Fire at ETA today:
Nick Hayek, CEO of Swatch Group, was personally on site and made a picture: "The fire has hit the heart of the production. Everything is destroyed, assembly department also smoky. Here the metal is refined and protected, for example against rust. »
http://www.20min.ch/schweiz/news/sto...rannt-24573827
Glad nobody hurt.
Does this mean that repairing the damage is going to hit the pockets of the customers I wonder?
How soon, if at all, will there be a shortage of supply?
No personal injuries is thé thing.Originally Posted by Umbongo
For the rest it is insurance.
There will be stock enough about for all but the big orders for new Swatch watches.
I cannot see it hurting end users.
It máy hurt third parties manufacturers as it is ´great´ argument to backorder, discourage.
Swatch themselves may suffer a cash flow hickup but on the other hand will benefit from the opportunity to update where they want.
I wouldn't be surprised to see it push up prices. Not necessarily for any substantive reason but simply because it can. There is the psychological opportunity for everyone in the supply chain to hike prices a bit.
The same thing happens whenever there is a natural disaster in Japan or south east Asia (earthquake, typhoon, flood, etc.): Memory prices (and latterly hard disk prices) go up, not because there is really a shortage of supply or capacity, but because the supply chain as a whole can get away with it.
When this happens in the computer components supply chain prices usually come back down. I doubt, however, that ETA movement prices will come back down. ;-)
Given the company will be insured there should be no price increase attachments at all, that is not to say there won't be of course but it would be a silly approach imo.
We can all calculate dates, though such an organisation, as we already know, likes grasping the watch worlds genitalia.
As in my message above, there does not need to be a substantive reason for a price rise in order for one to happen. Furthermore, such market/psychologically driven price rises are not necessarily caused by the original manufacturer but by the many players in the chain of supply.
Last edited by markrlondon; 29th December 2013 at 22:10. Reason: Fixed typo
How is any 'player' outside of ETA affected buy a supply chain? ETA produce the end product don't they? Makers dependant on their movements is an entirely different matter, but that would sure only lead to a shortage of finished watches and not justifying any price increases by anyone.
Regardless, we can speculate all we like, it will have no bearing on what may happen.
The watch equivalent of FOFAD
For those who have no idea what I'm talking about, "F... off! Fire at Donnington" was the standard response throughout the 1990's from any RQMS after the fire at Donnington MoD depot that happened in around 1885.
"Can I have a....?"
"FOFAD"
I would have thought somewhere along the line its going to cause supply problems - which inevitably will cause an increase in price whether there's insurance or not. Perhaps a good opportunity for other manufactures to step in......
I agree. If there is a reduction in supply, then demand rises (for a product constantly in high demand already) and the price could well rise.
The more so as in this case the manufacturer does not wánt to supply the outside players but is forced to by the national interest.
Thus the motive for price increases is STRONG.
We will see if there is an effect real soon on ebay even. Brokers and retailers may very well ´anticipate´ and increase the already ludicrous $265 2824-2 price even further;
http://www.ebay.com/itm/MOVEMENT-ETA...item20d833b56e
Last edited by Huertecilla; 29th December 2013 at 17:19.
I've just risked life and limb in the shopping centre to clear Argos out of their stock of F-91W's.
You watch, I'll be the most popular man on Sales Corner soon, mark my words
And if that didn't trigger an automatic alert in GCHQ then nothing will.
ETA will undoubtedly be insured but we all know what happens to your premium the year after you make a claim! I'd suggest a price hike will be inevitable to cover the costs...
SGR
Short term shortage of supply will allow ETA to stop supplying third parties. I'd be surprised if they ever resume third party supplies.
Massive reality check needed here:
It was only one small part of production that was damaged. Like all well built factories they must have firecells/doors etc...
"Der Sachschaden dürfte einige 100'000 Franken betragen."
Approx. 100000CHF worth of damage, around £68000. That corresponds to about 4 boxes of 50pcs 7750 movements, wholesale price.
It will have absolutely no effect whatsoever on prices. It might delay some deliveries for a few weeks while they rebuild though.
HTH.
They cannot stop; they can backorder but will have to resume delivery when the plant is running again.
The customers will however NEED to source alternatives to fill their orders. Any cancellations to Swatch will simply serve the Swatch interest.
All in all not such good news for an industry already experiencing shortages.
IF this will turn out to be serious delay, thus shortage, thus higher prices, then it may contribute to a faster re-appreciation of quartz.
I mean, the 2824-2 already retails for over 20 time what a Vostok automatic costs! yet I cannot see the fashion in the luxury of mechanical turning to Vostok and there is only so much bs the buyers will accept when they get 'Made in China' inside.
I can imagine that many will prefer a well made watch with quartz inside to the same watch ever vastly more expensive with a chinese mechanical inside.
THANKS!
Some of the damage is clearly shown in the video link from the OP
My Swiss-German is next to useless, but I have seen this translated online as several hundred thousand CHF.
It's also interesting to note that Swatch haven't put a figure on the amount, yet...
Still would be a drop in the ocean to Swatch Groups well filled coffers... they have more cash than they know what to do with. Clear from the pictures and the interview, it was just the galvanizing workshop.
They will construct the new, better one.
Insurance will pay.
Prices will rise up.
It was "just" the galvanising workshop. It will still take time to reinstate during which time the galvanising process will have to be carried out elsewhere.
The cost of the damage especially when compared to the cash available within Swatch is totally irrelevant; an area of their production process has been damaged and will need to be replaced or repaired before it can resume full production at that facility.
As I mentioned earlier, they can probably subcontract the plating processes but it will still take time and disrupt production.
Of course its not irrelevant. With money you could have workers there 24/7 repairing the premises if you like. Also its not rocket science equipment, all readily available within Switzerland, the home of the mechanical watch industry... They'll be up and running within weeks, no doubt.
Not a supply chain, the supply chain. I.e. The chain of supply from ETA to the end user of the movement (the watch maker).
They do. But they do not necessarily sell it direct to the end user of the product (that is watch makers). In some cases they will sell to end users but in many they will sell to a distributor who sells it on to others (possibly through more than one tier of distribution and reselling) and in other cases (as Eddie has noted) they will sell to primary end users who in fact order more than they need and resell on the rest for profit, acting as distributors. This then leaves room for additional tiers of distribution and reselling before a final end user is reached.
It is this network of sellers and resellers that I described as the supply chain.
At each stage there is opportunity for added margin. Normally that margin is constrained by competition due to wide availability, although that is decreasing with the reduced availability of ETA movements (hence the ongoing price rises with ETA movements). However, every player in that chain is always looking for ways to improve their profit margin and a key psychological hinge for this is: Disruption of supply.
Note that such disruption of supply does not have to be real! It is enough that there is a fear of it. That fear can be used to justify higher prices at every step in the supply chain. In other words, there is no need for there to be a real or substantive supply problem in order to cause a price rise: Prices can rise due to any anomalous event that can be used as a psychological tool.
Rest assured, this happens all the time in the computer components industry. Everyone is always looking for reasons (imaginary or real) to hike up prices. Emergencies (fires, disasters, whatever) are the ideal psychological cue for this, even where there is plenty of production and/or stock capacity such that there is no substantive need for prices to rise.
Whilst I am speculating that this will happen with ETA movement prices in this particular case, the ongoing reduction in availability and consequent increase in prices that is happening anyway does tend to suggest that every player in the supply chain (with the possible exception of ETA themselves!) will seek to take advantage of it. That's business.
Let me re-iterate: It is more than likely that this is not a major problem for ETA. They can probably recover from this quickly and relatively easily! But the probable lack of real problems is very nearly irrelevant to what happens in supply chains like this in reality when there is any anomalous event such as this one. There does not need to be a real limitation of supply (or increased limitation of supply in the case of ETA movements) for prices to end users to rise: The fear of a possible limitation of supply is more than enough for supply chain players at every stage to increase their prices. They take every opportunity they can to improve their profitability in a competitive market.
Last edited by markrlondon; 29th December 2013 at 22:30.
We will see soon enough.
The extra European Community $265 retail for ETA 2824-2 elaboré has been stable for several months.
:-)
Indeed.
Stolen, and distributed
Rob.
Yeah mate whatever you say which as usual is a lot. No idea where your appetite and time comes from to be quite so pedantic and so correct on so many subjects.
<chortle>
Poor old IWC, I mean ETA... ;)
Can you explain?
IWC is Richemont, a third party client of ETA, Swatch.
Richemont prices are, like all at that level, totally disconnected from engine cost. They can use any argument any time to increase prices and have the budget to sell that as desireable.
All prices are disconnected from engine costs, it’s called 'keeping your business afloat’.
R
Ignorance breeds Fear. Fear breeds Hatred. Hatred breeds Ignorance. Break the chain.
IWC use a lot of ETA movements, that's all.
'cilla presumably means IWC don't need a price increase on the movement to 'justify' an increase on their watch prices, that's all.
Other brands, perhaps the minnows, would only increase their prices where there was a corresponding increase in parts/overheads that can't be absorbed in the long term.
That is spot on in my opinion - remember the Tsunami and the floods in Thailand ? Apart from the obvious scale of the damage the fundamental difference there is there is/was massive over supply in these industries with multiple manufacturers competing mostly on price. JIT lines are just great but fall apart very quickly - much will depend on ETA's stock but I am sure distributors will be placing large orders and marking up their stock as we speak unless ETA make an announcement supply isn't going to be affected.
Yes, indeed.
Take TimeFactors. The pricing is very much cost based; cost plus competetive margin.
Swiss main stream brand have no such pricing for their mid range and above; they price according to what the market accepts; what their marketing makes acceptable. As such an increase in ETA cost is irrelevant but obviously a rare occasion too good to miss.
Not just minnows btw; Citizen and Seiko per example are very much locked in an eternal battle forcing them to cost + competetive margin for all but niche models. Even the Grand Seiko tc quartz models are restained by this as Citizen has a very competetive luxury tc range too.
Now have a look at SD. Since there is no competitor and Seiko has the marketing right, cost + margin is no longer the strategy.
Oh Huerty
Please stop banging on about quartz, you're giving me a headache...
The only battery powered thing I'm interested in.....? Well let's just say it's one thing that you can't compete with
Last edited by messym; 30th December 2013 at 13:53.
In my world it is just a tool. Even when using three at the same time they still are just tools for job well done.
I have a pun (in Dutch) about that which my gf though hilarious: ´raadt waar hij gaat´
But then I have also seen/applied véry much higher priced designer models too, so there too the added value is worth more than the function with cost bearing no relation to the price.
Btw; Swatch has production facility on the Virgin Islands. I bet it is galvanising.
Last edited by Huertecilla; 30th December 2013 at 15:22.
By minnows, I was referring to the small brands reliant on ETA movements, Citizen vs Seiko is an unrelated argument.
But on the point of Spring Drives, yes it is Seiko's halo movement, and has no direct equivalent from the Swiss side (yet), but I don't share the notion that it's allowing Seiko to act any differently from their norm.
Remember, Spring Drive has been in purely Seiko branded watches (my own), as well as Ananta – and the price wasn't way out of kielter with the automatics, especially the Hi-Beat variants.
We have no idea just how much time and money was spent over the two decades to bring Spring Drive to fruition, and given the relatively small numbers they've produced, has the R&D and subsequent development for the hand wound variants in 44GS and Credors, been repaid?
Nevertheless, we digress, so let's stick to the topic at hand, and see what effect this has had on ETA and those it supplies directly and indirectly.
Look at the production costs.
The standard auto and the SD cost the same. The SD QCO/AM brake and the wiggly spring assy are about on par and the rest is very much so.
Again; have a look at the GS models; those you can compair horizontally.
It is on topic to illustrate that the higher up we get in the luxury tree, actual manufacturing costs becomes increasingly irrelevant; not affecting the business.
For the independant micro brands it is directly affecting their business.
For bóth a real disruption in delivery will affect the cash flow.
Any manufacturer with third-party clients at this level must have robust contingency plans in place to cover such an event. The Clients would have insisted upon such plans, and would have audited ETA to ensure that the business could continue in disaster scenarios such as this.
There will be no discernible effect on supply, or prices, as existing contracts (which will include penalty clauses for any significant interruptions to supply) must be honoured.
Although no trees were harmed during the creation of this post, a large number of electrons were greatly inconvenienced.
Glad I asked the question now - this has turned into quite an interesting thread.
I think, from what Im reading, that Im in agreement with those who feel that, tangible reason or not, somewhere along the line the consumers pocket will be hit.
Apart from that Swatch group would be perfectly happy with clients declining to order ETA movements from them.
Eddie is an ETA user, maybe he can explain how much clout he has with ETA.
Maybe Richemont, Rolex, TAG-Heuer, Breitling et al have more clout for their watches, but I doubt that. It it thém who are the main competitors for Swatch brands.
I am no expert on such matters, but would doubt that the smaller companies would be able to do this?
Having read other threads about watches being made, it certainly sounds like the smaller companies can be messed around significantly awaiting delivery of movements.
A very interesting thread indeed, with plenty of interesting and alternate points of view.
I agree that for whatever reason, this will undoubtedly result in a price increase in movements, which may just be absorbed by rises in watch prices?
So, if that production facility made "Standard movements mainly sold to third parties", then that would, for a time, limit the supply of movements to those third parties - and then potentially increase the unit price for any new orders.
Hmm - what have Swatch group been attempting to do for some time now regarding their supply of movements to third parties?
So - given nobody hurt, everything insured and any insurance increase easily sorted with a price increase - that, obviously coincidental, fire perhaps isn't all that bad a thing...
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