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ThePuristS interview Philippe Merk, CEO of Audemars Piguet

May 12 2010 at 6:07 PM

ThomasM  (Premier Login thepurist178)
AP Discussion Group

I am pleased to be able to share with AP fans around the world a recent conversation I had with
Mr. Philippe Merk, global CEO of Audemars Piguet, SA


You came in to AP to assume the CEO position from outside the company, back in late 2008/early
2009. What were your impressions of AP before entering it?

I had always considered AP a leading world recognized brand, firmly anchored in the minds and
hearts of its fans with iconic and authentic products such as the Royal Oak, but also with a long
standing tradition of watch making know-how encapsulated in collections such as Jules Audemars or
Edward Piguet.

To me, AP has always shown a strong commitment to Excellence, always pushing the limits further
while capitalizing on its roots of horological tradition since 1875.

How were the realities of the company different once you were inside?

My perception was confirmed in all aspects and even reinforced I should say! AP is definitely on
top of the pyramid in the very exclusive haute horlogerie circle.

Audemars Piguet has been an independent family business since 1875 with strong values of Tradition,
Excellence and Audacity. This ensures long-term stability and acts as a fertile ground for the
development of the company.

We have consummate R&D competencies in our two Production sites, one in Le Brassus (APLB) and one
in Le Locle (Audemars Piguet Renaud Papi), both financially rock solid, here again independent in
all aspects (mind and business relationships) and focusing on the development of new complications.

All together a very sound and long-term oriented business model!

Of course, it does not mean there is no competition. APs strength is to have always turned competition
into a positive challenge: to be at the edge of innovation, technology, and utmost quality in all
timepieces we create. For instance the AP escapement, Millenary Carbon One or Alacrit, just to mention
a few

Success is a long-term process.


Any change of regime, no matter how peaceful or well planned, is always fraught with unforeseen

That is, of course, true. The team around Georges-Henri Meylan, together with the board of AP, has
done an excellent job in moving the company to the next level. With GHM now being on the board, a new
management team is following the path opened by its predecessors, sharing the same values and ambitions.
In this perspective, any change of regime can only be seen as positive!

Changes are always fraught because of the climate of uncertainty they might generate. But time will
show that with a coherent strategy and clear vision of the direction we are heading to, doubt has no
reason to be.

A new team of committed professionals is today in place and all systems are running smoothly!

AP has passed the last 12 months - which were difficult for the entire industry - very well. Today,
our performance exceeds our expectations and we expect double digit growth for the first semester.

Over the course of the past year, what have you found to be your greatest challenge(s)?

Our first challenge was to adjust the company to the new demand situation of the market in the year
of crisis 2009. I think the adjustment was well done: we have extremely healthy stock levels today
and the company stands on very solid grounds.

The second challenge was to handle smoothly the necessary adaptation to ensure the long term stability
of the new management team and the way it could be perceived both internally and externally.


What achievements are you most proud of?

Well, I must say that I am proud of how we managed the economic crisis of last year. Audemars Piguet
has always highly valued the internal know-how and human resources, and we are proud to be one of the
few watchmaking companies that had no lay-offs in these difficult economic times, while continuously
investing in innovation.

Furthermore we did maintain our leading position in the top luxury segment. We are very satisfied with
current financial results with growth in most key-markets and the positive perspectives we foresee. I
can tell you, AP is a very healthy company!

Indeed, you came in during a very interesting time a time of great macro-economic distress.

Please share with us more details about how AP weathered this storm, now that the sun seems to be shining
through the clouds again?

Our key concern at Audemars Piguet has always been to make the most stunning and technically fascinating
timepieces of the highest quality. An economic downturn does not change this constant preoccupation we
have had since 1875. This resulted in the presentation of strong and coherent products at the SIHH 2010.
The feedback from the market was really excellent, both from retailers and customers. I am already looking
forward to the rich pipeline of new projects for the years to come such as a new distinctive 3D movement,
new developments on the Offshore and the 40th anniversary of the Royal Oak! Without revealing too much, I
can tell you that Audemars Piguet will pursue its Tradition of Excellence with a clear vision, always
pushing the limits of watchmaking


What do you see as the essential qualities of AP what are the core values that you will defend
with your professional life?

AP is unique as it was able to build an extremely strong niche in the top luxury segment with the iconic
Royal Oak and Royal Oak Offshore collections. This took place while maintaining strong and traditional
horological values and the craft that excites so many collectors and aficionados.

AP has found the subtle balance and bridge between innovative technology and horological tradition.

It is also the oldest manufacture still in the hands of the founding families and this is a strong sign
of consistency and independence. In essence, AP has been in constant evolution for 135 years with an
increasing acceleration. The driving forces behind all this are the competence and the commitment of
our employees as well as the clear vision of our future. I am also convinced that another essential
quality of AP has always been to be very close to our business partners and customers.

You know, it takes more than just pure marketing circus to be a key player in this industry! Furthermore
a key-player to last It is all about being authentic, which is definitely the case for our company.
Audemars Piguet has a long history and legitimacy and we are looking at the future with strong confidence !

Looking forward, what does the future hold?

Apart from future product developments I talked about earlier, we are establishing new partnerships
with world famous personalities, and we are currently working on a brand new worldwide advertising campaign.
You will be thrilled by what we will disclose in the months to come!

It has been asked whether or not AP has a stolen watches register. I believe you do, but it is
very little publicized. Can you shed some light on this?

Yes, this is correct. And we think it is an essential service to offer to our customers.

Our Customer Service department registers the stolen watches in a special system. If it comes back to
the manufacture for a service, our system generates immediately a pop-up warning. Then the legal operatives
enter the loop to solve the issue

Our timepieces gain significant value over time, they are much sought after even by ill-intentioned persons.
There should be no doubt in our buyers minds that if their AP gets stolen, it has very good chances to be intercepted.

There are feelings among a growing number of long time aficionados and newbie alike that

a. There are too many limited editions

b. AP is losing touch with its classical high horology roots to chase after the easy money of ever
more Offshore and Royal Oak variants

c. Speculators and flippers are given free rein, and that somehow, overheated secondary markets and
speculative secondary market prices are dangerous for the long term health of the brand.

How do you feel about each of these concerns?

In fact I dont think there are too many limited editions. The Limited Editions concern mainly the Offshore
line which is one of our best-selling collections, with many fans and collectors worldwide. At Audemars
Piguet we consider Limited Editions as opportunities of celebrating a special event, momentum or product
innovation. This is a great space of creativity and the vivid expression of a brand renewing itself continuously.

There are four main axes of Product Development at Audemars Piguet: the Extreme Sports line with Offshore,
the Prestige Sport line with Royal Oak, the Classical Contemporary line with Jules Audemars, Edward Piguet
and the Millenary, and finally, the Millenary Ladies line for women. Each of these four axes embodies APs
values of Tradition, Excellence and Daring. They all correspond to a strong demand on the market.

In this perspective, we are not favouring any line but rather building our product offer with these four complimentary pillars.

Each one of these axes is a different facet to express our haute-horlogerie roots, with a twist of audacity.

As an example of our classical haute-horlogerie offering, we will be launching next semester the new Jules Audemars
extra-plat and extra-plat with perpetual calendar. We already have a clear agenda of development for the future.

Being a brand with iconic products implies the existence of a secondary market. I see the vitality of
Audemars Piguet on the secondary market as the reflection of the brands desirability. All the timeless
values encapsulated in an AP make it a value keeping object and the secondary market knows it very well.
There would be no secondary market if there would not be a strong primary market. Only legitimate products
of ultimate quality can generate this.

I guess its the reward of success!

What are you doing, specifically, to address the always present issues of

1. Quality control, both for new production and after-sales (SAV) repairs

2. SAV turn around

Audemars Piguet never compromises with quality. At each step of the production, the watchmakers do an
auto-control on their work which means that they are responsible for their quality. We are re-enforcing
the control time observation. On every watch from entry product such as the 15300 Royal Oak up to and
including the Grande Complication, all tests are applied in a strict and coherent manner with the same
level of accuracy and attention.

The similar procedure is applied on the SAV repairs (at the HQ level, at the regional level and also in
local after-sales services). We are consistent in all procedures. This was improved over time. The quality
control novelty is the introduction of new technologies to even better understand the behavior of our
movements over a longer period. Shock and stress test, wearing simulation are among some of the many tests
we make on our watches.

Any special insights into product development? Any sneak peaks?

Well you know, summer time is coming.

Sun, fun, outside activities AP will be presenting exciting new models under the heading black and white
that will be targeting the needs of the young and young in mind customers.

You want a sneak peak?

Well, June will set the stage for the launch of the first ever AP Diving Watch. The Diver will have a 300m.
water resistance and specific technical features and above all, an irresistible design! You'll know all about
it very soon!

(editor's note: The Diver was introduced to the trade at SIHH 2010, and was covered here and elsewhere on the net, and by this time, I believe in print as well.

The "official" public launch is scheduled for June, with a pretty bangup campaign that will be "mind blowing" - just as the Grand Prix launch was, and the Survivor before that.)


Last question what is your favorite watch model, regardless of brand? Favorite AP?

The timeless and super elegant Royal Oak model 15202 with the caliber 2120 remains an unsurpassed reference
point in the art of watchmaking for me. It contains everything I am looking for in a watch.

I wear it sometimes when I travel. It happens very often that I am approached by AP aficionados who want to
see the origins Royal Oak. Sometimes they own themselves an AP, sometimes they are just watch lovers. Despite
the fact that we were strangers a few minutes ago, sharing our passion about Audemars Piguet brings us together.
It is a little bit like belonging to a very exclusive, yet very friendly club Just like!

I dont think any other brand can generate so much enthusiasm. This is why I am so proud of heading this
Manufacture towards the future!

Thank you for your time, I know you have a very busy travel schedule!

(moderator's note:
AP NA will be holding a fund raising auction on Monday, May 17, 2010 in Manhattan.
Please contact the AP NY Boutique at (212) 688-6644 for more information)

"A Purist does not believe in gilt by association. Respect, AND disdain, have to be earned..."

This message has been edited by thepurist178 on May 13, 2010 7:15 PM

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