THE Swiss watchmaking industry owes its life to Swatch - those jazzy, brilliantly colored plastic watches beating time on the wrists of over 80 million people.Like McDonald's of old, Swatch can boast "millions sold." Its secret is fashion. The low-priced, mass-produced, quality watch comes out in dozens of new color combinations and designs each fall and spring. In the early 1980s, Switzerland's watch making industry was rapidly losing ground to lower-priced foreign competitors. Radical changes were needed. Nicolas Hayek, a dynamic business consultant, suggested merging the country's two largest watch manufacturers and streamlining them. The result was a new, merged company, SMH, now headed by Mr. Hayek. SMH now produces the Swatch as well as several other brands, including the top-of-the-line Omega watch. SMH has become a highly automated, no-fat company with healthy profit growth. But even high-tech can't save a company if it doesn't have good products. "The Swatch gave the Swiss watch making industry its strength back," says Hanspeter Rentsch, vice president and general counsel for SMH. "It's our world trademark." People buy Swatches because of their chic looks, high quality, and low price of 50 Swiss Francs ($40). The highly automated production of the Swatch allows the manufacturers here in Grenchen to offer all three. Unlike the old days of Swiss watchmaking, human hands hardly ever touch a Swatch before it leaves the factory. Here in Grenchen, for instance, in a room the size of three football fields, only eight people are on the shop floor. They supervise the machines that produce minute internal parts for the Swatch and other SMH brands. Running 24 hours a day, the plastic-injection molding equipment in SMH factories churns out 15 million Swatches a year. Automation also allows SMH the flexibility it needs to keep pace with even the most fickle of fashion trends. The basic engineering of the Swatch has changed little since it first became popular in 1983, but its colors and designs change constantly. SMH introduces a new collection of about 30 Swatches every spring and fall, and it has initiated Swatch collection clubs to keep the trend alive. Members get a limited edition Swatch when they join. Japan, SMH's main competitor, has been curiously silent in response to the Swatch, says Mr. Rentsch. "They have less expensive watches, but they don't have something like the Swatch." His explanation is that the Japanese are first-class industrialists and technicians, "but they have problems understanding fashion." The success of the Swatch has meanwhile inspired Hayek to expand the idea of lifestyle-at-a-reasonable-price to other products. There is now a Swatch telephone, and SMH and Volkswagen are planning a Swatch car to be available in about four years. Neither company is revealing much about the car. Rentsch says it will mirror the "Swatch philosophy of quality and price, fashion, colors, lifestyle, youth, and technology." By technology, he means an electric car. It is rumored that the Swatch car will be a two-seater, but no final decision has been made.