COLUMN ONE : Just Watch the Swiss Go--Again : The Japanese challenge has been met. Both inexpensive and luxury timepieces fuel the European recovery.

For five centuries, the craft of watchmaking was what made life tick in the valley towns and hillside hamlets in the Jura Mountains of western Switzerland.

In the 100-mile arc between Geneva and the Rhine River city of Basel, watchmaking was the economic mainspring and one of life’s noblest callings. The whole wide world operated on Swiss time.

Then came the battery-powered quartz watch revolution.

Confronted by a dynamic, aggressive quartz industry in Japan, the Swiss watchmakers--inventors of the minute hand, the second hand, the self-winding watch and the waterproof watch--fell on hard times.

Between 1970 and 1985, nearly two-thirds of Switzerland’s watchmaking firms went out of business. In 1970, there were 1,620 companies employing 90,000 people; by 1985, fewer than 600 companies employed 32,000. Unemployment in some of the high valleys above Lake Neuchatel exceeded 20%, an economic disaster in the Swiss context.

In many other countries, this would have been the end of the story: rest in peace for another tradition-bound Western industry overtaken by the Japanese.

But Switzerland, although much smaller than Japan--6 million people compared with 120 million--has its own commitment to national unity and collective purpose. Its bankers, businessmen and engineers hunkered down under the Japanese challenge. Independent companies consolidated their resources. Working together, most of the Swiss companies converted to quartz.

Meanwhile, the makers of traditional luxury watches came out with spectacular new models that could do everything from anticipate leap year to predict a solar eclipse--all without batteries.

Design engineers at one of the new consolidated companies, SMH (Swiss Corp. for Micro-Electronics and Watchmaking), were assigned the job of inventing a highly accurate, waterproof wristwatch that would sell for less than $30. By reducing the number of parts from more than 100 to 54, the engineers succeeded.

The result was the hugely successful brand name Swatch, which has been one of the keys to the Swiss industry’s remarkable recovery.

Figures just made public by the Assn. of Swiss Watchmakers in Biel show that in 1989 the Swiss industry reached an important milestone, accounting for more than 50% of the revenue of watch sales worldwide.

Ironically, one of the greatest increases was in Japan, where sales of Swiss watches surged by 70%, to $295 million.

The Swiss industry is not the dominant leader it was in the years after World War II. “After the war we were practically the only watchmakers in the world, and watchmaking was the biggest industry in Switzerland,” Max Hool, general secretary of the watchmakers’ association, told a visitor.

But strong sales in the higher-price sector, combined with the counterattack against the Japanese on the quartz front--mainly with the popular low-price Swatch--have brought the Swiss back into the race.

Analysts say that the higher sales result in part from the Japanese government’s lowering of prohibitive import duties on foreign-made watches, from 30% to 3%.

But Swatch executives also mounted an aggressive marketing campaign in the heart of Japan. At one point they draped a 500-foot-long Swatch wristwatch over the side of a Tokyo skyscraper.

“We wanted to do something spectacular on our enemy’s home ground,” Swatch spokesman Marianne Egli said in an interview.

The Swatch is only six years old, but by the end of last year its total sales had exceeded 65 million, company executives said. The Swatch, which now carries an average price tag of about $40, accounted for a good part of the Swiss comeback.

At first, the colorful plastic watches--sometimes so boldly fashionable that it was difficult to tell the time--were not welcomed by some of the old guard in the Swiss industry. An earlier experiment with inexpensive “pin-lever” mechanical watches, in an effort to meet the Japanese challenge, had ended in failure. Many felt that the Swiss reputation for accuracy and quality had been damaged in the process.

“Initially, there were some who opposed the Swatch idea,” Hool said. “But now practically everyone credits it with rebuilding the Swiss industry and keeping Switzerland in the game.”

The luxury companies borrowed some ideas from the Swatch promoters and began to advertise their watches as articles of fashion that also keep time.

Ornate, jewel-encrusted watches were introduced into the market, and they sold well--a direct reversal of the attitudes that had brought Switzerland into the watchmaking business in the mid-16th Century.

At that time, Geneva and the surrounding region were under the austere religious leadership of Protestant John Calvin. Calvin regarded jewelry as an unnecessary vanity and encouraged jewelry makers to switch to watchmaking, which had a practical, acceptable application.

Switzerland’s overall watch sales for 1989, the association reported, were a record-setting $4 billion-plus. In Japan, meanwhile, the Citizen watch company reported only a modest increase of 1% in the Japanese industry, compared to 20% for the Swiss.

The generally positive picture in the Swiss industry has put the watchmaking craft back in demand, so much so that the Union Bank of Switzerland, in a recent report on the industry, expressed concern about a shortage of skilled craftsman.

“Although it has lost nearly 60,000 jobs since the beginning of the 1970s,” the report said, “the Swiss watch industry currently suffers from a shortage of skilled labor.”

The shortage has revived interest in Switzerland’s five watchmaking schools, among them the Ecole de Mechanique here in La Chaux-de-Fonds, a hillside town where auto pioneer Louis Chevrolet and architect Le Corbusier once lived.

“The quartz watch revolution gave the false impression that there was no longer a need for watchmakers,” Ecole de Mechanique’s director, Claude Laesser, said. “People said that the watchmaking trade was obsolete. A total lack of confidence set in.”

In 1970, when the Swiss industry was at its peak, the school had 160 students. They could look forward to a salary of about $50,000 a year after four years of study and at least three years of apprenticeship.

But in the doldrums of the quartz revolution, interest among young people fell off precipitously. In 1986, only two new students enrolled at the school. By the time Carole Forestier, 21, began studying there three years ago, she said, her friends ridiculed her.

“They told me I was a fool,” she said, smiling shyly during a break in her studies. “They told me it was a dead craft.”

But now, with guaranteed jobs awaiting them in the revived industry, Forestier and her colleagues are no longer objects of ridicule.

The shortage of skilled workers has become so acute that some of the famous high-quality watch firms, like Patek Philippe in Geneva, have become concerned about finding the artisans needed to hand-craft watch parts, engrave gold cases and enamel watch faces.

Expensive, high-quality watches are still the base of the Swiss industry. While taking in more than half the revenues in 1989 watch sales, Switzerland made only 10% of the watches sold on the world market. The average price of a Swiss watch was $60, contrasted with $9 for a Japanese watch and less than $4 for a watch made in Hong Kong.

Despite its prices, which range from $1,500 to $16,000, Patek Philippe has a waiting list of five months to several years for its watches. It produces only 15,000 watches a year, contrasted with more than 400,000 Rolexes, which are much larger and turned out with mostly automated equipment.

“We have had an especially difficult time finding painters and engravers,” Patek Philippe spokesman Petra De Castro said.

This encourages Laesser in his hope of rebuilding the once-proud watchmaking school in La Chaux-de-Fonds, where nine new students enrolled this year. Next year he hopes for more.

“There is a gap,” Laesser said. “We have no watchmakers between the ages of 40 and 25. There is a lost generation.”