Family feud rages as Swarovski empire loses its lustre

Crystal-studded clouds reflected in a pond, an oversized crystal chandelier surrounded by mirrors: the headquarters of the Swarovski crystal empire are every bit as glitzy as you might expect -- but the sparkle can't distract from a bitter family feud over the company's future.

Normally, 650,000 tourists flock to the site in the town of Wattens in Austria's mountainous Tyrol region every year.

But the coronavirus pandemic hasn't only left it deserted -- it has also magnified much deeper issues for the company.

Exactly 125 years after founder Daniel Swarovski developed a machine to cut glass to shimmer like diamonds, his great-great grandchildren now reign over a diversified operation -- offering rhinestones to fashion brands, binoculars to hunters, and jewellery and crystal figurines of characters from Mickey Mouse to Princess Leia.

But CEO Robert Buchbauer says drastic change is now needed.

"We are forced to reimagine and rescale our entire Swarovski business," Buchbauer tells AFP at the Wattens HQ, framed by a selection of Swarovski-embellished robes.

Abandoning the masses

Swarovski's crystals may have adorned the outfits of celebrities like Beyonce and Marilyn Monroe and been used by designers including Christian Dior, but Buchbauer says among business clients they are losing their lustre.

Crystals made by competitors in China sparkle just as brightly -- for as little as one percent of the price.

To this already ruinous competition, Buchbauer says, the pandemic has added "sales shortfalls on a gigantic scale".

Overall revenues for crystals are projected to plummet by 30 percent, from 2.7 billion euros ($3.3 billion) last year down to about 1.9 billion.

Long-planned, sweeping cuts have only become more urgent, Buchbauer says.

He wants to make Swarovski's crystals more exclusive, producing fewer, larger and more colourful products that can be sold at a higher price.

Mass-market products like manicure sets and mobile-phone cases graced with Swarovski crystals may have given the company a wide appeal, but they have no place in the future, he says.

Neither will around 750 of its 3,000 stores worldwide.

The downsizing will also mean laying off about 6,000 employees.

The plans are already under way, with about 1,200 employees in Wattens losing their jobs this year and a further 600 posts expected to go in 2021.

Unless his plans are executed in full, Buchbauer says, "we'll end up among the losers."

'Steering toward a reef'

Other clan members are convinced that customers who have already been turning to cheaper competitors won't pay higher prices.

Paul Swarovski, a shareholder and former member of the executive board, says he wants to stop Buchbauer's plans "before everything goes down the drain".

He's been joined by Nadja Swarovski, one of three members of the executive board, as well as her father Helmut and her uncle Gerhard.

In the cut-throat luxury goods industry, Swarovski is one of few entirely family-owned businesses left run as a limited partnership.

Initially this was a useful structure for a small-scale manufacturer but all sides agree it is now an impediment for the international, multi-billion-euro operation.

Buchbauer, who became Swarovski's first ever CEO in April, won approval from shareholders for his own proposal which would bring the Wattens operations under the umbrella of a holding company.

The plan won the backing of family members holding around 80 percent of shares -- a "legally effective" decision, says Buchbauer, who stands to gain more power from the change.

Nadja, Helmut, Gerhard and Paul Swarovski and others objected, saying that the roughly 20 percent of shares they hold gives them veto power.

They have filed for arbitration, hoping that Buchbauer's move will be nullified.

Paul Swarovski insists Buchbauer must go.

"As long as the captain who is steering us toward a reef has his hands at the tiller, one has to make sure to get him away from the tiller," he says.

Bleak outlook

Meanwhile, members of the clan posting photos of luxury holidays on social media or descending from helicopters for meetings in Wattens have only added to the frustration and disbelief of employees, says union representative Selina Staerz.

"We don't feel like we are the heart of the company anymore," Staerz told AFP in between advice sessions for laid-off staff.

In a region otherwise dependent on tourism where Swarovski is the single largest employer, ex-employees may struggle to find new jobs.

Though Buchbauer says no further cuts would be necessary after 2021, rumours persist that the whole operation will be transferred to neighbouring Switzerland.

Either way, Staerz says, people have lost faith in an employer once lauded for providing benefits like childcare and housing.

Moreover, she says many staff don't believe that Swarovski will succeed in becoming an affordable luxury brand.

"The super wealthy don't need our Swarovski crystals. They can buy diamonds," she says.