TAG Heuer and Zenith- both owned by luxury good conglomerate LVMH, have announced the merger of the two houses under a new holding company. TAG Heuer and Zenith are now part of LVMH Swiss Manufactures SA, along with Cortech (the TAG Heuer-owned case manufacturer). TAG Heuer CEO Jean-Christophe Babin will head the new group.
The news comes in the same week that Bulgari announced that the Daniel Roth and Gerald Genta brands will cease to exist as independent brands and will instead be co-branded on Bulgari watches.
So what will change at TAG Heuer? In the short-term, not much, with the reorganisation being described as mainly a legal, financial, administrative and accounting restructure, and with each brand retaining their own operational management. Of course, there is already co-operation between the two groups, as TAG Heuer already uses the El Primero Zenith movement in some of its watches and Cortech is a major supplier of cases to Zenith.
The reasons driving the changes at TAG Heuer and Bulgari are not hard to see- the financial crisis has hit the Swiss watch companies hard and there is now the need to rationalise costs to off-set the declining revenues. The TAG Heuer and Zenith move effectively removes duplication of back-office costs without having too much impact on the watches that the customers see- no-one really cares about whether Zenith has its own in-house legal team or shares legal resources with TAG Heuer.
However, the reality is that once companies start down the path of merging operations, there is inevitably a flow-on impact to other parts of the business over time- will we see Zenith watches sold in TAG Heuer boutiques? Not in the short-term, but longer term its a strong possibility. Certainly it also gives TAG Heuer even better access to the El Primero movements for its high-end watches.
For today at least, this merger is nothing for watch enthusiasts to get too excited about- however, it will be the interesting to see how independent the brands remain in the medium-term, especially if Swiss watch sales remain soft.
TAG Heuer, Zenith and Cortech (watch case manufacturer) have merged!
In December 2009, the watch making companies TAG Heuer International and Zenith have amalgamated to give rise to LVMH Swiss Manufactures SA, located in Chaux-de-Fonds. The new company is chaired by Jean-Christophe Babin (CEO of TAG Heuer), assisted by Jean-Frederic Dufour (CEO of Zenith) and by Jean-Claude Femiot (CEO of watch case producer Cortech in Comol). “The operation is primarily of legal, financial, administrative and tax related character. Each brand keeps its own operational management”, says Jean-Christophe Babin.
At this point it is not clear whether the also will favorise “industrial synergies”. New machines to manufacture platinum for example would need to be adapted to the small volumes production of Zenith and to the high volumes of TAG Heuer. However, the three entities concerned already have strong relations. The main customer of cases manufactured by TAG Heuer is Zenith which also sourced from Cortech, while some of the Grand Carrera models from TAG Heuer are equipped with the Zenith El Primero movement. The merger will accelerate the industrial integration mainly at Zenith, an authentic manufacture, rather than at TAG Heuer (280 collaborators) which mainly buys its movements from specialised suppliers.
The regrouping will not have consequences on the manpower of the companies, reassures Jean-Christophe Babin. It is true that Zenith (150 employees) and Cortech (90) already reduced their workforces in 2009. Hublot, directed by Jean-Claude Biver, is at this point (still) is not concerned with the regrouping strategy of LVMH.
Source: Chronometrophilia Switzerland/ Via http://home.watchprosite.com/?show=forumpostf&fi=17π=3594861&ti=578221&s=0