By  on March 27, 2009

MILAN — Hard times call for hard decisions, but Swarovski executive board member Markus Langes-Swarovski said Thursday the latest wave of cuts at the crystal giant’s main production facility in Wattens, Austria, was necessary to safeguard the future of the business.

“From a business perspective, to ignore the present general conditions would be irresponsible,” Langes-Swarovski said. “After careful examination we have therefore decided on a plan of action for the [lasting] security of our market leadership and for the business location in Wattens.”

Swarovski on Wednesday revealed plans to trim 600 more positions at the site this year — to add to the 150 cuts signaled in February and more than 750 job losses in 2008 — reducing the Wattens workforce to 5,000. Around 500 more heads will go next year as the company relocates certain manual finishing techniques to “more cost-efficient business locations,” namely in Eastern Europe.

Langes-Swarovski said Thursday it was too early to specify where, but underlined these would be “near shore,” or close to Wattens.

Swarovski, which counts two-thirds of its production in the euro zone, has plants in eight other countries, including the Czech Republic, and employs 23,900 people worldwide.

Langes-Swarovski stressed the group’s new production facility in Qingdao, China, which is due to go online in the second half of this year, would not replace Wattens or any other site long term. He said the new factory would be independent from Swarovski’s existing product and brand portfolio, and operate independently of other Swarovski business locations in China, to serve the Chinese market.

“The market is shifting,” Langes-Swarovski said, citing a polarization between the premium and low-end and a fading middle market. “We weren’t in the lower segment, but the China investment is to capitalize on [that]….The activity [there] will not relate to the Swarovski brand.”

Langes-Swarovski said the company’s balance sheet had “weakened” due to the downturn, but that prudent financial management had allowed still for “a very good cash position.”

He said Swarovski, which has operated sites in and around Wattens since 1895, had revised down by 30 percent the 120 million euros, or $163.2 million, earmarked in September to modernize the plant. “Wattens is still the heart of our operation, particularly in terms of technology and innovation,” Langes-Swarovski said. “Those investments are trying to stabilize the role of Wattens. Swarovski as a brand will remain made in Austria.”

Langes-Swarovski said the recession and low-price competition in the standard components business from manufacturers in Egypt and China would likely dent Swarovski’s performance this year, and anticipated a single-digit decrease in revenues from 2.52 billion euros, or $3.7 billion, in 2008. However, he highlighted that the specific components business, which services the fashion industry, was “still very successful” despite the difficult environment, and ruled out price cuts.

Overall, the components business represents around a third of Swarovski revenues.

Langes-Swarovski also said the firm’s consumer business, which has been a growth engine for two years and in 2008 represented around 40 percent of revenues, was thriving. Langes-Swarovski cited aggressive retail expansion plans for 2009 with 98 new owned-operated boutiques and concessions and 121 partner-operated stores set to open by yearend. In 2008, Swarovski’s retail footprint totaled 897 directly operated units and 774 partner-operated boutiques.

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