Swiss Industry’s Time Has Come Again: Fashionable Watches Set Trend : Marketing: Once told to leave watchmaking to the Asians, the Swiss now dominate the trade through cost control and product development, top executives say.

Perestroika has hit Switzerland’s once-moribund watch industry: a recently launched wristwatch has a hammer and sickle for hands and a red dial with Russian lettering.

The perestroika model illustrates how sharp marketing with an eye for fashion have helped restore Swiss power in world watch markets.

Swiss watchmakers are headed for their third straight year of record revenue, buoyed by the success of the plastic-case Swatch, a quartz-controlled timepiece in trendy designs. Sixty million have been sold since 1983.

“We are the only ones to show we can hold off the Japanese in mass production,” says Nicholas G. Hayek, board president of Switzerland’s main watchmaking conglomerate, SMH, which accounts for three-quarters of industry exports.

He warns against complacency. Cost control and product development are the bywords in countering Asian competition in the fight for an estimated 500 million customers annually.

New medium-priced Swiss models, some using stylish hardwood or stone cases, also recaptured ground from Japanese manufacturers. The luxury watch trade, a traditional Swiss preserve, is booming.

In the 1970s, Far East producers rose to dominance. The Swiss industry, unable to match their cheap digital watches and facing high labor costs, posted big losses.

Nowadays it has trouble finding enough qualified workers.

With the major economies prospering, consumers will pay for watches that are fashion accessories, not just time-tellers. Swatches come in seasonal collections that now total several hundred models.

But a competitive Swiss industry re-emerged only after its 1970 work force of 76,000 shrunk to about 30,000 and two-thirds of the factories shut down.

The crisis spelled doom for scattered small shops making the more than 100 parts for a fully mechanical watch. Neat but disused plants still dot western Switzerland’s watchmaking belt.

Hayek was tapped in the mid-1980s by commercial banks propping up an ailing industry in which they were key shareholders.

“They said we have no more possibilities to fight Japanese and Hong Kong low-cost production; we’d better stop making watches,” Hayek, management consultant by trade, said in an interview at SMH headquarters.

“We came back with a report saying the contrary.”

Ernst Thomke, who conceived of Swatch and now is SMH chief executive, named the problems in 1982 near the peak of the crisis.

He charged watchmakers had not pulled together and knew little about their foreign markets, where more than 90% of Swiss watches and movements are sold.

Consolidated, automated and infused with talent, the industry last year reported sales of $3.1 billion, a third more than the once-leading Japanese. Another 20%-plus increase is expected this year.

Hong Kong is the top Swiss market, re-exporting most of the shipments. The United States, Italy and West Germany follow.

“Every brand has a message. It has to be clear, understandable and unique,” says Hayek, 61, who wears three Swiss watches on his arm.

Swatch grabbed U.S. and European buyers with pop colors, designs including see-through models and numberless faces, and a relatively low price, about $31 in Switzerland. A conservative touch --there are no digital versions-- didn’t hurt.

Enterprising Swiss soon launched other novelties such as a clip-on watch.

Hayek, born in Beirut to a Lebanese mother and American father, has run up enough successes in Switzerland to be able to operate with maverick flair.

Until recently, he says, the watchmakers had been “doing things the same way for 200 years” in a society “where people are not used to overcoming challenges.”

Hayek outlines the challenge of the 1990s:

“Our worry is that the Swiss watch industry does not make enough efforts to sell more watches,” he says. “Not only more expensive watches, but more watches.”