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| Joined: | Thu Nov 3rd, 2005 |
| Location: | USA |
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4/99
Mr. Bally, many watch brands use ETA movements but most of them don't want to talk about it. Instead, some of these companies pretend to make their own movements. Does that annoy you ?
Not at all. We're used to making a quality movement and design for customers who don't mention that it's made by ETA. It's the decision of the customer, if he wants to keep the ETA markings and then can profit from the world-wide parts and repair service. For example, if they use a marked 2892 they have a world-wide replacement-part organization to their disposal. But, if they use an XYZ marking, they'll have big problems, for example with the warranty.
Sometime I hear comments like "such an expensive watch and only an ETA movement inside ". Words like these give the impression that an ETA movement is of lower quality.
It should be the other way around, people should say "Well, it has a good ETA movement inside this watch but the price is astonishingly high". Some watch magazines rate movements with points, that's only something for spectators. An exclusive automatic, exotic movement gets more points. But the consumers won't be happy with that alone and they don't know if the movement is reliable. You have to realize that the flatter and smaller a movement is, the more delicate and hard to regulate it becomes. Such a movement may be rated highly because of its looks but can be one of the worst in regard to long-term functionality.
Mr. Bally, you deliver the entire Swiss watch industry with parts
In regard to the Swatch Group (of which ETA is a part of), I can confirm that. There's hardly a watch-company that makes mechanical movements and doesn't have to get certain parts from the Swatch Group. Just, for example, because the company Nivarox-Far belongs to the group, they furnish the coils, balances, anchors (English ?) and anchor-wheels to all the makers, without exception.
At the last Basel Fair, watches were shown with the Daniels co-axial escapement whose movements were made completely by ETA. How do you see the future of these movements ? Won't a two-class society of ETA movements develop, for example, only the co-axial movements for Omega and the regular ones for the other watch companies ?
George Daniels developed the co-axial escapement 20 years ago and always was looking for someone who could industrially manufacture it and bring it into a commercial product. In 1994, we signed a contract with him that we would finish developing it and then worked with Nivarox-Far for five years. Omega was the only company prepared to finance it, invested many millions and now has the right to exclusively use the escapement. But there are other brands in the Swatch Group who will use it in the near future, for example, Blancpain. We've also had inquiries from other important companies in the Swiss watch industry if we would deliver these movements to them.
Well, the traditional escapement has served well for over 200 years, do we really need a new one ?
The co-axial escapement has massive advantages. But, due to their complexity, they are more expensive. But they have great, long-term advantages. If you have a movement fit with the co-axial escapement certified as a chronometer, you won't just get a watch that runs with great precision only for a short period. Compared to a regular escapement, the friction is so small that you hardly get any wear at all. So, you don't have to have the watch oiled after three or five years because no wear and tear occurs, a very long-term stability of the precision is guaranteed.
Do you think that the co-axial escapement will at one time entirely replace the old system ?
I'm certain it will develop in that direction. At the moment we still make these movements in relatively small numbers for Omega. I can imagine that in the future, Omega will want to use these movements in all of their watches. In the upper price-segment, the general move to the co-axial escapement is a realistic possibility.
And what about the ETA movements you sell to companies outside of the Swatch Group ?
We're talking about a considerable premium here. Many companies couldn't pay it even though they of course would be getting better performance.
By how many percent are these movements more expensive than the standard ones ?
That's hard to say. The Omega movements are already so special that they can't be compared to the standard ones. The new escapement is a considerable additional cost factor. But that doesn't mean that they won't get cheaper if we work on the technology and lower the production costs.
Would you please explain that in more detail
Look, in recent years we've invested very much in the treatment of the end curves of balance coils. These are now heat-treated with a laser after the coil is bent. This way, we achieve that the coil doesn't change after receiving a blow. This development is patented and is offered by Nivarox-Far and other manufacturers. The costs for this special treatment of the coils went down from 10 CHF ($ 6.50) to 1 CHF ($ 0.65) since we started producing in series. The costs of the co-axial escapement could go the same way.
What's generally being developed these days, especially in the mechanical sector ?
To answer this, you have to look at the product mix. There are products that are very trendy at the moment. An example: Last year we bought out a ladies quartz chronograph movement, we have a huge demand there. Or take the Autoquartz which appeals to consumers who estimate quartz precision together with the mechanical component. At the moment, the simpler mechanical movements are less in demand because in that price range, high-quality quartz movements are already available. High quality mechanical movements are so in demand that we're having trouble filling the orders.
How many mechanical movements do you produce every year ?
A bit less than five million
Has the number of manufactured mechanical movements gone down in recent years ?
Yes, especially because of the decrease in export of simple mechanical movements to Hong Kong that were designated for the Chinese market.
So you could say that the number of high-quality movements is on the rise and the number of lower quality ones is sinking ?
Yes, that's why we invested so much in recent years, to meet the demands of our clients and to be able to produce such high-quality movements more effectively. We invested a lot in the production of small series, in special series that are in demand more and more; in special versions, special plates and bridges and especially in engraving and decorating.
During our tour of the facilities, I noticed that since the beginning of the 90's, you've bought a lot of machinery for the finishing of movements and have hired more staff in this area.
This service has become extremely important and we had to make enormous investments because we absolutely wanted to keep this work here. We especially invested in engraving, mostly laser technology with which complicated work is done nowadays.
Would you say that many companies that used to do the finishing themselves or had it done by other companies now have the work done by ETA ?
Absolutely, that area has increased enormously and the usage of highest quality movements has increased too.
Is there anything ETA doesn't do themselves ?
Yes, we get certain parts from our sister companies in the Swatch Group. Comadur, for example, furnishes us with the jewels. Coils and balances come from Nivarox-Far. They also make the main-springs. All ball-bearings which we used to get from the outside are now made here because we've built-up a lot of know-how in this area. In the mechanical movements, there's hardly a component that we don't make ourselves. What we don't make, of course, are the materials we use.
The assembly of the movements is done here too ?
Yes, we have an assembly center for that.
So, you could say that ETA is a "manufacture"
Yes, we're the largest manufacture in Switzerland because we make everything in-house.
ETA's knowledge in quartz technology allows you to produce in other areas than movements.
Yes, actually it was a bit of a "leftover product" that we could deliver our step-motors to the automotive industry. Every car nowadays has at least 4 of these in the dashboard. The motors used before were designed differently and were complicated, heavy and expensive. We miniaturized these motors and made them light and thin and gave them a modular design. Now we can sell millions of these to Germany and especially to the United States.
What importance do these products have with ETA. They really have nothing to do with watch-making.
Absolutely not. That's why we separated this division and also make other products for the automotive industry. In this area, we have a turnover comparable to a medium-sized Swiss watch company.
Is ETA on its way to becoming a company in which watch movements only play a minor role ?
Not at all. Developing and producing watch movements is and will remain our main business.
Do you still have customers all over the world ?
Yes, but we make about 60 % of sales inside the Swatch Group, followed by the rest of the Swiss industry. You have to consider that 80 % of the Swiss watches that are exported are fit with an ETA movement. Other customers come from Germany, Italy, France, the USA and there's a lot of business with Hong Kong where we sell the lower priced movements to. Some of these movements only cost 1.50 CHF ($ 1.00) including the battery. But even these are highly precise quality movements.
Are these movements sold to European companies ?
We need this type of movement in Switzerland too but we make them here and sell them as "Swiss Made". The movements made in China and Thailand are sold to Hong Kong.
Does that mean that parts come from the Far East and are used in Switzerland ?
"Swiss Made" is an exactly defined term. It means that apart from the assembly, at least 50 percent of the parts are made here.
When you say that 80 percent of Swiss watches are fit with an ETA movement then most Swiss watches are actually ETA watches.
That would be overdoing it a bit. The usual watch buyer is only mildly interested in that, they mostly only see the design of the watch. Our job is to assure that the customer is satisfied with the movement, that it runs precisely, has enough power-reserve and that it winds well.
Didn't you used to have exactly that problem with the 2892 ?
The 2892 is from 1976 and was constructed as a 12.5 lines (28.2 mm) movement. In 1982, we narrowed it down to 11.5 lines (25.6 mm). Through that, we lost a bit of torque from the rotor but we fixed that problem with a wider segment made out of a heavier material and by changing a few angles. Nowadays, we don't have any problems at all with the 2892.
What's your best selling mechanical movement nowadays ?
That's caliber family 2820, 2824, 2834, it's the cheapest movement but a real tractor and very reliable, variable and undemanding.
From the view of a watch engineer, what makes a good, reliable und precise-running movement ?
First, you have to take care that an automatic movement winds correctly. To test this, we have developed a whole array of "wearing simulations". If the movement passes, it already deserves the name "automatic". Afterwards you have to test if all the movement's functions and the calendar switching works. Then you have to check the screw connections, the oil, the regulator and the general wear and tear. But a test in a watch magazine, where only the looks and how exotic it is are rated, is silly in my opinion.
How do you proceed with developing, producing and testing a new movement ?
First we define the required specifications. Afterwards, the first simulations are done in 3-D on the computer. We have software with which we can simulate spring force and abrasion. Then, a series of prototypes are made. That's the "moment of truth" when fundamental mistakes can be found and corrected. Then a so-called "zero-series" is made during which the movements have to pass through a number of tests. If they are passed successfully, the production of the tooling is started (for producing in series). More tests come after that and then the watch goes on the market.
Are the movements worn on wrists during these tests ?
Yes, but that's only the smallest part of the tests. You can't age a watch quickly on the wrist
Mr. Bally, ETA plays a very important role in the Swiss watch industry. How do you see the future in the coming years ?
We don't only play an important role but also have a very big responsibility for the industry. To the effect that we have to keep our leading position in development, in all fields, like quartz, autoquartz, mechanical or multi-function movements. Then we, of course, have to make a profit to be able to make future investments. You visited us about seven years ago and have now seen how much was invested, what changes were made. If you, like us, invest around 100 million ($ 65 million) every year, you have to sell quite a bit to stay competitive. You know, Switzerland is the most expensive industrial location in Europe, in the whole world even, in regard to wages. It's imperative that we can maintain our hi-tech level. That's why we school so many apprentices who are the foundation for our future. We have so many orders for new developments that our R&D department is constantly overburdened. Fortunately, we invested in micro-electronics at a very early time, these
investments are now the base for all our quartz movements. Nowadays, we are specialized in developing integrated circuits with very low power consumption. About 60 % of our non-watch related turnover comes from this area of business. It's similar with the quartzes of our sister company Micro Crystal. These miniature quartzes are used more and more and 50 % of turnover is done outside of the watch-industry. But our key role must remain in the watch industry.
Mr. Bally, thank you for the interview.