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CORPORATIONS: 5 Billion Time Signals

6 minute read
TIME

Arde Bulova, whose company sells more jeweled watches than any other in the U.S., was wound up like a mainspring. It was the middle of his busiest season. And the Justice Department, looking into the American watch industry’s dealings with the Swiss cartel, had made what he thought was an unreasonable request. It had asked Bulova, along with other U.S. watch companies, to turn over hundreds of documents concerning their business, and had set a deadline for last week. Said Arde Bulova: “I wanted to answer them very briefly and simply: ‘Don’t bother me.’ But our attorneys told me we had to comply with the subpoena.”

Bulova Watch Co. makes no secret of the fact that it does business with a cartel. Like other U.S. watchmakers who import Swiss movements, it has to; the Swiss passed a law in 1951 cartelizing their entire watch industry. Since 86% of all jewel movements sold in this country come from Switzerland (about 70% of Bulova’s do), virtually every U.S. maker deals with the cartel. In doing so, the industry knuckles under to a tightly closed shop. The Swiss dictate how much watches are to be sold for, where they may be sold, and how many a manufacturer may have. Furthermore, they limit the use of watchmaking machinery bought in Switzerland—if a watchmaker is lucky enough to be permitted to buy it.

One reason why nobody has ever broken the cartel is that nobody has been able to compete with the Swiss in price. The cartel puts a tag of $4 on a 17-jewel movement; the U.S. tariff adds another $2.10. To make a 17-jewel movement in the U.S. costs $10.50. Higher duties narrow the price spread for 21-jewel movements. Therefore Bulova, biggest of the importers, has been forced into making only 21-jewel movements in the U.S. Although Bulova is the biggest U.S. manufacturer of jeweled watches, its production, along with the rest of the U.S. industry, has been dropping in the face of tough Swiss competition. Bulova now turns out almost a third of the estimated 1,700,000 jewel movements produced in the U.S., as well as watch casings for all the movements it imports.

Unceasing Repetition. Arde Bulova has worked out his own method of doing business with the cartel with one hand, and competing with it with the other. In Switzerland, where his company has a plant, he had to join the cartel; in the U.S., he has kept on top in a business noted for freewheeling competition.

Bulova started in the watch business in the Manhattan jewelry shop run by his father, an immigrant who learned the watchmaking craft in Czechoslovakia. Later, while the Swiss still depended mostly on handwork, Bulova expanded mass-production methods in the U.S., introduced more standard and interchangeable parts. These innovations, plus agressive advertising and sales promotion, masterminded by President John H. Ballard (Bulova is board chairman), were mainly responsible for lifting Bulova into its leading position among U.S. watchmakers.

Back in 1927, when radio was still young, Ballard began buying radio spot announcements, made the name Bulova synonymous with watches by dinning “Bulova Watch Time” into American ears an estimated 5 billion times in 26 years. Bulova’s sales have climbed from about $4,700,000 in 1927 to more than $60 million in the last fiscal year (ending March 31), when the net profit was $2,684,648.

Unobstructed View. The only executive who has been with the firm longer than Ballard (who began as an office boy in 1909) is Bulova himself. A man of strong opinions, he likes to impress his own ideas on anyone who works with him. At his luxurious home in Stamford, Conn., he designed an outdoor swimming pool with a rollback dome, so that it could be enclosed and heated in the winter. When he became interested in helping wounded veterans, he went about it in his own way. He built a $1,000,000 school at Woodside, N.Y. to teach watchmaking; since many of the students were paraplegics, he equipped the building with ramps and doors that opened by electric eyes. All graduates (435 to date) are placed in jobs in their home towns, unless they choose to go into business for themselves.

Sure of his likes, Bulova will occasionally admit that he is wrong. Because he admired the design of the Washington Federal Reserve Building, he used it as a small-scale model for his new $10 million plant near New York City’s La Guardia Airport. The building’s showpiece was a lobby designed like a planetarium, and at night, nearly 7,000 stars twinkled from its ceiling in a perfect replica of the Northern Sky. But when Bulova saw it during the day, he thought it looked ugly, had it torn out and replaced with Plexiglas.

Impossible Competition. By devising better methods and designing better machines, Bulova has increased productive efficiency by a third since 1941. During the war, Bulova’s machines and skilled workers switched 100% to defense, turning out such intricate parts as timing devices and fuses. Now that electronics are beginning to replace clockwork mechanisms, Bulova’s research subsidiary, under General Omar Bradley, is moving into that field, while working to keep watchmaking skills alive. Bulova recently started operating a Government-built plant at Rolla, N. Dak., the only one in the U.S. to teach Chippewa Indians to make jewel bearings (synthetic sapphires) for watches and defense products.

But Bulova knows that better machines alone are not enough to compete with the Swiss. Because watch parts are so minuscule (25,000 tiny screws can fit into a thimble), watchmaking still requires skilled handwork. The women who do the job average about $70 a week, v. about $18 for similar work in Switzerland.

For that reason, Bulova thinks the Justice Department will come a cropper in its efforts against the Swiss cartel. Says he: “They can’t do anything about the situation. Sure, the Swiss watchmaking industry is a cartel. But the Justice Department can only take steps where free competition in the U.S. is interfered with. There is no cartel here.”

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