Zodiac and the myth of the quartz crisis - By Søren Christian Andersen

[Grossisten]

In 1978 Zodiac's founding family, the Calames, were forced to sell the company after almost 100 years of ownership. This led to some bumpy years for the brand, as it changed hands several times, even going bankrupt at one point, before the current rebirth in the hands of Fossil Group. This article explores what happened to Zodiac in those years: Was the development a result of the so-called quartz crisis? And was this primarily a technological crisis – or were other factors at play?

Towards the end of the 1970'ies Zodiac appeared to have been on the technological forefront having invested in the booming quartz technology, maintaining the high quality that was core to the brand and being continuedly innovative having just introduced the world's first LCD watch to obtain an official chronometer certificate and launching the worlds slimmest quartz watch. Zodiac seemed to have as fair a chance as any brand of surviving.

However, at that point in time for most brands the odds for surviving were extremely unfavorable: Almost the entire Swiss watch industry was in financial trouble. In fact, large parts of it were on the brink of extinction in what is commonly called the quartz-crisis pointing to the rise of this new technology as the main cause.

But according to the historian Pierre-Yves Donzé in his book "History of the Swiss Watch Industry" the reasons are more complex, and two factors are often overlooked: First and foremost, this was a period of prolonged worldwide economic crisis, triggered by the oil-crisis in 1973. And there was not just one oil-crisis – but several consecutive ones, the last beginning towards 1980. That alone put many businesses worldwide in financially stressful circumstances, unemployment was on the rise and sales of consumer goods were naturally affected.

Switzerland had very specific complications added: The Swiss Franc was as a consequence of the economic turmoil untied from its close relation to key foreign currencies – particularly the Deutschmark and the US Dollar. The Franc soared (and has continued to do so to this day) making Swiss watches increasingly expensive in their most important export markets. This particularly favored the Japanese competition.

In fact, Seiko's sales figures for mechanical watches showed a surprisingly slow decline at the same time as the Swiss figures plummeted. And for years quartz watch-sales were far from the boom we perhaps imagine today (quartz watches were relatively expensive at first) but followed a slow climbing curve. However mainly for the Japanese. The Swiss crisis was very much a sales-crisis.

The second factor hampering the Swiss was tradition. The very thing that had made the industry highly competitive was no longer an advantage by the 1970'ies: The Swiss tradition of so-called "etablissage" developed from crafts perfected in small family-owned workshops, one producing dials, another hands, yet another cases and others assembling the watches: Swiss watchmaking was very much born as a cottage-industry. The focus was on quality, collaboration was essential, and competition largely centered on the quality of craftsmanship.

The Swiss industry had its first harsh wake-up call from this traditional approach as early as 1876 when they realized how far advanced US watch factories where in industrializing production. It took the Swiss decades to come up to speed mechanizing – but a structure consisting of many small and medium sized family-owned businesses remained, the western region of Switzerland having watch related factories or workshops in even the smallest of villages. A watch was still by 1975 produced by assembling parts from a myriad of suppliers and sub-contractors.

This had over time proved increasingly inefficient and as other industries including foreign competition moved towards larger corporations and concentration of capital the Swiss to a higher degree stuck to their structure of relatively small family-owned businesses. This was certainly the case of Zodiac, who remained independent in the hands of the Calame-family. Even if some Swiss competitors had organized in watch groups such as ASUAG and SSIH, the structures – and perhaps culture – were still comparatively inefficient. Larger scale of business gave the Asian and US competitors advantages in not only manufacturing but also purchasing, marketing and sales. Times were changing and the Swiss were running late.

On top of this came the emerging quartz technology. Contrary to the belief of many, the Swiss to some extent did keep up technically, but quartz and particularly digital watches required cutting tradition by the roots: Craftmanship was no longer core in a world of cheap machine or even robot-made movements, that could or should not be repaired. Precision ceased to be the result of 100-years of skills passed down from father to son. It is fair to assume that this shift in attitude was almost impossible for the Swiss to make. This may explain the reluctancy to commit fully to the new electronic technology, which some sources point to as part of the problem.

One may also speculate whether the Swiss got complacent? They had managed to outcompete first the English (this in the very early days of Swiss watchmaking) and later the US watch industry. Quality-wise their German and French counterparts could not quite keep up. By the end of WW2, the Swiss industry - virtually unscathed by the fighting that left Europe and Japan in ruins and US manufacturers exhausted by their role in the defense industry - dominated the watch market. Three decades of prosperity followed as the world economy got back on its feet and Swiss watch sales soared.

It seems that the Swiss almost stubbornly kept doing what they had been so very good at without changing much: Manufacturing high quality mechanical watches. To high quality perhaps - as my father, a wholesale importer of Zodiac to Denmark, almost regretfully remarked one day, he could only ever sell every customer one watch in their lifetime. They were simply too well-made. Which I guess is what benefits us, the collectors, today.
 
Towards 1980 the alarm bells could no longer be ignored: The two largest watch groups of the time ASUAG (including among others Eterna, Longines, Certina, Edox, Hamilton, Mido, Rado, and movement manufacturer ETA) and SSIH (best known brands being Omega and Tissot) were facing a fall in production of up to 80% according to Watch-Wiki. Workers were laid off by the numbers, factories closed, machines disassembled, tools destroyed, and unsold stock scrapped at zero value as any hope left was put on quartz models. The whole western region of Switzerland, the so-called Jura-arc named after the Jura-mountain range, was in a deep crisis, not least a "cultural" crisis: The Jura was seen as the cradle of Swiss watchmaking and had been the worlds horological capital, dominating the world market for decades and specializing in the crafts and skills of the industry for centuries. Now the ship was going down with everyone still aboard and no one knew where to locate the lifeboats. No wonder the quartz-crisis in Switzerland is still known as simply La Crise, THE crisis.

Enter the Swiss banks on a rescue mission: Merging ASUAG and SSIH into SMH and putting now legendary Nicholas Hayek at the helm eventually saved brands like Omega, Tissot and Longines, while others were sacrificed (Eterna for instance) and sold off. The recipe is well-known – Hayek cleared the forest of a thousand subcontractors and business units to centralize production; the brands were tiered in marketing segments preventing damaging internal competition and most importantly the already existing SWATCH project was carried through with extreme success: In fact it was the conquest of the low cost watch market that financed the survival of the traditional brands in the group. Over time SWATCH managed to outcompete the east Asian rivals, beating them at their own low-cost game, a quite impressive feat. A final strategic step was moving all brands towards the luxury segment, that was the only profitable segment at the time. Even so, had there been no SWATCH, iconic brands like Omega might very well have perished.

The story of Zodiac is different: Staying independent the brand initially survived the difficult circumstances – even if narrowly according to a speech in 1978 made by CEO René Calame at the companys anniversary: Zodiac claimed to be well-prepared to contend in the quartz-tech-race even if they maintained an extensive mechanical model range.

Then an unexpected blow tipped the boat: A major customer went bankrupt, soon two more followed - the losses caused financial difficulties that could not be solved in the dire economic climate of the time. Allegedly it was the 1976 bankruptcy of Zodiacs US client, Trauner Inc., that brought on this situation.

On top Zodiac was in the middle of a generational change, which is a challenge to any organization: René Calame, grandson of the founder, had joined the company before WWII and especially since becoming CEO played a key role in the technological leaps and impressive economic growth Zodiac experienced for four decades. Having already passed the CEO-role on to his son Pierre, René Calame passed away just as the worst part of the crisis was about to hit. René's brother, Zodiacs Sales Director, Maurice Calame, who had been with the family business since 1945 soon retired (and passed away in 1981) leaving the fate of Zodiac in the hands of René's son, Pierre. Even if thoroughly trained and already involved in the business Pierre Calame unlike his father and uncle was alone at the helm in the fight against the terrible economic tide crippling the industry and the company's urgent financial difficulties.

So, several factors played a role, the emerging quartz technology apparently not being the main one: The Calame family were forced to sell the company to the owners of Zenith, Dixi Group. By 1982 Zodiac was virtually merged with neighboring Zenith. The brand was from then on led by a group of marketing specialist that unsuccessfully focused on quartz-technology in a more fashion-style line of watches. After a decade Dixi chose to sell the brand on. The next owner, a former executive of Heuer, even if going back to some of Zodiacs roots with a sporty line of dive- or dive-inspired watches produced by Zenith eventually failed and went bankrupt. Two American companies took over, first Genender and later Fossil group.

In the turmoil of 4 decades of changing ownerships the Zodiac brand seemed to have come a long way from its origins with many classic model-lines disappearing including at one point the iconic SeaWolf. However, to the pleasure of many Zodiac enthusiasts, the current owners have rediscovered the heritage and brought back strong elements from the golden years reintroducing models such as the SeaWolf (now labelled Super SeaWolf) and Olympus and put a strong emphasis on one of Zodiacs signature features, the automatic watch.

In the meantime – after years in the deep dark halls of almost oblivion – mechanical watchmaking has made a miraculous return following a niche-rebirth around 1992 and later a 20-year long boom. Swiss watchmaking again dominates world markets in terms of value and the future opportunities for a brand like Zodiac seem bright.

One could wish for the watchmakers and workers at Zodiac of the day, and especially for the Calames, that they had lived to see this day, that proves so much of what they did right. It certainly pleased my late father, the by then retired Zodiac-importer, that the core values of Swiss watchmaking prevailed in the long run. Core values that made Zodiac build watches of such high quality that we may still enjoy classic models today.

About the author: Descending from a line of watchmakers I virtually grew up in my father's watch import business in Copenhagen, Denmark. He brought Zodiac to the Danish market as well as BWC and was later an agent for Zenith. Our family had ties with the Zodiac owners, and we have frequently visited the Zodiac factory and even the family's private homes.

[YuriyV]

It is very interesting topic.
Thanks for the article.
I saw several publications about Zodiac financial issues in Swiss newspapers dated by 1970s. It is a good illustrations to this topic.
Here is one of them in "Fan l'Express, Neuchatel" 1978-08-30, completely proving what said above:

Zodiac gets the debt relief

The Zodiac SA watch factory, in
Locle, obtained a debt restructuring stay of
four months, i.e. until December 23
next. No irregularity, or act
disloyal were detected, and the management of
the company was declared flawless.
The difficulties encountered by Zodiac are
partly cyclical in nature, but
also due to the wrong entry of payments and the bankruptcy of several representations abroad, told ATS
lawyer Perruccio, appointed commissioner
stay. The family business has reduced its
staff since the beginning of the year. These
from 100 to 50 people. His number
in 1977 had reached fourteen
million francs.

[Grossisten]

Thanks for this very specific input, Yuriy, its great to be able to study the topic in detail.

Your newspaper article underlines to what degree this was a sales crisis, as it mentions several clients going bankrupt. You may then speculate how large a role the rising prices due to the currency issue played - and how much was about people wanting the latest gadget, a cheap digital watch (or an analogue quartz) rather than a fine mechanical one.

It certainly was terrible times for the Swiss industry.

[Butch]

Thanks to you both for this interesting information. It certainly does fill in some holes in what I did not know and why.

It is important to note that you can have the best product in the world, but if you have no customers left for it then you will not be able to sell them. I have never found out what happened to Trauner. Over the years several of the family's offspring have reached out to me but they do not know either as they were grandchildren.

A little on Genender, outside of the current history page above. While not close, Ken and I became friends over the years. Ken owned the brand for 3 years. He bought the rights to it out of bankruptcy. As a manufacturer and importer of watches for a long time it was always his dream to own a Swiss watch brand. He made several trips over those years to Switzerland and became quite disillusioned with the Swiss watch industry. Somewhere in 2001 Ken made a trip to Texas to discuss paying Fossil to use their vast distribution system for his Zodiac watches. After a couple days of discussion, which was more of a Q&A on the brand than it was about distribution Ken said, Fossil ups and offers Ken $5 MM for the brand. Having just bought it 3 years ago for $1 MM, and given his dissatisfaction with the Swiss watch industry, and his acute business sense, he took the deal. Who wouldn't? Yes, my heart was broken, but I was happy for my friend.

One of the many disillusions Ken shared with me during those 3 years (we are still friends and exchange emails, just trying to put a timeline on this) was that if there was ONE Swiss National in the room in the Chinese factory then the watch could legally be named Swiss Made.

[Grossisten]

Thank you Butch for adding yet more pieces to the puzzle of Zodiacs history.

I'm glad you find my info interesting, it is fascinating (if also a bid sad, because of the outcome) to dig into this topic.

One thing I have come to realize is just how devastating this crisis was: For generations the people of this region of Switzerland had perfected not only their watchmaking skills but the entire structure around it which included production of (spare) parts, service, sales networks and the giant weave of suppliers and other business relations that made this almost one big family (even if some relatives were very distant). The ties within the industry were deep yet invisible to the outsider, there was a long tradition of marrying sons and daughters from watch-making or -trading families to grow the "empires". The DuBois family of Le Locle is one example worth studying. Another example is that at a time of unrest in the region Zodiac founder Ariste Calame and Doxa's founder (his name evades me) joined forces in setting up a local militia. It was a small town and even if competitors everyone knew each other personally. The business units were small and employees were often considered almost as friends of the "patrons", the owners. This way of life was all these people knew. And it was not just in Switzerland - my own family had a similar story: My great grand father a watchmaker, my grandfather a watchmaker too, traveling Europe to train and creating an international network that helped my father set up his import business. My grandfathers network of watchmakers in Copenhagen was also essential in securing may fathers apprenticeship with one of the best watchmakers in town. When the Calames met my father and grandfather they recognized the dna of a family business and to some degree opened their arms to us. Had this bin 1895 and not 1975 I might even have been considered eligible to marry one of the daughters..... :-)  I read in a post here that Keith Trauner - grandson of Zodiacs US agent Trauner - had a similar experience with the Calames.

When this whole structure collapsed due to competition from people with at totally different mindset (the mindset of large corporations promoting a throw-away society) it was not just the people of the western part of Switzerland that were hit. It was everyone involved in watchmaking all over the world. Thousands of watchmakers had to find different careers also here in Denmark. All the connections, the whole structure and indeed culture around watchmaking was disrupted.

Around two thirds of the workforce in the watch industry left - and have never come back. The towns, like Le Locle saw an exodus of people and they are still not back to the population level from before 1975. It was - almost - a nuclear strike on watch industry.

This might be one reason Ken Gendender was disappointed - the Swiss watch industry he was looking for was in fact not there anymore.....

[Grossisten]

Hi all,

I'm updating this thread with some news - a teaser if you like. Through stubborn research and with the use of my limited knowledge of French, I have recently come across a reliable source for information about Zodiac. Many details - especially about the period leading up to the take-over by Dixi in 1979 - that were until now unclear to me or unconfirmed now seem pretty certain. Personal details about the Calames that I out of respect have refrained from sharing were actually public at the time.

I look forward to sharing this with you all in due time - I need to translate and put it together in an article or post.

So... stay tuned, I guess.

[Butch]

For me, this era of the Zodiac brand is a black hole. The period from the Calames to Monnier owning the brand has always been hard to find anything out about. I found one resouce that mentioned DIXI buying the brand and that is about it. Aside from the 80's catalogs with the Rado Look A Like watches. I personally await your next post with bated breath sir.

Thx, Butch

[Grossisten]

As I expect writing an article will take some time here is a taste of the content I will base it on:

The following appeared in a local newspaper in august 1933 (translated by Google):

"The reason Ariste Calame flls, "Zodiac" watchmaking factory, in Le Locle, was then struck off from the takeover of assets and liabilities by Zodiac S. A., a public limited company, whose head office is in Le Locle. The share capital is 40,000 francs, divided into 80 registered shares. The company is managed by a board of directors of 1 to 5 members. Named: Messrs. Ariste Calame, industrialist, Charles Baillod, doctor of medicine, René-Ariste Calame, industrialist, all three residing in Le Locle."

I interpret this as the news of the Company Ariste Calame Fils (and sons) being replaced by Zodiac S.A. (Ltd), ie. the company was transformed to a limited company called Zodiac.

[Grossisten]

In a different article it is mentioned that it was Rene Calame who initiated the transformation to a limited company when he took over as CEO in 1934 (the years dont quite match, but this could have a number of reasons, not least the almost 20 years between those articles). In another short article the inauguration of the then new Zodiac factory is dated to have taken place on August 15th 1951.

[Grossisten]

You cannot view this attachment.In a longer article from Zodiacs 90th anniversary in 1972 the history of the brand is told in-depth. Much is wellknown but certain facts were new (to me at least). For instance the location of the "old" Zodiac factory, inaugurated in 1908. Its in fact and much to my surprise placed within a few yards of the "new" factory - on the same road, Bellevue, but at bit up the mountain. I'll try to attach a picture.

[Grossisten]

Finally (at least for today), details of the end of the Calame ownership and especially its causes was reported on August 7th 1978, again translated with the aid of Google:

"Events began to rush with the bankruptcy of the agent of the brand in the USA, in 1976. In fact Zodiac did not recover from this hard blow. In 1975, the New York office, backed by its powerful client, the American army, absorbed 50 percent of Zodiac's production, or 40 percent of the company's turnover.
During the "easy years", that is to say when the market was powerfully buying, the American windfall
allowed all hopes and Zodiac is not the only company to have dreamed on this pillow. The time came when everyone had to relearn how to sell. The stop was brutal. To the American bankruptcy were added those of the agents of Japan and Italy."

This confirms what I had heard from my father when he was Zodiacs agent in Denmark and mentioned several times also in the original post that I am commenting on here.

So there we have it, the smoking gun, the explanation in black and white (in the article at least).

[Butch]

A tidbit: AAFES (Army and Air Force Exchange Services), where the stores found on US military bases around the world. In the 70's they even had a catalog you could order from and have it delivered to your local PX (Post Exchange) as the stores were known on the bases. I remember in 1974 or 5 ordering a unique looking Zodiac dress watch for my wife (at that time I was in South Korea). Back in the early 60's, if not the 50's, Trauner had cultivated that relationship and business deal. It would not surprise me to find that they were the biggest consumer for Zodiacs here in the US.