GENEVA -- Swiss watchmakers are increasing shedding workers. Exports of their luxurious watches are slowing as Chinese consumers are buying less, and a stronger currency is also hurting their business. Cuts have been made mostly in administrative jobs so far, but some skilled professionals are starting to feel the pressure.
Christophe Claret, a second-tier watchmaker, sacked 30 of its 115 employees in the last 18 months. It has cut the number of workdays and pay by half for 70 of the remaining 85 staff, relying on the local government to compensate for their lost income. Most of the dismissed employees are administrative staff. The company cannot let go of trained, highly skilled professionals, explained Christophe Claret, the owner of the company. Usually, it takes at least three years of training at the company, on top of seven years at watchmaking school, to become a professional watchmaker. The company is waiting for demand to recover.
The Swiss watchmaking industry has steadily increased exports in step with the growth of the Chinese economy. But in 2015, exports to Hong Kong, the biggest buyer of Swiss watches and a major destination for mainland Chinese travelers, plunged as much as 23% from a year before. Exports to mainland China fell 5%. Other major markets that used to make up for the lost exports, such as Japan, the U.S. and Europe, are also showing signs of decline in recent times.
A stronger franc is also weighing on watchmakers. In January 2015, the Swiss National Bank, the central bank, removed the cap on the currency's value against the euro. The franc soared against major peers, forcing many local watchmakers to raise prices in the euro area, Japan and the U.S.
Big names are also hurting. Compagnie Financiere Richemont, the world's second-largest luxury goods maker that owns Cartier and IWC Schaffhausen, revealed that it has reduced 500 positions by the end of April, which is equivalent to about 5% of its workforce in Switzerland. "It was necessary to contain the level of production in line with the level of [sales]," said CEO Richard Lepeu at a conference call. He explained that some were offered jobs at Richemont's supplier, while others voluntarily retired, meaning that not all of them were forced out of their jobs.
Unia, Switzerland's biggest labor union, has negotiated with Richemont to minimize the number of workers to be dismissed. During negotiations, a Unia official, Pierluigi Fedele, admitted that job cuts included not only administrative staff, but also skilled workers who are responsible for major production work.
In the Swiss watchmaking industry, skilled workers have long been provided sanctuary from job cuts resulting from temporary fluctuations in the market to allow for long-term training. But that may soon change.
In October last year, Parmigiani Fleurier laid off 17 employees, including six technicians. A public relations official explained that all of the six were general technicians who moved between different sections rather than specialized technicians responsible for making specific parts. Nonetheless, the case was a reminder of an industrywide problem about how to maintain skilled professionals that underpin an industry famous for mechanical watches.
Nick Hayek, CEO of Swatch Group, the global watch giant, said the company will not easily dismiss those employees it has invested in over a long period of time. A company of such strength may be able to take that position. However, many more may have to endure by reducing workdays, like Christophe Claret has done, and through other measures as they wait and hope that demand will rebound.