MASTER MECHANICS

4 EDITORIAL europa star
“We are not in luxury.
“We are in quality.”
These few concise words say it all.They
describe how the family owners of
Hermès responded to Bernard Arnault
(LVMH) at the announcement, legally
necessary, that he had acquired—as
secretly as it was‘amicably’—17.7 percent
of the shares of their company.
“We are artisans. Our goal is to make
the best products in the world. We
are not in luxury. We are in quality,”
stated Bernard Puech, President of the
board of directors of the Hermès limited
partnership company. This legal
arrangement guarantees control of the
business to the family, the major shareholder,no
matter what happens,even if
the family no longer has majority control
(today it holds approximately 73
per cent of the company). As Bernard
Puech adds, “Even it there is only one
single family-held share, the family will
maintain control.”
We will not venture into the various
possible outcomes of this ‘friendly’ hostile
action, which was immediately and
energetically rejected by Hermès. The
brand obviously fears that the particular
friendship of Arnault might become
too insistent and end up suffocating it
one day. But rather than focus on the
strategy of the ‘kiss that kills’, let’s look
at the forceful response of Hermès that
differentiates ‘luxury’, of which LVMH is
the most striking example, from ‘quality’,
which is of a whole other order.
The subtext of what Bernard Puech is
saying is that quality in the long term—
Hermès is in its sixth generation of managers—cannot
bend to the strategic
family policies of globalized finance. He
goes on to emphasize in passing that
“the structures that have allowed this
attack are the subsidiaries of LVMH
based in Luxembourg,the United States,
and especially in Panama, a country
that is not the most transparent when it
comes to financial regulation and the
source of funds.” Moreover, as the
directors of Hermès are saying, beyond
the financial engineering that made
this happen, there is a deeper incompatibility,
which is cultural. Luxury is
a status; quality is a value. Luxury
addresses the exterior; quality addresses
the interior. Luxury is an image;
quality embodies a product. Hermès,
they say proudly, “is not a signature; it
is a cultural soil, a culture incompatible
with that of a large group.”
This way of considering itself as a ‘soil’
that must be cultivated to grow new
fruits ‘every season’, this manner of
envisioning time over the long term
are culturally at odds with a financial
policy that seeks, on the contrary, to
annihilate time in its immediacy and in
the instantaneousness of the flux of virtual
transactions.
Beyond the case of Hermès versus
LVMH, the shock of cultures concerns
all of us.The battle that is being carried
out on the high-end product level is
raging everywhere else as well. It is
part of what we call ‘the great choices
of society’. Do we want to favour the
absolute race for performance, the
relentless pursuit of growth at any price
that demands instantaneity? Or do we
opt for the ‘soil’ that will perhaps not
give immediate fruits but that we can
certainly cultivate for many years to
come? In other words, do we want to
regulate,organize and plan for the long
term or do we prefer to leave everyone
free to grab up as much as they can in
the shortest time possible?The answers
RPierre M. Maillard Editor-in-Chief
are not insignificant. They will fashion
the future, for better or for worse.
As you can see, we are way beyond
watchmaking, whether it be ‘luxury’ or
‘quality’.And, having observed Hermès’
activities in watchmaking, we can certainly
testify that it has been this ‘culture
of the soil’ that has dictated the
brand’s patient growth. Step by step,
without cutting corners, by planning its
activities in terms of decades, and by
not claiming to be something it is not,
Hermès has, in thirty-two years, gradually
acquired the metier of timekeeping,
of which it can now rightfully be proud.
The moral of this story is that the
most high performance brands are not
always those that claim to be. As
Hermès declares, “Since going public in
1993, the annual growth in net profits
of LVMH has been 7.6 per cent while
that of Hermès has been 14.7 per cent.
The shares of LVMH have risen by a factor
of six on the stock exchange—
those of Hermès by 35.”
The believers in the long term have
thus every reason to continue to cultivate
their soil.