Watch companies adore anniversaries. In this age of hyper-marketing, any anniversary divisible by five is worthy of fireworks and commemorative limited editions. (Only anniversaries divisible by 25 used to get that treatment.)
There is, though, an industry milestone coming up that is not likely to get much attention. In fact, the only person giving it any thought may well be little ole me.
Twenty years ago, on June 24, 1998, the world’s largest watch company changed its name from the SMH Group to the Swatch Group. While little remembered today, the decision was controversial at the time. Especially within SMH. If you were an executive at, say, Omega or Longines or Blancpain or fill-in-the-blank, you weren’t so crazy about your multi-billion-dollar parent company changing its corporate identity to that of a $45 plastic watch.
As the 20th anniversary of the name change approaches, I am mindful of that controversy. That’s because I opposed the move, and, in a ridiculous turn of events, SMH Chairman Nicolas G. Hayek, Sr., became convinced that I was leading a shareholder revolt against it.
First, some background. I started my watch reporting career just before Hayek arrived on the Swiss watch scene in the early 1980s. Hayek, of course, is a Swiss watch legend. He is rightly hailed as the savior of the Swiss watch industry during one of the darkest hours in its history, the quartz-watch crisis. The instrument with which he did it was SMH, a company he conceived and led from its creation in 1983 out of two giant Swiss watch firms that were hemorrhaging red ink.
Hayek was one of the most brilliant, talented, charismatic, competitive, combative, and successful men ever to set foot in a watch factory or executive suite. (And one of the funniest. No lie: He was once featured in a Swiss TV program called “What Makes Nicolas Hayek Laugh.”) I covered his entire watch-industry career closely, from the early 1980s until his death at work at Swatch Group headquarters in Bienne on June 28, 2010, at the age of 82.
But there was an occupational hazard to being the ringside reporter at the heavyweight watch champ’s big bouts. Hayek had a boxer’s instincts. “Don’t forget, I am a fighter,” he told me once, in a rare lull in his action-filled career. “If there is no fight, I become very bored. That’s what Nick Hayek has been missing lately,” he complained. “No fights.”
In covering him for 27 years, one could not avoid occasionally getting yanked into the ring and forced to spar with him. It had happened to me in 1992, when he was furious about an article I wrote that he considered unfair. We argued about it on the phone and in a fruitless exchange of letters. He cut me off for a while. Ultimately, we patched it up, but the experience was unpleasant.
With the Swatch Group name change controversy, it happened again.
The Name Game
It all started on February 19, 1998, when SMH announced its financial results for 1997, and some other news. The company had had a great year. It reported record sales, passing the 3 billion Swiss franc mark for the first time, with operating profit up 53.6% and net profit up 24.5%.
It also announced that Nick Hayek, Jr., Hayek’s son, had been promoted to the top job at the Swatch brand.
Then came this: “At today’s meeting, the Board of Directors decided to propose to the General Meeting of Shareholders to change the name SMH into ‘The Swatch Group of Switzerland SA.’ Or into another name including the name ‘Swatch.’ The Group Management Board has been asked to submit proposals.”
It took me a minute to deconstruct those three sentences. What they meant was that Hayek had decided to ditch the SMH name. He and the board of directors had charged the SMH’s 10-member management board to submit proposals for a new name. That board consisted of the firm’s top executives, like Blancpain CEO Jean-Claude Biver, Rado chief Roland Streule, ETA strongman Tony Bally, and head of legal affairs Hanspeter Rentsch, as well as Hayek père et fils. The final choice would be submitted to the company’s shareholders for approval at its annual meeting in June.
The search for a new name had one rule: it had to contain the word “Swatch.” Why? The statement explained: “The present name is very complicated, and the abbreviation is difficult to understand in the various main languages. With the choice of ‘Swatch’ added in the group’s name, the worldwide notoriety [sic] of the brand is taken into consideration.” (“Notoriety” is a poor translation of the original German text. Swatch was famous, not notorious. Notoriety connotes unfavorable fame.)
This idea struck me as unwise for lots of reasons. In those days I was editor of a watch trade magazine called American Time. I also wrote a watch column for each issue of a sister publication, National Jeweler, a jewelry industry news tabloid. I decided to address the proposed name change in my column in NJ.
I was well aware that the Swatch brand had a special significance for Hayek. It played a crucial role in the revival of Swiss watch fortunes and the rise of SMH in the 1980s. But it had been 15 years since Swatch was launched, and the watch was no longer a sensation. By the late 1990s, sales had tailed off in the face of stiff competition from Fossil, Guess and other Hong-Kong-made fashion watches. (As Professor Pierre-Yves Donzé notes in his 2014 book, “A Business History of the Swatch Group, “Overall, sales of Swatch watches did not continue on the same level as during the first 10 years of the brand’s existence.”)
Moreover, by 1998, the mechanical watch renaissance was well underway. Hayek knew that, of course. He and Swatch were instrumental in it. He launched the Swatch Automatic in 1991, he told me on several occasions, in order to keep production of hairsprings going at SMH’s Nivarox-FAR during the lean years of the quartz era.
Around the same time, he agreed to acquire for Omega the Co-axial technology that George Daniels had been shopping around unsuccessfully in Switzerland for 15 years. Omega, devastated by the quartz crisis, was mounting a comeback as a mechanical watch. (In the second half of the next decade, it would account for one-third of the group’s watch sales.) In fact, in 1998, SMH was celebrating Omega’s 150th anniversary, highlighted by the publication of a 487-page hardback history of the brand called “Omega Saga.” To me, the timing of the name change seemed odd.
I also knew what Swatch meant to Hayek personally. Swatch was a highly profitable, revolutionary product, yes, but to him it was much more. It represented an industrial philosophy, a model for how first-world economies could compete with low-wage manufacturers without sacrificing their industrial bases.
“Swatch is a convincing argument in favor of maintaining an industrial base in the highly developed nations of Europe and North America, and for preserving our craftsmanship traditions,” Hayek wrote in 1992. “If we allow our factories to move away, and to take our know-how with them, we run the risk of losing our independence altogether. Swatch has proven time and again that with a bit of imaginative creativity, and the will to succeed, it is indeed possible to produce a better product here at home than can be done anywhere else in the world, and at a better price.”
Hayek’s success competing against Far Eastern manufacturers with the 100%-Swiss-made Swatch brought him fame and acclaim among the business and political elites. In October 1993, at Harvard’s Graduate School of Business Administration, he gave a lecture titled “The Rise of Swatch and the Revitalization of Western Competitiveness.” (I was there. He spoke on stage to an audience of businessmen for an hour without notes and received a roaring standing ovation at the end.) He gave a similar speech to the European Commission in Brussels at the invitation of then Secretary-General Jacques Delors.
In the 1990s, Hayek attempted the replicate the model in other fields. He launched Swatch phones and a company called Swatch Telecom. He entered into a joint venture with Germany’s Daimler-Benz to develop an urban mini-car that he dubbed the Swatchmobile. The Micro Compact Car company, headquartered in Bienne, worked on the prototype of what is now the Smart car.
He also relished playing the role of Mr. Swatch at events around the globe. Perhaps the most famous episode was when the gray-bearded, pear-shaped, 68-year-old SMH chairman carried the Olympic torch through Atlanta on its way to the Olympic Stadium for the 1996 Summer Games, where for the first time Swatch – not Omega or Longines – was the official timer. Hayek’s personal identification with the Swatch brand ran deep. After the Games, he told me how much he enjoyed bantering with people along the torch route who were cheering on “Mr. Swatch.”
I understood all of that. But I also knew that, for most people, Swatch was not a philosophy of life or a winning economic model for the West. It was a fun, funky, inexpensive quartz fashion watch. That’s all. Therefore, the name did not belong in lights on the group’s headquarters building in Bienne. So said I, anyway.
April Fool’s Day
The column appeared, perhaps appropriately, in the April 1, 1998, issue of National Jeweler. The title was “SMH To Become ‘The Swatch Group,’ Or Something Like That.” You get the gist of it in the following excerpt, which is how the column ended.
I can understand Chairman Nick’s and the board’s dissatisfaction with the SMH designation. The initials stand for Société Suisse de Microélectronique et d’Horlogerie. On their own, the initials convey nothing, unlike, say, Disney or Nike or Gap. And the short and punchy Swatch is a great name for a watch.
However, ever since the Swatch phenomenon of the mid-1980s, SMH has been tempted to stick it on everything. The brilliant Max Imgrüth, the first head of Swatch USA, was the first Swatch brand extender, putting it on T-shirts, umbrellas, pens, fanny packs, you name it.
But the top Swatch brand extender is Hayek himself. He gave us Swatch telephones, pagers and Swatch Timing, which replaced Swiss Timing, which used to time athletic events under the Omega or Longines label. He’ll soon have the brand on a car. Using it to identify the entire group, however, is going too far. I know Swatch is SMH’s cash cow. I know it made watch history. I know how much Mr. Swatch (a.k.a. Nick Hayek) loves it.
‘Hayek gave us Swatch telephones, pagers and Swatch Timing, replacing Swiss Timing,’ I wrote. ‘He’ll soon have the brand on a car. Using it to identify the whole group, however, is going too far.’
Nevertheless, the view here is that Switzerland’s top watch group, parent to Omega, Longines, and Blancpain, can do better than adopt the name of an item forever famous as a $45 plastic, albeit revolutionary, watch.
Call me old-fashioned.
The winner of the Swatch-amacallit contest (Swatch Unlimited? MicroSwatch Inc? Swatch R Us?) will be revealed at the shareholders meeting on June 24.
Let the campaign begin! SMH shareholders, unite! Vote No on June 24!
‘You criticize our idea,’ Hayek screamed, ‘but you don’t offer any suggestions of your own. Okay, since my idea is no good, tell me: what should I name my company?’
On Monday morning, April 13, 1998, the day after Easter, I was working in my office and the phone rang. I answered and a female voice with a German-Swiss accent said, “Mr. Thompson, please hold for Mr. Hayek.”
It was not unheard of for him to call me. It was rare, but it did happen. It could be about something I wrote. It could be something else. This time, I knew it was about what I wrote.
After a few seconds, he was one the line: “Hello, Joe Thompson!”
“Good afternoon, Mr. Chairman. Are you working on Easter Monday?” In Switzerland, Easter Monday is a holiday.
“No,” he said, cheerily. “I am at my home in Cap d’Antibes. It is a beautiful day, I am in my pool [suddenly the tone got hostile] and I am wondering what to name my company!”
“So you saw the column.”
[Screaming now] “YES! AND IT IS COMPLETELY NEGATIVE. YOU SEEM TO HAVE SUCH A GREAT INTEREST IN THIS MATTER, AND YOU CRITICIZE OUR IDEA, BUT YOU DON’T OFFER ANY SUGGESTIONS OF YOUR OWN. OKAY, SINCE MY IDEA IS NO GOOD, TELL ME, WHAT SHOULD I NAME MY COMPANY?”
The call had come out of the blue, and my response was essentially that of the feckless Ralph Kramden, in the 1950s sitcom The Honeymooners, whenever he found himself in a fix of his own making: “Homina, homina, homina, homina, homina…”
Hayek had a point. I had not given a ton of thought, or even an ounce, to a new name. I just thought the Swatch option was a mistake.
With my brain issuing nothing but “hominas” in response to the unexpected question, the watch gods intervened. Out of nowhere, I heard myself say, “Well, if it was me, I’d call it the Hayek Group.”
Silence. (Where’d he go?) Then, softly, almost sweetly, he said, “That’s a good idea.” But the moment passed in a flash and the anger returned. “But you know I can’t do that! The Hayek Pool only controls 36% of the company shares, and I can’t put my name on the group.” (The Hayek Pool refers to a group of investors, led by Hayek, who held a controlling share of voting rights in the group, a total of 35.5% in 1998. Hayek himself held 28.5%, which is how he got to be a billionaire.)
“Well, what about the Omega Group? Omega is as well known as Swatch is.”
[Screaming again.] “SEE THIS JUST SHOWS YOU DON’T HAVE ANY IDEA WHAT YOU ARE TALKING ABOUT! MANY, MANY COMPANIES HAVE ALREADY REGISTERED THE OMEGA NAME AND WE ARE NOT ABLE TO USE IT.”
“Well, why do you have to change it all? What’s wrong with SMH?”
[Screaming louder now.] “BECAUSE NOBODY KNOWS WHAT IT MEANS! AND THE INITIALS STAND FOR FRENCH WORDS THAT DON’T MATCH THE NAME IN OTHER LANGUAGES!”
With that, I had exhausted my supply of useless suggestions. He had made his point. It was a short fight: a TKO in the first round.
As the champ danced back to his corner, and I was crawling out of the ring, he said something shocking. Twenty years on, I still can’t believe it. In a tone that was almost friendly, he said, “But you keep hitting us. That’s what we need.”
With that, he hung up and I whispered a little prayer of gratitude to the watch gods for the Hayek Group answer. It definitely tempered the fury a bit. And spared me another stint in the Tower.
I thought that was the end of it. I was wrong.
The Campaign Trail
Nine days later, the Basel Fair opened. In those days, SMH held an international managers’ meeting in Switzerland just prior to the fair. At the fair, several SMH executives told me that Hayek had mentioned my opposition to the name change in his speech to the group. Some people didn’t understand the decision to change the company name, Hayek told them. They should expect questions about it and be prepared to answer them. Someone who didn’t understand it, he told them, was me. The reference wasn’t hostile, they said. Just a warning to them to expect questions and give good answers. (So, now I am a poster boy for a “No” vote in June, I thought: That’s strange.)
It got stranger. In May, I had another phone call from SMH. This time it was Yann Gamard, CEO of SMH Group U.S. at the Weehawken, NJ, headquarters. I knew Yann well, but he never called me.
“Hey, Yann, what’s up?”
“I am just calling to see how the campaign is going.”
I had no idea what the man was talking about. I had moved on to other stories, other columns. Campaign? Did he think I was running for sheriff of Overland Park, KS, where I then lived?
“What campaign, Yann? What do you mean?”
“The campaign against the corporate name change. I just got off the phone with Mr. Hayek and he wanted me to check with you about it.”
I was bewildered. True, the column ended with the line “Let the campaign begin!” But I never dreamed anyone would take it literally. Or think I was spearheading it. I explained to Gamard that there was no campaign, certainly not by me, almost certainly not by anybody. I had no shares in SMH, no votes, and no clout.
Furthermore, the name change was a fait accompli. What Hayek wants at SMH, Hayek gets. It was Hayek himself who joked that the initials SMH stood for Sa Majesté Hayek.
“It was just a column, Yann,” I said. “Just a little opinion column, that’s all. There is no campaign against the new name.”
He said he would let Mr. Hayek know.
On June 24, SMH officially became the Swatch Group. No doubt the Chairman let out a huge sigh of relief.
With that, the episode ended.
Sort of. There is a postscript. Two, actually.
Just 15 months later, the Swatch Group acquired Groupe Horloger Breguet from Investcorp, a Bahrain-based investment company. That led, I am told, to a twinge of regret on the Chairman’s part about the name change.
The day of the announcement of the Breguet acquisition, Sept. 14, 1999, Jean-Claude Biver was in Munich for a meeting. When Biver heard the news, he immediately called Hayek, and said, “I want it!”
“No,” Hayek told him. “This one is for me.” (Hayek told me the story; Biver confirmed it later.)
“I had a vision of what I could do with it under my personal management,” Hayek told me in 2004. “I decided to change practically the whole Investcorp team and take over the CEO position.” His attitude was, he said, “It’s my business now. I am going to show you what you can do with such a brand.”
In fact, according to Swatch Group scuttlebutt, what Hayek really wanted was not Breguet, but Nouvelle Lemania, the Vallée de Joux movement producer, which was part of the Breguet Group and made the movements for the Omega moon watch. Hayek’s goal was to lock in that crucial source of supplies for Omega. When I asked Hayek about it, he hesitated slightly and said “I wanted both Lemania and Breguet.”
When the Swatch Group acquired Breguet in September 1999, Jean-Claude Biver called Hayek immediately. ‘I want it,’ Biver said. ‘No,’ Hayek told him. ‘This one is for me.’
But he admitted he didn’t fully understand Breguet’s potential at the beginning. “After I purchased it, I realized suddenly I have pearls here,” he told me. “I have the perfect object you can love. Let me explain to you what Breguet is. Breguet for me is the best marriage of technology and art.”
Hayek, the ardent industrialist, had caught the Breguet bug. Breguet, he realized, could be the group’s high-mechanical, luxury watch superstar that Blancpain had never quite managed to become.
Investcorp had trashed Breguet. They marketed it as a sport watch: 80% of its advertising was for the Type XX chronograph, a pilots’ watch introduced in the 1950s. And they moved a lot of merchandise through gray market channels.
Hayek proceeded to sink a fortune into reviving the brand and spotlighting the horological genius who founded it. He promoted Abraham-Louis Breguet as the inventor of the tourbillon and sparked a tourbillon craze. He turned Nouvelle Lemania into Manufacture Breguet and launched a series of expansions and upgrades to the factory. He created a Breguet Museum in Paris and became an aggressive purchaser of original Breguet models at auction. He had Manufacture Breguet produce an exact replica of the legendary “Marie Antoinette” grand complication pocket watch of 1827 (No. 160) that had been stolen from a Jerusalem museum in 1983 and was still missing. (It was later recovered.)
The transformation was complete by 2002. In May of that year, Hayek held a gala banquet at Versailles Palace to celebrate the 200th anniversary of the invention of the tourbillon by Abraham-Louis Breguet. He gave an emotional speech honoring “Breguet, the artist who became an entrepreneur.”
“An entrepreneur for me has always been and is an artist, a creator, an innovator, who motivates all people around him and creates new wealth and new workplaces,” he said in his speech at the event. “A-L Breguet knew how to create beauty, pleasure, happiness. But he also created new jobs and new wealth for a vast number of people and directly helped to advance society.”
In Breguet, Hayek the entrepreneur saw himself. Mr. Swatch was now Mr. Breguet.
In 2003, Hayek Senior stepped down as CEO of the Swatch Group, handing the reins to Nick, Jr. But he never gave up the CEO position at Breguet.
A few years later, I had dinner in Lausanne with a top Breguet executive, whom I had known for 25 years. He had worked at other well-known Swiss brands and been brand manager in the U.S. for one of them. Hayek had recruited him to help revive Breguet. At dinner, inevitably, we talked about Hayek, Sr. At one point, the 1998 name change came up.
“I think he regrets that now,” my friend said.
The irony was rich and I couldn’t resist. “You know, if he had just listened to that dimwit watch reporter in the States, he wouldn’t have any regrets now,” I said. “But noooooooo.” He laughed.
This is hearsay, of course. I don’t know for certain that Hayek came to regret the name change. But the speculation is not idle: it comes from a well-placed source. It is certainly possible that, after positioning Breguet at the group’s pinnacle, he experienced the same frustration as SMH CEOs whose brands seemed secondary to mass-market Swatch after 1998.
The second postscript is this: In 2014, Marc Hayek, Hayek’s grandson, the CEO of Blancpain (he was also CEO of Breguet, succeeding his grandfather) held a Blancpain press event at the Hayek family compound in Cap d’Antibes, France. There he unveiled the Blancpain Fifty Fathoms Ocean Commitment Bathyscape Flyback Chronograph watch. I was among the horde of press invitees. There I came upon the pool where Hayek, Sr. made the Easter Monday phone call. I stood at poolside and, with a smile, relived the day I spoiled Mr. Swatch’s swim.