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In 1965, ETA invested heavily in automation with the goal of increasing the efficiency of production. The following year, the firm produced about 4.2 million self-winding movements. ETA made about 18 million pieces in Caliber group 2750/2770 between 1969 and 1976. An especially successful item in this series was a self-winding caliber for men’s watches that debuted in 1968 and included a rapidadjustment option to reset its date and weekday displays. Felsa — the family-run, Grenchen-based ébauche manufacturer — was taken under the wing of ETA in 1969. Felsa is remembered today as the source of the “Bidynator,” which was launched in 1942 and boasted the first bidirectionally winding rotor mechanism for men’s wristwatches. At the same time, ETA achieved another milestone, when it automated the process used to drive in jeweled bearings.

“The so-called “Watch Statute” of 1934 suppressed healthy competition, and remained in force until the early 1970s.”

In 1971, after 39 years in the service of the ébauche factory, Rudolf Schild (alias “Mr. ETA”) retired from the business. Since his first day with the firm, Schild had held its tiller firmly in hand and skillfully piloted the ship through both stormy and tranquil seas.

One of his most trusted mates was a watch technician named Heinrich Stamm, who began his career in 1925 as a design engineer at A. Michel before joining ETA’s crew in 1939. Stamm served as ETA’s head design engineer from 1943 to 1969. His inventions of the ballborne rotor and extremely slim self-winding movements significantly contributed to the strong position that ETA enjoyed on the market. Another high point in Stamm’s life work is the distinctive ETA toothing, which was introduced simultaneously with the Eterna-Matic in 1948. This special toothing was used in all ETA calibers starting in 1951. According to Heinrich Stamm, about 40 million watch movements had been manufactured with this kind of toothing by the end of 1967.

Another Crisis
Soon ETA became caught up in yet another Swiss watch industry crisis brought on by the arrival in 1970 of quartz watches. After World War II, Switzerland enjoyed an unprecedented watch boom. But whenever success comes too easily, complacency sets in. Though the first dark clouds of the looming quartz crisis gathered in the Far Eastern skies in the early 1960s, the self-satisfied Swiss manufacturers didn’t take notice. Those clouds eventually massed into a gigantic storm which, exacerbated by the shockwaves of the oil crisis of the 1970s, came crashing down upon the Swiss watchmaking business. Extensive parts of the industry died out because they had scarcely anything of their own to offer that could keep abreast with the new trends. The traditional (and, for many years, quite profitable) focus on hand-wound and self-winding movements had blinded the Swiss and lulled them into overlooking the new technology. Thousands of watchmakers lost their jobs or switched to employment in the micromechanical and microelectronic industries. In towns that had once thrived with watchmaking activity, streets were now filled with vacant, unlit factories with dirtcovered windows.

“In 1982, the remaining Ébauches subsidiaries were fused to create one overall business called ETA SA — an appropriate name, considering that company’s history of achievement.”

ETA felt the dire consequences of the ongoing progress in quartz technology, further exacerbated by a global recession, in 1976. Thanks to an intramural educational program, ETA’s workers and employees were speedily retrained so that they could manufacture the promising new quartz watches. That year ETA debuted its first “Flatline,” a 3.6-mm-slim quartz caliber with a date display and a sweep seconds hand for men’s watches.

The ASSA-FHF-AM trio controlled about 80 percent of Switzerland’s ébauche production. ASSA, however, was the most powerful. It was worth twice as much as FHF and three times as much as AM. The founding fathers wanted to create a conglomerate that would control the spectrum of production and the prices that its member firms charged for their products. A conventional merger into a unified business with hierarchical structures was out of the question; all three firms wanted to maintain the existing structure of the companies out of loyalty to their founders.

They opted for an alternative solution: to establish a corporate trust as a holding company for the three firms. The corporate trust would own the shares of the three founding companies, but would not interfere with each company’s individual entrepreneurial freedom to act as its directors saw fit. The special situation of A. Michel SA and the generally difficult conditions on the watch market as a whole brought additional banks into the game. An impartial trustee company took care of all assets belonging to the three companies, including real estate, movables, machinery, tools, facilities and stock. In all of the negotiations, the involved parties took pains to ensure that it would be possible for some (and, in the best case, all) other ébauche manufacturers to come aboard under the same framework conditions in the future.

Merger Mania

Ébauches SA started operations on January 1, 1927. It had at its disposal company capital valued at 12 million Swiss francs, with a bank loan for an equal amount. The group moved quickly to agree on uniform pricing, eliminating competition among its members, coordinating the purchase of materials, and unifying important components of watch movements so that all components would be made according to the same specifications. The three member companies agreed to refrain, for a period of five years, from manufacturing and/or trading ébauches in any form whatsoever, both domestically and internationally. The result was an immediate 10 percent increase in the price of ébauches.

It then sought to further strengthen the cartel by integrating as many other ébauche manufacturers as possible and by absorbing the ébauche departments of vertically integrated watch companies. Nine independent factories joined the cartel in 1927, giving Ébauches SA control of an impressive 90 percent of Switzerland’s overall production.

The stock market crash of 1929 and the ensuing depression battered Ébauches SA’s sales but bolstered its ranks. Sales for 1930 fell 50 percent compared to the previous year. However, 30 additional ébauche manufacturers joined the group early in 1931.

The remaining 10 percent of Switzerland’s ébauches were produced by independent watch companies that, for individual reasons of their own, were unwilling to join the cartel. One of these was Eterna, directed by Theodor Schild, a relative of ASSA’s Cesar Schild. Theodor Schild was reluctant to split his business into separate entities, one to manufacture ébauches and one to manufacture watches. Ebauches SA offered renegades like Theodor Schild so-called “friendship contracts,” replete with all sorts of limiting clauses and conditions, which gave the reluctant firms some forms of control. The move worked. In 1932, seven companies moved into the Ébauches fold, including Eterna. Schild finally agreed to split Eterna into two companies, which he and his heir apparent, Dr. Rudolf Schild, continued to manage. The watchmaking part of the business was called Eterna SA. The ébauches-manufacturing part of the business, which became part of Ébauches SA, was christened ETA SA, an abbreviation of Eterna.

Ironically, Ebauches’s structure made it difficult to respond to the economic crisis. Forward- looking entrepreneurial steps were urgently needed to deal with the worsening business climate. However, such steps were not taken because the principles of the holding company accorded higher priority to the entrepreneurs’ freedom.

Instead, the cartel imposed protectionist measures “to ensure clear orderliness in the Swiss watch industry.” These steps led to the founding, in 1931, of a financial and controlling agency known as ASUAG, the Allgemeine Schweizerische Uhrenindustrie AG (General Swiss Watch Industry AG). ASUAG’s primary guiding function was to create an overarching “super holding” conglomerate that included the manufacturers of regulating components (like balances, balance springs and escapements) along with the manufacturers of movement blanks. ASUAG was a joint response by the Swiss watch industry and the Swiss government to the Depression. It was created through an investment of 50 million Swiss francs, a portion contributed by watch industry organizations and the rest by a grant from the Swiss federal government.

The Swiss government’s participation in the ASUAG holding company altered the original balance of power within Ebauches SA. Management regimes led by executives who were responsible to themselves and their shareholders were replaced by new teams led by government bureaucrats. Ébauches SA and ASUAG, the highest level of the corporate structure, exercised no leadership power for many decades, despite a great deal of financial resources and entrepreneurial talent. The new structure was risk-averse and produced few new ideas; strategies were designed to maintain the subsidiaries’ existing market positions. Passage of the so-called “Watch Statute,” a law designed to protect and regulate the watch market that took effect on March 15, 1934, reinforced the new bureaucratic structure. The new law sought to uphold existing prices by making it mandatory to receive official permission before exporting watch components, tools, machinery or plans. The edict also stipulated that new businesses could only be opened with prior official approval. The same restrictions applied to expansions, relocations and restructurings.The Watch Statute was like a state-sanctioned straitjacket similar to the old guild order that suppressed free thinking and a healthy competitive climate. Though it later underwent some changes, the restrictive statute remained in force until the early 1970s.

Every movement has its history and development. Today I want to introduce you the history of Swiss ETA movement.

“ETA SA has survived and often shaped the turbulent times that beset the Swiss watch industry in the 20th century.”

Watch aficionados know ETA as Switzerland’s most important manufacturer of mechanical and electronic watch movements. A subsidiary of Switzerland’s giant Swatch Group, ETA produces movements, movement blanks (widely referred to by their French name, ébauches, which are sold to outside assemblers), as well as the group’s Swatch watches. Few people, however, know ETA’s turbulent history. The company now known as ETA was born in the crisis of the Great Depression, carved out of the Eterna watch company to participate in a cartel of ébauches manufacturers known as Ebauches SA. ETA has survived, and to a great extent shaped, the often turbulent times that beset the Swiss watch industry in the 20th century.

The Ebauches/ETA story begins after World War I, when, after years of profitable munitions manufacturing, Swiss watchmakers resumed making watch components. The sudden surge in ébauche production soon outpaced demand. A regulating institution, Société Suisse des Fabriques d’Ebauches et de Finissages (Swiss Association of Ebauche Producers and Finishers), founded in 1917, could do little to prevent the descending spiral in prices and sales. By mid-1921, Swiss watch unemployment figures exceeded 30,000.

The problem was that some 40 ébauches manufacturers were competing to win contracts from slightly more than 500 companies that assembled complete watches. With supply outstripping demand, surplus components were exported to foreign countries. That created more competition for Swiss watches on world markets, and led to further job cutbacks in Switzerland. It was a vicious circle, in some cases aggravated by the banks in the Swiss watchmaking regions. Some bankers were overly generous in extending credit; by the mid-1920s watch industry debts totaled approximately 200 million Swiss francs.

Watch and banking industry leaders realized that only a fundamental reorganization could put the watch industry back on its feet. A first step occurred in 1924 with the creation of the Fédération Horlogère Suisse (Swiss Watch Federation), or FH. The new association united about 75 percent of Switzerland’s watch firms (both manufacturers and assemblers, known as établisseurs).

Another important step came on December 27, 1926. On that day Switzerland’s three movement-blank manufacturing giants — Schild SA (ASSA), Fabrique d’horlogerie de Fontainemelon (FHF) and A. Michel SA (AM) — established a corporate trust known as Ébauches SA. Ébauches was the result of a remarkable initiative by Cesar Schild. Schild was the director of the ébauche factory, ASSA, based in Grenchen, and grandson of Urs Schild, who had founded Eterna in Grenchen in 1831. ASSA had been the leading movement- blank manufacturer in Grenchen since around 1905. ASSA employed more than 300 people, its manufacturing facilities were highly mechanized, and it produced 5.8 million movement blanks in 1926. ASSA management could have been content to continue with business as usual. But not Cesar Schild. He understood the need for urgent action. He set out to create a cartel for ébauches producers that would stop the price slide that was killing the Swiss watch industry.

Schild met with executives at FHF. A family business since its founding in 1793, FHF had broken the one-million-unit barrier in 1913 and had continued to increase production ever since, despite the fact that FHF’s production facilities needed modernization. The two competitors laid their cards on the table and openly shared their sales figures and closely guarded business secrets. Both companies were financially healthy; neither was under any compulsion to merge with the other. From this position of mutual strength, the two entered into negotiations with the ailing A. Michel SA. At the time, AM was under the influence of a large bank that was exerting strong pressure on it in an effort to recoup the capital that it had invested in the firm.