ThePuristS Interview Nicolas G. Hayek
President and CEO, Montres Breguet SA
Chairman, Swatch Group

Dr. h.c. Nicolas G Hayek is currently President and CEO of Montres Breguet SA, and Chairman of the Swatch Group, having passed his CEO role in the Group to Nick Hayek, Jr, in January of this year. 

Despite having a reputation for being a good entrepreneur, the poignant look that passed over Mr. Hayek's face when he answered a question about time, and the gentle words in his personal message for our audience, tells me that this is also a man of compassion, even if he would not want his competitors to know this. 

Widely hailed as the pivotal person in the survival and renewal of the Swiss watchmaking industry, itself a key industry for Switzerland, in addition to banking services, pharmaceuticals, and packaged foods, Mr. Hayek casts a wide and deep shadow.  When recent circumstances created a situation where a portion of his staff was going to be unfairly targeted for exclusion, ostensibly for racist reasons, Mr. Hayek is rumoured to have said, "That is ridiculous.  Let them try and come and take my people."

Here is clearly a man who has seen a lot, been through a lot, and not only survived, but also prospered, in his time on this earth. Candid, lucid, precise - Nicolas G. Hayek Sr. is a man that is master of his world.

Some Breguet facts:

• sales have increased 40% year to year, every year, for the past 3 years;
• booked orders during the first several days of Basel 2003 were up 42-45% for the same period 2002, even with all the events going on in the world and their negative impact on attendance overall;
• the Breguet jewelry line was released as a result of demand from certain major Breguet dealers;
• jewelry currently accounts for 5% of turnover at Breguet;
• Breguet jewelry production is consistently sold out as soon as it leaves the factory;
• The ladies' market is a key growth area, with models like the Lady's Tourbillon and the Queen of Naples leading the way. 

(Breguet stock photo)

The Interview

TP: Mr. Hayek, what will the history books say; what have you done for Montres Breguet SA since taking over as President and CEO?

NH: What did Nicolas Hayek do after he took over Breguet? 

First of all, I dealt with a key distribution issue.  

I then ordered immediately a group of watch movement designers to create new movements - nice looking movements, but technically highly improved movements.

We improved service to our customer - the goal being faster, more responsive service.  This is an ongoing overhaul.

We created and released new models, we increased capacity - we invested $15M in a new plant.

We created a complete watchmaking school – to develop new, better movements, to train watchmakers to improve service to the Breguet customer. 

TP: This school is specifically for Breguet?

NH: Swatch Group has many schools in its system, this one is specifically for Breguet.

TP: How long has this school been open? What is the current enrollment?  Is it to train technicians, or true watchmakers?

NH: The school has been open 1 1/2 years, and currently has 14 students.  We are training both service technicians and watchmakers.  The program is 1 1/3 year long for technical service education, and 3 years to become a watchmaker.

TP: What would you say to a person new to high horology, to give them insight into the essence of Breguet?

NH: Buy a Breguet and wear it.  You will know.

(we all laugh, agreeing at how subtly profound that comment really is)

TP: Even though there is a history of industrialized processes dating back to Leschot, Japy, and Dennison in the early to mid-19th century, industrialization of the traditional watchmaking processes is often decried as having killed the heart and soul of haute horlogerie.  How do you reconcile industrialized processes with the traditional art of watchmaking?

NH: By dividing the company.  I have 160 companies, 650 profit centers, each with its own management. If I make a Swatch, I automate it. When I make a Breguet, I make use of all the traditional crafts. And if the skills have disappeared from Switzerland, we create them again. We then open a small atelier, with top managers from Swatch Group like Mrs. Emch, the young Emch, Marc Hayek, the craftsman that make those rotors (for the anniversary moon) at Blancpain, and we utilize all these trade skills again.  In doing so, we also encourage young people to take up those skills again as well. 

For watches like Swatch, Tissot, even Longines, I automate as much as I can in big series watches and brands but not in luxury brands. 

So yes, you can reconcile both. You have both the high cultural art of making watches, like making a painting by Picasso, and you have the camera that takes pictures and makes 2000 pieces. We have both of them. At Swatch Group, you can find a watch for $10 and one for $10 M, and everything in between. And depending on the company, we handle it differently. For the guillochage alone, for Breguet, we have trained lately about 20 people to revive this nearly lost art. To make the special enamel indices area on the dial, we are training new people, because it is a lost art.

TP: In the market segment that Breguet occupies, is the market near saturation? or is it far from saturation?

NH: I wouldn't say far from saturation, but there is plenty of room to grow.

TP: So you feel that Breguet can grow from market growth, as well as by taking market share?

NH: The high-end market, the market sector that Breguet occupies, is not yet saturated. There 
is room to grow, both from market growth and from taking market share. 

TP: There was a period of time when Breguet products were considered grossly overpriced relative to the market, and there was a rampant parallel market as a result.  Has Breguet addressed these issues? Have the prices been adjusted back to a more realistic level?

NH: I don't know that we had to make major adjustments to our prices.  We had an agent in the US, who increased the prices many times, and we had to stop this. After that, we made the US prices to the right level. But this was only a US market problem, nowhere else was this a problem. The first day I took over management of Breguet, I stopped all subject deliveries that could go to parallel markets and this immediately. But also remember, the US market influences the internet very much.

TP: What was Breguet production last year?

NH: 8500 to 9000 pieces.

TP: And this year? What do you project?

NH: 12,000 to 14,000 pieces.

TP: Turning to something a little more abstract, what do you see as the areas that the Group must work on to continue to grow? Are there areas with room to improve?

NH: Oh, my god, in a company like ours, we have room to improve every day, in every area – 

• quality improvement; 
• speed of production; 
• innovation capacity of company;
• costs;
• cost controls;
• returns;
• growth in market.

Don't worry, we have enough work to do. (laughter)

TP: What about market growth?

We are growing; we are growing 3-4 % every year, even in bad years. We have no problem increasing market share from everybody.

Plus - We have specialists in microelectronics.

Sony, Microsoft, HP are all running after us, wanting to work with us.

We have a wafer fab plant that can make 1.5-volt chips; there are only two other factories in Japan, one in Taiwan that can currently make 1.5volt chips.

So Swatch group has many growth possibilities, not just in watches and luxury goods.

TP: There seems to be a changing of the guard in the industry - Marc Hayek at Blancpain, Manuel Emch at Jaquet Droz - What influence do you see this having on the industry?

NH: We are putting new people, with new ideas; entrepreneurs, not MBA's...people who really look at the market of the consumer. Creative people, artists, not businessmen...

(Click on the play button (right arrow) of the media player below to watch Mr. Hayek's full answer - your browser must be ActiveX enabled and MPG compatible. 

If your browser is having trouble with the video clip, click the button to the right to open a new browser window that should auto-play the mpg. Or, click the button below to view the text transcript of Mr. Hayek's comments.)

TP: When will the signs on the Lemania factory be changed to read, "Montres Breguet?"

NH: It has already. When you look at the new Nouvelle Lemania plant in L'Orient, you will see "Manufacture Breguet" Very little product is made for third parties. L'Abbaye is already 100% Breguet.

I have a Glashutte development group with their own mentality. They make a cell, and close it. (referring to the tendency of groups to get insular once they are formed, naturally or by plan) 

I have in the Vallée de Joux, a Vallée de Joux mentality. In the same mentality of the Vallée de Joux, F Piguet, Blancpain, Breguet, N Lemania, ETA. And I have in Grenchen, ETA.

We have lots of developers, who have very good ideas.

But I have to keep telling them, "Start tabula rasa, start from zero.

Don't make me a movement that we have already made, by improving a small thing about it."

Like the carmakers – they never think about a new car, they take the car of last year, and improve a few things.

I decided to make a reveil, a wake up watch, for a price of 35k SFr, which is a hell of a feat, for the music you hear, for everything, all the features you get. I took two highly gifted young watchmakers, took them out of the cell where they were, put them together, and told them, "You are now going to make me a watch, starting from zero, without thinking about the movement designs from Piguet or Lemania, or anybody else." 

One of them was from Blancpain, one of them was from Breguet.

When I finished the watch, I could not tell Blancpain, "Thank you very much, I took your man, but you cannot use the result." or Breguet...

I said, "Both of you use it, and we will announce this to the trade." 

Because this is nothing unusual, but most of the companies in the industry do not announce this.  If  you look at most of the mechanical movements in Cartier, or Panerai, or in other brands, you will find that these are the same movements that all of them purchase from our company.  Why not two companies of the Swatch Group who developed the movement together, to make something completely new, both use the movement?  

Some of the people are horrified! And we say, "Why? You do it everyday."

TP: Why didn't Lemania submit a design proposal? Was the project assigned to Piguet?

NH: No, no, it was not assigned…There is a difference between the design of a watch, the production of a watch, and the assembly of the watch.

In a company like ours, I can give the design to two engineers or watchmakers to make, put them in a room, close the door, and go out. Don't think about either F. Piguet or Nouvelle Lemania or anything else.

When it is finished, I would look at how many pieces I want to make, and if I am going to use the mechanical equipment that I have at Piguet to make some of the ebauches, some of the parts…then I look at where am I going to assemble it? And the biggest assembly capacity we have now is at Piguet, so we gave the parts, the assembly responsibility to Piguet.

TP: So is the movement done by Piguet? Is this a Piguet movement? 

NH: The movement is NOT a Piguet. It is assembled, produced by Piguet, but it is NOT a Piguet movement.

TP: One of the most compelling Breguet models of the recent past is the ref. 7010BA, popularly known as the Rothschild watch. The real story behind it has been quite a mystery and subject to many contradictory rumours. What is the real story behind this watch?

NH: We had given the Rothschild family a three year exclusivity on this watch. Those three years are over 
now. 

TP: There are plans to put this watch into production, then? When?

NH: We are still deciding the final details, but we will release it.

TP: As busy as you must be, how do you manage time?

NH: I don't manage time. I love time and I hate time. I hate time because you cannot grasp it, you cannot close it, you cannot stop it. And I love it because it gave me so many happy moments of my life. I don't manage time, never tried to manage time...

TP: Do you have any special message you'd like to give to our internet audience?

NH: My message is much more general than just watches...

(Click on the play button (right arrow) of the media player below to watch Mr. Hayek's full answer - your browser must be ActiveX enabled and MPG compatible. 

If your browser is having trouble with the video clip, click the button to the right to open a new browser window that should auto-play the mpg. Or, click the button below to view the text transcript of Mr. Hayek's comments.)

TP: Thank you very much, Mr. Hayek.

ThomasM