Defenestration: Sales dive leads to turnover at the top

A 25 per cent plunge in sales is hardly the ideal prerequisite for job security. But for Switzerland’s crisis-hit watchmakers, sharply rising unemployment has extended well beyond the workbench.

In little more than a year, at least four chief executives of top watch brands have left their jobs. The reasons have never been spelled out. But, in each instance, the market downturn played a part.

By far the most dramatic defenestration remains the December 2008 ousting of Patrick Heiniger at Rolex. Even today, the reasons for the departure of the apparently impregnable boss of 15 years’ standing remain unclear.

Two factors only are uncontested: no one believes Mr Heiniger left voluntarily “to pursue personal interests”, as Rolex claimed. But most, by contrast, accept the group’s assertion that the cause was not massive losses on Bernard Madoff’s Ponzi scheme – one of the many rumours swirling at the height of the speculation.

More convincing is that Mr Heiniger was pushed out because of crumbling profits following sharply lower sales, notably in the important US market – at a time of surging investment in new products and facilities.

In such circumstances, Mr Heiniger’s emphasis on lavish marketing and entertainment probably did not help. As ever, Rolex declines to comment.

Last May, it was the turn of Thierry Nataf to pursue “personal projects” after almost eight years running Zenith, the premium watchmaker owned by Moët Hennessey Louis Vuitton of France.

During his tenure, Mr Nataf revived a famous, but increasingly neglected, brand, with a big expansion in models, boosting output from the group’s historic Le Locle factory.

But while few disputed his success in restoring some of the brand’s lustre, sales, by all accounts, plunged in the downturn, while costs remained stubbornly high. Not surprisingly, support at LVMH’s Paris headquarters for Mr Nataf’s emphasis on expensive, controversially styled, niche watches ebbed, prompting his exit.

Zenith, like Rolex, declines to comment. But the choice of Jean-François Dufour as Mr Nataf’s successor speaks volumes.

An industry veteran and former head of product development at Chopard, Mr Dufour is more restrained than his outgoing predecessor, who had previously contributed to the revival of the Veuve Cliquot champagne brand.

Mr Dufour, who took over on June 1, has been wary of any public criticism. But a planned change of corporate image – to be seen at Baselworld – combined with comments about streamlining the range, shifting away from pricey limited editions and cutting costs point to a “back to basics” message that is probably more appropriate to the times.

Richemont, meanwhile, lost two of its chief executives within days last September, as Fabian Krone and Michel Nieto both left following “strategic differences”.

Neither Mr Krone, head of Lange, or Mr Nieto, chief executive of Baume & Mercier, appear to have done anything particularly wrong. Both, moreover, faced difficulties, even before the downturn.

Mr Krone, chief executive since May 2004, had made headway, taking Lange beyond its origins as a German specialist watchmaker. But the job was by no means over, and had been hampered by the crisis: big investments to expand output were frozen, while sales in the first five months of 2009-10 were reportedly down 16 per cent.

Baume & Mercier, meanwhile, had struggled for years because of its difficult position as a lower priced “pure luxury” brand, squeezed between more exclusive marques enjoying greater cachet, and the top ranges of mid-market brands.

For both executives, matters were exacerbated by internal frictions – probably stemming from underlying misgivings at Richemont about the slow pace of the brands’ development.

To speed things up, Richemont nominated Jérôme Lambert, the successful head of Jaeger-LeCoultre, as a “mentor” for Lange.

Similarly, Georges Kern, the head of IWC, was asked to perform the same task for Baume & Mercier. Although not intended as slights to either of the incumbent chief executives, the appointments may have made an already uneasy situation untenable.

Not even Swatch Group has been spared. Normally known for its tight management team – underlined by the prominence of the controlling Hayek family – last August brought the surprise departure of Manuel Emch as head of Jaquet Droz, Swatch Group’s “boutique luxury” brand, after eight years in the job.

The move was odd in many ways. Mr Emch, aged 37, was son of Arlette Elsa Emch, one of the group’s top executives, and very close to chairman Nicolas Hayek. His departure came just days after a very public ceremony laying the foundation stone for a new plant for the brand whose revival Mr Emch had largely masterminded.

Moreover, none of those present had betrayed any hint of turmoil ahead.

Swatch made clear on Mr Emch’s departure that the move had been at his behest. And he had indicated indirectly that he no longer felt comfortable in the job, prompting speculation he would reappear somewhere in the arts world – another of his passions.

Hence the surprise last December, when Mr Emch re-emerged as chief executive designate of Romain Jerome, the quirky watch brand owned by an ultra-rich Saudi Arabian family.

With the downturn apparently receding and the Swiss watch industry hoping for recovery in 2010, the rate of top level exits may slow.

Certainly, watchmakers’ emphasis on continuity and stability has not diminished. But, as recent events have shown, you can never be too sure.