At Home With A. Lange & Söhne
New York Times, Nov. 26, 2015
DRESDEN, GERMANY — Punctuality is a matter of professional pride for watchmakers. So when Wilhelm Schmid, chief executive of the German watch brand A. Lange & Söhne, arrived late to meet his boss at the airport, he was a little anxious.
Mr. Schmid’s boss, Johann Rupert, chairman of Compagnie Financière Richemont, was flying in from St.-Moritz with his son, Anton, for the Aug. 26 inauguration of A. Lange & Söhne’s new watch manufacturing site in Glashütte. The town, about 45 minutes south of Dresden, in Saxony, is the historic home of Germany’s watchmaking industry.
Adding to the pressure, Mr. Rupert was not the only person Mr. Schmid needed to impress. The men would be joined in Glashütte by a group of dignitaries — notably, Chancellor Angela Merkel, who was visiting a camp for migrants in nearby Heidenau before speaking at the factory.
“Right before the chancellor arrived,” Mr. Schmid, 52, said. “From then on, I knew the plan would work out; the machine was running.”
He could have been speaking literally. The 58,000-square-foot, carbon dioxide-neutral watchmaking facility had opened in April after more than two and a half years of construction. With its fleet of cutting-edge CNC machines, dust-free environment and large atelier windows with views of the surrounding countryside, the energy-efficient building — now home to about 200 employees — unites the watch assembling and finishing departments, as well as logistics and raw parts production.
At a cost of tens of millions of euros, the factory opens a significant new chapter in the company’s 170-year history. And for Mr. Schmid, a native of Germany who joined A. Lange & Söhne in January 2011 after a successful career at BMW, the opening was yet another milestone in his assimilation into the high-end watch business. So far, it appears that he has developed a keen understanding of what makes the industry tick.
“I’ve been in the situation where I’ve had to push luxury products because production was going when there was no demand and I’ve learned that lesson the hard way,” said Mr. Schmid, who also is a self-professed car fanatic and the eldest son of a Ford dealer.
“So my very clear target is to always avoid having more watches than customers.”
And with the expansion of Lange’s production facilities, Mr. Schmid has had to disabuse collectors of the notion that more manufacturing space implies an increase in output.
“Unfortunately, a building doesn’t build watches,” he said. “My life would be so much easier if it did. We have the same capacity as we had six months ago.”
In that time, however, demand for high-end watches has softened, placing even greater pressure on brands to maintain their profitability. A. Lange & Söhne — like all Richemont brands, which include Jaeger-LeCoultre, IWC Schaffhausen and Panerai, as well as the Yoox Net-a-Porter Group — does not disclose individual sales figures. But at the group’s annual general meeting on Sept. 16, Richemont announced that watch sales for the five months that ended Aug. 31 had declined 1 percent at constant exchange rates.
For the first nine months of 2015, exports were down 2 percent overall, according to the Federation of the Swiss Watch Industry. In Hong Kong, Switzerland’s No.1 market for watches, however, the decrease was far more severe: Exports to the region dropped 20.5 percent from the same period in 2014.
Mr. Schmid said the decline in Chinese demand was not as detrimental to Lange’s bottom line as it might seem. “Our target market is not Asia, America, Europe or any country — our target market is watch collectors, and you can find them anywhere,” Mr. Schmid said.
But without increasing production, how does Mr. Schmid intend to make the company grow? By selling more high-end watches than less-expensive models.
“There are many ways to skin a cat, as we know,” he said.
By way of explanation, Mr. Schmid cited two of Lange’s best-known models: the Grand Complication — which contains 876 parts; features a grande sonnerie, perpetual calendar, split-seconds chronograph and flying seconds; and retails for 1.92 million euros, or $2.1 million — and the Saxonia manual wind, which sells for $14,926.
“Statistically, they’re each one watch,” he said.
While Lange would have to sell quite a few Grand Complications to recoup its investment in the new manufacturing site and to grow the business — especially considering the weak Asian market — Mr. Schmid remains circumspect about future plans.
“The vision of the new building was not to increase turnover, but of course the decision to construct a new building was to give room for growth and we will do that within our DNA and within the level of quality we are known for,” he said. “I strongly believe everything has to grow — not by 50 percent every year, but we have to grow. Otherwise, you lose steam.”
If any brand knows what it’s like to lose steam, it’s A. Lange & Söhne. After World War II, the East German government expropriated the company — which dates to 1845, the year that a Dresden watchmaker, Ferdinand Adolph Lange, established a factory to produce precision timepieces in Saxony — and the Lange name all but disappeared. In 1990, after Germany’s reunification, the founder’s great-grandson, Walter Lange, resurrected the brand.