Swatch Says LVMH Should Invest More in Watch-Parts Production

Swatch Group AG, the world’s largest watchmaker, said rivals including LVMH Moet Hennessy Louis Vuitton SA should invest more in watch component production, as it aims to lift a regulatory requirement that forces it to sell parts to competitors.

Swatch Group is continuing talks with Switzerland’s competition regulator, known as Comco, to lift the obligation to sell watch movements, the mechanisms that make timepieces run, to third parties, Chief Executive Officer Nick Hayek said at a press conference in Biel, Switzerland today.

Comco started making Swatch Group sell components to third parties in 2004 because of the watchmaker’s dominant position in the watch component industry. Some of the requirements expired at the end of last year, and the company has been asking the regulator since 2009 to let it decide to whom it will sell finished movements.

“We want to be able to choose to whom we deliver so it’s not like a supermarket where everyone can help themselves,” Hayek said. “If LVMH spent 10 percent of the money they’re spending on Bulgari on training and watch production, that would be a good thing.”

Swatch Group would never have spent as much as LVMH did for its 4.3 billion-euro ($6 billion) purchase of Italian jewelry maker Bulgari SpA, Hayek said.

“Jewelry is much less sexy than making watches,” Hayek said. “That’s not to say it doesn’t interest Swatch Group, as we do have our own jewelry. Making watches is more interesting.”

Liquidmetal License

The company also said it obtained a license to use alloys made by Liquidmetal Technologies Inc. in watches, gaining access to metal that’s moldable like plastic.

Liquidmetal alloys can be molded at a lower temperature, Marc Hayek, head of the Blancpain and Breguet brands, said. The final product is harder and corrodes less than other metals, he said. Terms of the agreement weren’t disclosed.

Apple Inc. completed a patent-licensing agreement with Liquidmetal Technologies in August.

Swatch Group may reach annual sales of 10 billion Swiss francs ($10.7 billion) within three years, without taking into account possible acquisitions, Nick Hayek said. The strength of the Swiss franc stripped 100 million francs off sales in the first two months of the year, he added.

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