A proudly American shoe company ships jobs to China

Paonia, Colo.

On the Chaco factory floor in western Colorado, workers are head down at sewing machines and sole trimmers – stitching, gluing, and shaping pair after pair of rubber-bottomed river sandals. The high-ceilinged room hums and buzzes with activity, as it does every day, but today is different. For most of these employees, today feels something like a graduation and something like a funeral.

Since company founder Mark Paigen invented the sandals in his spare room almost 20 years ago, Chacos have caught on among river guides, kayakers, and weekend warriors, and the company has grown from a one-man operation to a 145-person business with a catalog of styles and an international clientele. Through it all, the sandals have been designed, made, and proudly worn here in tiny Paonia.

The company’s steel-sided headquarters and factory sit just outside town, next to soccer fields and within sight of the western edge of the Rockies. The setting, tucked between the mountains and the desert, is starkly gorgeous, but as the saying goes, one can’t eat the scenery. The county’s per capita income hovers just above $17,000, and blue-collar jobs with benefits – like most of those on the Chaco factory floor – aren’t easy to find here.

So the sandal builders at Chaco tend to stay around – Cheryl Burch, the leader of the “glue team,” has been with the company more than 13 years – and their camaraderie is palpable, their ribbing and bickering like that of an extended family. The tags on the completed sandals read “Made with pride” – sometimes even “Made with love” – “in Colorado, U.S.A.”

But in the past two decades, shoe manufacturing has rapidly decamped overseas. Now, only about 1 percent of all shoes bought in the US are made here, with the vast majority of the rest made in China. (US military footwear, required by law to be made domestically, helps sustain what stateside manufacturing remains.)

Chaco, founded on small-town loyalty, resisted the trend. While the company sent some of its manufacturing abroad, it continued to make the bulk of its sandals – some 320,000 pairs a year – in this isolated Colorado valley. Today, that’s about to change. “We knew it had to happen,” says Mr. Paigen, Chaco’s founder and owner. “There was no way we could continue to compete in the marketplace and have our material costs so much higher than everyone else’s.”

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Paigen is a former river guide who remains an inveterate skier and sailor. In his years leading the company, he has traded shaggy curls and a moustache for a trimmer look. While he recognizes what he describes as the “tremendous feeling of solidarity” on the factory floor below his office, he says the move to China was at least a year overdue.

“We’ve seen our margins erode, erode, erode,” he says.

Even after accounting for shipping and other costs, he says, a pair of Chacos can be made for at least $4 to $5 less in China than in Colorado. That translates into roughly a $16 to $20 difference for consumers, he says, and while some might be willing to pay such a premium out of patriotism – or regional pride – he doubts that loyal core could support the company.

What’s more, he says, dwindling domestic supplies of materials and equipment could soon force Chaco to look overseas for more of its components, no matter the location of its factory – meaning that if were it to stay in Colorado, the factory would have to ship in materials only to assemble them with more costly labor.

Paigen, and employees throughout the company, are also aware of the decision’s disadvantages – not only the immediate loss of local jobs, but also the environmental costs of overseas shipping and the inevitable difficulties of distance. Company headquarters and manufacturing, once separated by two flights of stairs, will sit on opposite sides of an ocean; quality control will be tougher in the short term, and special orders will take longer to fill.

In this small town, where the 45 people who lost full-time work aren’t anonymous laborers but friends and neighbors, the cost is emotional, too. While nearly all the employees upstairs – those in product development, customer services, human resources, and the like – will keep their jobs, some tear up when discussing the move. “I understand the economics – I’ve spent my whole career in numbers,” says David Shishim, manager of customer services and sustainability. “But there’s still an inescapable sense of betrayal.”

Some employees, upstairs and downstairs, wonder if added efficiencies could have extended the life of the US factory floor. But most acknowledge that at some point, manufacturing had to move or die.

“It’s not anybody’s fault, it’s what has to be done for business,” says departing employee Jerry Price. “None of us like it, especially us older ones who have been here for a while. We really appreciate the company, and know what it’s been doing for us and the valley. Now it’s going away, because somebody clear around the world can do it cheaper.”

Many longtime customers, local and otherwise, are also disappointed by the decision, and the customer services department has handled more than 100 critical e-mails. “People say, ‘You were the last ones doing it right, and now you’ve sold out,’ ” says Paigen. “If I can sit down and talk with somebody, they’ll usually understand that our choices are limited. But it often takes a long conversation.”

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On closing day at the factory, the production teams cheer their way through their last sandals, and the entire company assembles to watch the final pairs come off the line. When they’re finished and packaged, the workers sign the box with farewells, leaving it on Paigen’s desk – part tribute, part reminder.

By the next morning, the factory floor is eerily empty, with only a skeleton crew of workers left to muscle apart the remaining equipment. Some of the machinery already bears red “sold” tags; the company hopes to rent the cavernous space to another business.

Ten factory employees will stay on for the long term, to repair sandals or fill custom orders. Several departing workers will participate in the federal Trade Adjustment Assistance program, which funds education and retraining for those who have lost their jobs to foreign commerce. Others may take often better-paying but more dangerous posts in the nearby natural-gas fields or coal mines. Still others may move elsewhere.

Outside, in the high desert sunshine, departing and remaining employees gather for a lunchtime barbecue. Chaco, which announced the factory closure last fall, has extended a wide array of small-town courtesies – and practical assistance – to its soon-to-be-former employees.

But today, there’s no avoiding the firings. Beneath the speeches, thanks, and tears runs a trickle of bitterness. “All I got to say is, when China is down, look for us,” Debbie Mitchell, a member of the factory’s glue team, says to the crowd in parting. “We’re still here. We want our jobs.”

While the mourning won’t last forever, that doesn’t make today – or tomorrow – any easier. “When one door closes, another one opens,” says human-resources manager Mary Treder. The tough part, she acknowledges, is the hallway.