How TAG Heuer Survived the Great Gold Calamity

One used to say that the harsh time for the watch industry in the 1970s was due to the quartz revolution. I disagree. The development of less expensive watches based on quartz is a consequence of a global reason: the dollar drop against the Swiss franc. And this drop was directly linked to the abandonment of the gold standard that had ruled the world since 1946 and the Bretton Woods Agreement for monetary and exchange-rate management.

In the 1970s, I was spending half of my time in the United States to drive the business. I was very aware of the economic situation. So, when on August 15, 1971, President Richard Nixon addressed the nation about the US’s monetary troubles, I knew it was not a good signal for my company and for Swiss watchmakers.

President Nixon explained that he had to defend the US dollar against speculators to protect his nation. Therefore, he had decided to cancel the direct and systematic convertibility of the US dollar to gold: the Nixon shock. Gold was to be paid US$35 from 1946 until 1971 and it raised inexorably up to $42.22 in 1973. And then, gold disappeared from the international agreements in October 1976, simply to become a raw material among others.

The subsequent switch to floating exchange rates saw a sharp appreciation of the Swiss Franc. For Swiss watchmakers, this meant our watches became so expensive that they were simply no longer competitive in key markets such as the US. The US dollar was the equivalent of CHF4.33 in 1974. In 1975, it dropped by 48 per cent within a few weeks and sales dropped even more, to 53 per cent. What could we possibly do against this new reality?

For well over a decade, from 1960 to 1974, Swiss watch exports had been growing constantly on an annual basis. In 1975, however, the figures suddenly started to drop, which came as a shock tothe entire industry. That year, the drop was 22.1 per cent in pieces and 16.6 per cent in value. From 1970 to 1979, the dollar lost 60 per cent of its value against the Swiss franc. Gold was not there any more to reinsure, to protect and to preserve the international balance. We had to draw the drastic conclusion that, in these conditions, we were not competitive enough to throw ourselves into this battle. The years 1975-1982 represent the toughest period of my life—and probably also for the entire Swiss watch industry.

At Heuer, we had decided to develop the company through our own electronic division and we were committed to investing in its diversification. In a way, Heuer-Leonidas had mastered the switch to quartz technology with the Microsplit and the Chronosplit. We were ready! But our successful “Microsplit”, which was the world’s first pocket-sized LCD quartz stopwatch accurate to 1/100th of a second, had to be sold near its production cost to remain competitive. Everything was different on this new market: retailers, after-sale service, pricing, customers.

Electronic devices were not the new mechanical chronographs; nor was quartz the new gold in this new world. But the paradox is that, while we were struggling with the results, with the consequence that we were lumbered with liquidity problems, Heuer was hip and trendy. The partnership with Ferrari was doing very well; it was offering glamour, boldness and consistency to our brand. It was not solely a matter of chronographs—Heuer had a bright brand image.

And if one timepiece from the 1970s should remain in the mind, the odds are that it would be the gold Heuer Carrera 1158 CHN, the one that was offered to the famous drivers, with their name and blood type engraved on the caseback: 18ct gold, iconic bracelet, also 18ct gold with the Milanese mesh. Twist of irony or gold power? I let the reader decide...

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