Swiss watch business up, but sub-prime woes linger

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Swiss watch business up, but sub-prime woes linger

By Teresa Novellino

April 02, 2008

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Basel, Switzerland—The party is still on for a Swiss watch industry that enjoyed another export increase in 2007, but the U.S. sub-prime mortgage crisis has become an unwelcome guest that watchmakers fear could start impacting business in the year ahead.

Swiss watch exports reached about 15.75 billion in U.S. dollars (16 billion Swiss francs) last year, a 16 percent increase over the previous year, and a rise of more than 50 percent over the previous four years, said Jacques Duchene, president of the BaselWorld Exhibitors Committee, at press day on Wednesday, the day before the show opens.

Driving the increase, the largest in 18 years, is a renewed consumer affinity for the mechanical watches the Swiss are known for, he said.

But despite the good news, economic troubles of recent months are worrisome, and companies should be prepared, Duchene said.

"The sub-prime crisis is far from over," he said. "It has already had implications for our business and can be expected to bring further complex problems in its wake."

He noted, however, that the Swiss watch industry is optimistic for 2008 since new markets in other parts of the world are developing, with Swiss watch exports to Russia up 57.4 percent and exports to China up 43 percent, for instance.

But some of the developing markets have restrictive import policies for luxury goods, he noted.

On the plus side, the Federation of the Swiss Watch Industry (FH) has successfully pushed for a revised law to protect intellectual property that will enable Swiss customs authorities to take stronger action against product imitations and forgeries. The revised law goes into effect this July 1 and will prohibit the import, export or transit through Switzerland of manufactured products that infringe on a protected brand or design.

Already, the FH has instigated a series of confiscations of fake watches, most recently in January, when police in Mexico City confiscated 90,786 fakes, as well as weapons and drugs, Duchene pointed out.

As for 2008 watch models, the Swiss will roll out original large chronographs for many of its new 2008 models, including ladies' chronographs that offer some innovative mechanical functions, said Francois Thiebaud, president of the BaselWorld Swiss Exhibitors Committee.

Big cases, pink gold and jewelry-style watches for men are also on tap at this year's show.

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