Your $5,000 Rolex May Have Been Crafted by French

Switzerland’s Vallee de Joux has 6,000 people living in its 10 villages. Luxury watchmakers based there, including Audemars Piguet and Jaeger-LeCoultre, need at least that many workers, leaving them dependent on French to top up the ranks of horologers.

“Just do the math,” said Michel Wicky, who runs an Adecco SA recruiting unit in Lausanne. “Switzerland is too small and the watch industry needs cross-border workers.”

Watchmaking, the nation’s fourth-largest export industry, with sales last year of 13 billion francs ($11.5 billion), added more than 19,000 jobs in the decade through 2008, according to the Swiss Watchmaking Industry Employer’s Association. A third of those jobs went to workers who aren’t Swiss. Since then, the industry has cut about 4,000 jobs and the country’s unemployment rate rose to 4 percent from 2.5 percent in the past two years.

Most Swiss timepieces are produced in a 290-kilometer (180- mile) arc running from Geneva, home of the Rolex Group, following the Jura mountains and reaching Schaffhausen on the German border, where International Watch Co. is based.

Switzerland makes 95 percent of all watches that sell for more than 1,000 francs, said Rene Weber, an analyst at Bank Vontobel AG in Zurich. Rolex prices start at about $4,000.

“Watches have to be Swiss, or else they’re of no interest to the world,” he said.

Cross-Border Commute

The percentage of people employed in watchmaking who are not Swiss increased to 53 percent in 2008 from 45 percent in 2001, according to government statistics. About a third of the people who work in the industry live in France and Germany. Cross-border workers earn an average salary of 5,633 francs, compared with 6,093 for Swiss workers, government statistics show.

“Cross-border workers are less expensive, and there are people willing to come from Toulouse, Nantes and even Brest to work for lower salaries,” said Antonio Fructuoso, a 45-year-old Geneva resident who left his job at Franck Muller in 2008 after working more than a decade in watch assembly. “I don’t blame them. They’re just seizing an opportunity, but there should be some thought made for watchmakers who lived in Switzerland throughout the crisis.”

Reliance on workers from abroad is weighing on salaries and making it harder for local watchmakers to find jobs, Fructuoso said. Unemployment among Swiss residents in the country’s watch industry climbed to 11 percent in April from 3.4 percent two years earlier.

Swatch Approach

Fructuoso said he filled in 60 job applications during the past two years and has so far found no position. He said he has cut his salary request to 5,000 francs a month from the 6,200 francs that he earned previously.

“We don’t care if it’s a Swiss employee, a German, an Italian or an American,” said Nick Hayek Jr., chief executive officer of Biel, Switzerland-based Swatch Group AG, which owns brands such as Omega and Longines. “We can’t cover all our needs with just people in Switzerland.”

Swatch, the largest maker of Swiss watches, reported a 9 percent decline in profit last year when watch exports fell 22 percent, the biggest drop since the Great Depression, government reports show.

Nicolas Hayek, a Lebanese-born engineer who later became a Swiss citizen, is credited with revitalizing the industry by introducing the Swatch brand in the 1980s. Swatch now owns 18 watch brands, including high-end names such as Breguet, whose most expensive watches sell for more than $500,000.

Along the Border

The franc’s 16 percent appreciation against the euro during the past two years has made Swiss salaries even more attractive, boosting the purchasing power of workers when they return to their home countries each evening.

David Contrino moved from Grenoble, France, three years ago to Annemasse near the Swiss border when he left the real estate business. The 33-year-old Frenchman worked at Rolex and then at Geneva watchmaker Franck Muller until the latter cut his position along with half of the company’s 550 employees in 2009.

“I was very happy with the pay that I had at my last post, but I’m ready to accept a lower salary to find a job,” he said.

Foreigners have played a role since the birth of the Swiss watch industry in the 1500s. French Protestants took the technology to Geneva, and then spread it along the Jura.

“If we hadn’t had this huge number of French watchmakers, the Swiss could not have developed their industry at the same speed,” said Jean-Claude Biver, the CEO of Hublot, a brand owned by Paris-based LVMH Moet Hennessy Louis Vuitton SA. “We owe the French a lot.”

Since the 1980s, French families on the Swiss border have urged their children to learn watchmaking because they could earn double or triple as much across the border, Biver said.

In Annemasse, Contrino is still hoping to find a job in Switzerland.

“People have higher salaries, but they also work harder,” he said. “I’m still very happy I made my career change.”

To contact the reporter on this story: Tom Mulier in Geneva at tmulier@bloomberg.net.

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