Take the little train from Neuchâtel to Fleurier and the countryside swiftly changes from urban to rural, even by the isolated standards of Switzerland’s watchmaking region. One stop before the end of the line is Fleurier, a pretty village of stone houses and rustic streets. It is an unlikely spot for the boldest experiment in Swiss watchmaking in years.
Starting in 1996, the Sandoz Foundation, based on the wealth of one of Switzerland’s leading industrial dynasties, decided to invest in watchmaking. As so often with such things, the link was personal. The foundation had a big watch collection, whose trusted restorer was Michel Parmigiani, a celebrated craftsman and an independent watch developer, used by top brands.
Initially, the scheme involved supporting Mr Parmigiani’s creation of a new, ultra-exclusive marque. As time passed, however, it became clear that sourcing components for the tiny runs envisaged would be tricky.
So the foundation upped the stakes and decided to become a true manufacture, producing not just finished watches but all the components required for them along the lines of much bigger brands such as Rolex and Patek Philippe.
That meant making everything from precision microcomponents, such as wheels and gears, to the bigger, but often complex, elements such as cases and dials. The lavish investment extended even to hairsprings, tiny, but exceedingly complex and capital-intensive products.
“No new brand had set up a manufacture because the costs are astronomical, unless you have huge volumes,” says Jean-Marc Jacot, chief executive. “You need three things: money and patience, of course, but also an entrepreneurial spirit. It’s not enough just to be rich.”
While Mr Jacot, a veteran watch manager, runs the business, Mr Parmigiani, 60 next year, stays in the background as guru, producer of one-off pieces, and general “ambassador” for the brand.
Mr Jacot admits the venture could never have happened without the foundation’s deep pockets. But he denies Parmigiani reflects just the whim of some Swiss billionaires. “This is a serious business. There is a long-term plan for profitability. Anyone who thinks Parmigiani is the folly of a sugar daddy has got it wrong.”
The company’s structure was put together through a series of takeovers in 2000-2001. Gears and hairsprings come from the Atokalpa subsidiary, movements from Vaucher, while dials are made by another internal supplier. In all, the group employs about 500 people.
But even after the acquisitions, it took years to bring the companies to the exacting standards required. “Atokalpa was a micro-engineering company. But its business was high volume and very much focused on the mid-market. We hired some of the best specialists in Switzerland to transform the company into what we needed. It took us four years. No one at the time thought we’d manage,” says Mr Jacot. With the main pieces in place, the only big element in Parmigiani watches still sourced externally are the distinctive, finely engineered hands.
Industry observers say such an ambitious venture would have been breathtaking for a giant manufacturer, and was little short of astounding for a minnow. Parmigiani is committed to staying small to maintain quality, with output at just 5,000 pieces a year.
The long-term plan envisages raising watch production to about 12,000 units a year and movements to about 20,000.
Mr Jacot emphasises output will never be raised so high as to dilute Parmigiani’s role as the dominant customer, ensuring its movements and components remain unique. Mr Jacot admits recession has taken its toll: selling 20,000 movements next year “has grown less likely”, he says. He declines to offer details about profitability. The components companies are making money – thanks partly to Swatch Group‘s decision to limit supplies of movement kits to third parties, creating unexpected demand. Parmigiani and Vaucher are at about break-even, he adds.
No one, however, seems concerned that payback remains some way off. Cash has invariably been reinvested and Parmigiani believes it must broaden its range further. “We now have seven movements. But to be a real manufacture, you need a collection of calibres,” says Mr Jacot.
The company has moved into sports watches with its Pershing range, made in collaboration with Ferretti, the Italian luxury boat maker. But there are still some niches to fill. “We need one or two more highly complicated movements,” he says.
The fact that Parmigiani will always remain a small brand means it has caused relatively few ructions among rivals, in spite of its unique funding. Any supporter of the Swiss watch industry – or admirer of bold engineering initiatives in general – can only be impressed by what is happening in Fleurier ... and thankful not to be footing the bills.
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