrong, and as a guy, that isn’t something I relish. Also there is (as they say) ‘history’ between us (Montblanc, Minerva & me).

Let me try to explain; let’s be honest, Montblanc has never really been taken seriously as a watch company, they make nice pens, particularly the limited edition ‘Writers Series’ (full disclosure, I own a few of those pens & use one of the Alexandre Dumas pens to sign letters), but as to watches, they were pretty much ‘Johnny Come Lately’ and had little to attract the true watchnut. I always believed that the SIHH held a similar opinion, as the Montblanc presentation was always the last one on the last day for the press, usually many of the press would leave early and miss it, whilst others would show up only out of duty. In fact, I remember one Montblanc presentation where a watch writer fell asleep & started snoring during the PowerPoint presentation.

Then a couple of years ago it was announced that Richemont had bought Minerva watches, not just the brand but also the factory & shortly after it was announced that the Minerva brand was being ‘given’ to Montblanc. To those of us who had followed & cherished Minerva, it was as if a five year old had been given command of a Boeing 747. Those with long memories on Timezone will remember the close relationship between TZ & the Frey family who had owned Minerva. Around a decade ago the Freys made two limited edition watches for TZ, I think they were the first LE ever for us. They were based on their Pythagore watch dating from the dark days of WWII & a beautifully simple, classic time only watch. Both editions sold out & I still have mine, a black dial one with rose gold batons & hands. When the Freys sold out in 2000 to Emilio Gnutti, an Italian businessman with a somewhat checkered recent history, many of the TZ Minerva fans felt that the brand had lost its soul, particularly as the new management wanted to take it much more upmarket. In order to accomplish this move upmarket they hired one of the most accomplished watchmakers of modern times, Demetrio Cabiddu, who had worked with Genta on the design of the minute repeater sonnerie and subsequently at Minerva’s neighbour, Blancpain.
The decision to take the brand upmarket meant that the new management immediately increased the prices of the current models by a factor of two or three. To say that there was resistance on the internet watch forums where Minerva had found its new customer base would be putting it lightly, essentially there was a revolt & people looked on the new management as though they were the four horsemen of the apocalypse. It came to a head when I approached the Minerva stand at the Basle fair of 2002 on the Press Day, for the first time in my life (and so far only) I was thrown out of a stand; vituperation, in a heady, emotional mix of English & Italian was hurled at me as I scampered away; fully aware of how the world had now changed, at least as far as Minerva and Timezone was concerned.
Before long Mr. Gnutti had rather more important things to worry about than Minerva, he was Chairman, President, CEO or on the board of many companies in Italy including the recently privatized national telephone company & subsequently was caught up in the scandals surrounding the privatization of much of Italy’s infrastructure. At one point he was sentenced to six months in Jail, although via many appeals it is uncertain whether or not he has actually served any time behind bars. Nevertheless it must have been a relief to him when the deal was done with Richemont & the factory was no longer part of his portfolio.

Then last year, a couple of months before the SIHH, I got an email from Montblanc’s PR folks asking if I was interested in a one to one meeting with anyone at the SIHH. Only being polite I asked if they might have anyone from the Minerva operation who would be available & the reply came asking if I wanted to meet with the head of the operation, Hamdi Chatti. Suddenly my attitude changed, I have been around the watch business a little too long to have idols; but there are a number of people I truly respect & Hamdi is one of them. I first met him when he was running the Fine Watchmaking division of Harry Winston, where his responsibilities encompassed the Opus line of watches as well as absolutely amazing tourbillons & perpetual calendars.
However, before my meeting with Hamdi, there was another regular Montblanc presentation that I had to endure (or so I thought); for the second year in a row we were shown the Nicolas Rieussec single pusher chronograph, and last year I did little more than acknowledge its existence, this year I looked a little more closely and found much to admire. Students of language will know that the word ‘chronograph’ means ‘time writer’ and that is what the very first chronographs did, by virtue of a revolving dial below a stationary pen. Nicolas Rieussec invented this very first chronograph in 1822 and Montbanc (who, as we all know, have a history in writing equipment) chose to copy the layout of this writing chronograph rather than follow the more conventional design route.

The design of the chronograph features two small dials at the 4 and the 8 positions with fixed blued steel hands standing vertically above them. When the chronograph is operated the dial discs revolve and you read the elapsed time by the fixed hands. It isn’t just that they have chosen an unusual operating system that makes the watch stand out, the movement which powers it (the first from Montblanc’s own factory) is stunningly designed & finished.

I really like the design of the movement, with its balance assembly at the bottom of the movement, placed perfectly in the centre, the diagonal Cotes de Geneve are a nice touch and the symmetrical layout of the jewels on the chronograph bridge shows that there has been significant thoughts about the aesthetics of the movement itself.

So, by the time of my meeting with Hamdi Chatti I was feeling rather more favourably disposed towards Montblanc than I would ever, previously, have thought. When I arrived for my appointment Hamdi was still involved in a meeting, so I took the opportunity to wander around the stand and look at the stuff on display. On a table was a display of enamel dials in various stages of completion and next to them were a series of dial drawings & case drawings. A member of staff came up & explained to me that these were part of the new custom watch operation. A client can approach the factory, where they will work together with a designer, they will agree on the type of movement to be used, the layout of the dial, which material it will be made from, fired enamel, silver or brass, and whether it will be guilloche or not and if so, in how many patterns. The design of the case can be chosen, as well as the material and all of these choices are drawn on separate sheets of translucent paper and overlaid on each other until the client arrives at a combination they want and only then does manufacture begin. It is an interesting idea, halfway between having a watch completely custom made by someone like George Daniels and buying a regular limited production piece. It is obviously never going to be a major business, but it goes a long way towards establishing Montblanc/Villeret as different from the herd.
Looking further around the stand, I saw a display of movements and took the chance to examine them under my loupe, I was seriously impressed. It wasn’t just the finishing, it was the layout & the overall appearance that grabbed me.

They look as if they could have been made at any time from the turn of the last century to the 1970s, but certainly not in the 21st century. Look at that huge balance wheel, look at the beautiful curves of all the bridges & levers, gaze with reverence upon the sawn’s neck regulator lever & look at the humour inherent in the use of the Minerva trademark ‘arrow’ at the end of the blocking lever; Minerva being the goddess of both the useful & the ornamental arts and this movement most certainly qualifies for both categories.

This movement has been designed by someone with sensibility & feeling, as well as a thorough understanding of movement design. And when I saw the watch into which this movement is fitted, I also knew that whoever was in charge of watch design was equally talented.

Like every other Montblanc/Villeret watch I saw, the dial was stunning, a perfect 4 piece black fired enamel one with a depth that almost invited you to dive in.

By this time Hamdi was through with his meeting & I was able to renew my acquaintance with him, after the usual pleasantries we began to talk about how the Montblanc/Minerva/Villeret operation will continue. He explained to me how lucky they were when they bought Minerva, as it was almost a ‘time capsule’ of old style watchmaking. Although the Gnutti team had introduced new wire erosion machines & CAD/CAM systems, they had not got rid of the old machinery and tools. Also, because Minerva was so small and their specialization in sports timers & chronographs so tightly focused, they were not hit by the ‘quartz revolution’ nor by outrageous case designs; two maladies which decimated the rest of the Swiss watch industry during the 1970s and 1980s.
Demetrio Cabiddu and his young team have all stayed on after the Montblanc takeover and now a tightly focused program is well underway at the factory. Development of an automatic movement has been abandoned and all Montblanc/Villeret movements will be hand wound. Also, almost all the watch movement is made in house, because they choose to make their watches the old fashioned way with big balance wheels & 18,000 bph, they even have to make their own hairsprings and balance wheels. All the finishing work is done by hand with every completed part personally inspected by M. Cabiddu after finishing & before it is assembled. Obviously this limits the production, but the decision has been made at management level to pursue the goal of the highest possible quality rather than that of quantity.
The design of most of the current production was well under way when Montblanc took over, and it was considered ridiculous to scrap all the research and development which had been expended, so although they were developed under the previous management, it is important to realize that they were developed by the same watchmaking team who are now building them. As well as the chronographs with which Minerva made their name & which are now being made with the newly redesigned movements, Montblanc/Villeret have introduced as their flagship a watch which the old Minerva could never have thought of; a tourbillon. Let’s be honest, making a tourbillon nowadays is nothing special, if you are a watch company & you want to have one in your product line, there are number of companies happy to supply you with the entire tourbillon system, ready for you to drop into your movement, or even to build the entire movement for you. This path is not the one chosen by Montblanc/Villeret, rather they have decided to make the whole thing in house; just take a look at the top bridge of the tourbillon.

Inspired by the mathematical symbol for infinity, this bridge looks like two fine wires pulled into an elongated figure ‘8’; but it isn’t, in fact this bridge is made from a single piece of steel, initially machined into a rough facsimile and then painstakingly finished by hand. With a tourbillon this unique, you wouldn’t expect the watch to revert to convention with its time display, and it doesn’t disappoint. It may be one of the first wristwatches to use the mystery display, first introduced by Cartier in their pendule mysterieuse of 1913, where the hour and minute hands are replaced by two crystal discs with the outline of a hand printed on each one. The hands seem to float in space with no central post; whereas, in fact each disc is driven independently by gears on its outer rim.

The rest of the case top (I can’t really describe it as the dial) has some of the most stunning guilloche work I have ever seen, all of it hand done; it is much better than the work I have seen on recent Breguet watches and almost as good as the work on Urban Jurgensen or George Daniels. The case is a fitting housing for masterpiece contained within, almost heart shaped with the time dial extending the shape of the case below the expected circumference. It is a big watch, there is no doubt about that, but the design makes it look harmonious with the double stepped curved lugs flowing gracefully into the case with its domed bezel. Look closely at how the strap fits into the curve of the case bottom; I have rarely seen such precise meshing of two such disparate elements.

But the Mystery Tourbillon wasn’t the only special watch coming from Villeret this year & the next watch that Hamdi showed me was equally surprising, the Grand Chronographe Regulateur.

What appears to be a simple monopusher chronograph has a couple of surprises up its sleeve (if you will forgive the pun); the pusher at 10 operates a second hour hand which is usually hidden behind the regular hour hand. This system (similar to the one Louis Cottier patented for Patek Philippe in 1959) is one of the most convenient there is, giving an uncluttered dial in normal use and quick reading of the second Timezone when needed. Obviously because both hour hands revolve around a 12 hour dial, a day/night indicator is needed for the ‘home time’ and the watch has a tiny one near the 1 index.

As I mentioned earlier, all Montblanc/Villeret watches are manual wind only, so a power indicator is a good idea and not only does this watch have one, but it is one of the most interesting ones I have yet encountered. In the same way that most cars have a fuel gauge which slowly recedes as the contents of the tank decline & then, when you are down to the last 10% or so, a light will illuminate on the dash to reinforce the idea that it might be a good idea to find a filling station, the watch has a ‘Reserve Gauge’. This comes into operation when the watch gets down to just 12 hours power remaining, the silver power reserve hand stops at the 12 hour mark and a red hand comes out from behind it, slowly traversing the red reserve sector.

Once again the dial is a masterpiece, it is gold with multiple decentered Guilloche decoration, I love the little dramatic touches of red as accents on the quarter hour markers.
At 47mm, it is a nice sized piece; and, like all of Montblanc/Minerva watches has their patented hidden cuvette, which can be opened to reveal the sapphire back and the stunning movement.

These watches are handmade in tiny quantities, for example the last two watches I have discussed are made in a series of 8 each in both pink and white gold and a unique piece for each model in platinum. Distribution will be similarly limited, there are only 3 dealers in the whole of the US and just 2 in the UK. The plans are that there will never be more than 30 dealers worldwide.
After the Frey family sold the company in 2000, the new owners discussed their plans for the brand and stated that they wished to be talked about in the same breath as Patek Philippe & A Lange when high end horology was discussed. Along with the rest of the watch world, I laughed at the presumptuousness of the statement; now having looked at the watches coming out of the factory, I have to put my hand on my heart and admit “I was wrong”. These watches are easily the quality of the other two brands; the problem, as I see it, is that getting the quality to this level was an easy task compared to convincing the buyers that they have.

I wish them luck.

"The Attic", a trip into watchmaking history.

 Feb 11, 2011 - 04:13 PM Go to previous message

The watch industry likes to tell stories about the history and romance behind their brands, and we all buy into them, well most of us do but the rest of us know that the vast majority of the Swiss watch brands are all owned by one of three huge conglomerates and that there is as much romance about their history as there is about the sausage industry. But every now and then, you realise that there are some great stories in the business & when you come across one, you know that it is worth telling over & over again. The story of Charles Vermot and the Zenith El Primero movement is one of those, I have told the story before, but this retelling comes with some additional new information.

The tale goes back to 1975 when the US firm, Zenith Radio Corporation, owned Zenith; the quartz revolution was at its height and mechanical watches were in the doldrums. The owners decided that mechanical watches had had their day & the future belonged to electronic watches. Thus, an order came down from the US HQ to dispose of all the tooling for the movements & to sell the tools as scrap. Despite protests from management & watchmakers, the decision was irrevocable and furthermore the Swiss staff was ordered to dispose of the plans & blueprints, as these would also be of no use in the brave new electronic world.

However Zenith has a tradition and a history, people stay there for a long time; several of their current employees have been with the firm for over a half-century. This comes about through one thing; loyalty and it was this loyalty to the firm & its history & tradition that saved the El Primero. Charles Vermot was a senior watchmaker with the company & was entrusted with the disagreeable task of disposing of the El Primero tooling. Rather than follow orders, he meticulously wrapped each item, labelled it & took it to a disused area of the factory where the tools were arranged on shelves in the attic. And, in a notebook he copied down the exact procedures necessary for making the movement from scratch using the tooling he had saved.

And, it was in the attic that the history of the El Primero might have stayed if it hadn’t been for another small company in the neighbouring town of La Chaux de Fonds, who asked if Zenith might have some El Primero movements for sale. The resulting watch, the Ebel 1911 chronograph launched in 1982 proved to be a huge success for both firms, and so the tooling was recovered, put into use and before long Swiss watch companies were beating a path to Zenith’s door clamouring to use the only high quality automatic chronograph movement then available. The El Primero is a remarkably efficient movement, bearing in mind its 40-year-old design; it runs for 50 hours at full wind but if the chronograph is running, that autonomy is only reduced by 5 hours. However it is important to realize that the El Primero was designed in the 1960s when craftsmanship was at its height and it was not designed for large-scale industrial production, unlike (for example) the Valjoux 7750.

In fact during its 41-year history (including the enforced exile in Charles Vermot’s attic) the total of all El Primero movements ever made (including the hundreds of thousands found in the Rolex Daytona 16520) add up to only 600,000, by contrast over 1,000,000 Valjoux 7750 movements are made each year.

That is the story as it has been told here and elsewhere, here we go with the new stuff;

The original Zenith factory expanded over the years, winding its way down the hill on which it is built, the original part is a listed building which is not allowed to be externally altered in any way. There are plans underway to completely refurbish it internally very soon, but in its current configuration it is completely unsuitable for modern watch making and so has been almost completely abandoned. The watchmaking is currently carried out in the various buildings which have been added on to the original structure, this means that the different operations are spread out & so extremely inefficient, which is why the plan is to refurbish the old building then move all of the production there.

I was at Zenith recently to look at their Basel introductions and to spend some time with their CEO Jean-Frédéric Dufour who had recently been voted 'Man of the Year' by the world’s horological press, but after the meeting was over I accompanied Claire Ferrier out of the office building and up the stairs to the watchmaking area. After my visit she opened another door & we found ourselves outside staring up at the edifice of the original building.

She took an old key and opened a door which seemed to be made of old weathered fibreboard & beckoned inside; this was the view that greeted us:

This was the old control room where lubricating oils were sent throughout the building to each of the different departments, the floor was covered in dust and debris and cobwebs stretched across most of the fixtures, it was like walking into a time capsule of the Victorian age. From here we walked outside to another door, entered and found ourselves staring at a huge stone staircase, we slowly climbed it, gazing at the heavy chain hanging down the centre of the stair well.

At the very top of the stairs our passage was barred by a slatted wooden door, through it I could see some shadowy shapes.

Claire produced another old key and, with some difficulty, opened the door, turned on the light and invited me inside, this was the sight that greeted me as the first journalist ever to walk into the attic where Charles Vermot saved the firm's tooling.

Swiss watchmaking companies like to give the impression that they are all about precision engineering, micron tolerances and anal cleanliness; and, to be honest, that is how most watch factories operate, but this room was at the other end of the scale to those factories. It was dark, dusty and items were spread out all over the floor, stacked on chairs and on top of any other possible flat surface.

Not everything was in disarray, lots of items were on shelves, some neatly labelled and some not.

Lying in disarray on the shelves were the tools needed to make the individual calibres:

Including one of their most iconic calibres, the 135, winner of countless chronometer competitions from the 1950s until the competitions were finally abandoned in the 1970s.

Some of the wooden shelves were bowing under the weight of the tooling & I feared for the safety of the tools on the lower shelves.

Despite the fact that stuff was spread out all over the attic, covering any possible surface, there was one area which was clean & empty, this one;

When I looked down, I could see the label identifying what had been there

This is the Zenith internal code for the El Primero chronograph movement, and this small wooden space, tucked up in the eaves of a Victorian factory attic was where Charles Vermot had secreted them and where they had lain, safe from prying eyes, for almost a decade.

Here they are, back in use, and now on rather more sturdy metal shelves down in the factory.

The watch shown at the start of this piece is the limited edition El Primero chronograph that Zenith launched last year in honour of Charles Vermot, and this year they will launch a total of three watches named after the man who saved the patrimony of the company.