* Tag Heuer to use Seiko parts as Swatch cuts deliveries
* Parliament votes to toughen "Swiss Made" rules
* Brands investing in production, workers
By Caroline Copley and Nathalie Olof-Ors
ZURICH, March 21 Watchmaker Tag Heuer, squeezed
by a cut in supplies from Swiss rival Swatch, said on
Wednesday sourcing parts from Japanese peer Seiko will
not tarnish its prized "Swiss made" tag.
The move by Swatch, for decades the main supplier to the
Swiss industry, has sent watch companies scrambling to build
in-house production or form alliances with alternative makers of
movements, dials and cases.
Swatch has said repeatedly it wants to concentrate on its
own brands and encourage rivals to build their own production
Tag Heuer, a unit of French luxury group LVMH said
a deal it announced on Wednesday to use parts from Seiko
Instruments Inc. would not hurt its "Swiss made" image as the
company is a member of the Swiss Chronometry Society.
"We are the first company to announce in a transparent way
that we are going to fit our movements with parts from Seiko,
which are known as among the best," Ch ief Executive
Jean-Christophe Babin told Reuters.
"The Swiss brand guarantees quality and reliability but not
necessarily the fact that 100 percent of the components come
from Switzerland," he said, adding no-one worries that
Switzerland imports millions of cases and dials.
The Seiko components will be used in Tag Heuer's Calibre
1887 mechanical chronograph.
"This seems like a good thing. Given the need for an
alternative supplier, of course competitors will highlight that
Seiko is Japanese even if the parts and movements are made in
Switzerland," Kepler analyst Jon Cox said.
But Cox said the reduction in supply would benefit Swatch's
margin as it will be able to charge what it likes for its
components, while rivals are forced to invest in production.
The Swiss parliament is currently debating whether to
tighten rules on what constitutes a "Swiss made" product, in a
bid to stop competitors knocking off poorer imitations which
dent the country's reputation for quality.
BLESSING OR CURSE?
The Federation of the Swiss Watch Industry backs more
stringent rules, saying they will help protect jobs.
But smaller manufacturers, most at threat from Swatch's
cuts, argue this could be another nail in the coffin.
Many Swiss exporters hurt by the surge in the Swiss franc
are moving production abroad. But the watch industry -
Switzerland's third most important export sector - is tied to
keeping production in the country.
The lower house of parliament last week proposed at least 60
percent of a watch's value should be produced in Switzerland, up
from a current law that requires 50 percent of movements to be
manufactured domestically. The motion must still be passed by
the upper house.
Tag Heuer, which has forecast sales of 1 billion Swiss
francs this year, is building a new production site to create an
extra 100 jobs, while Swatch wants to create at least 500 jobs
in Switzerland this year.
With unemployment around a low 3 percent, watch makers are
turning to nimble-fingered hairdressers and manicurists as they
look for staff.