Hong Kong-based Producer of Work Boots Opens Factory in Tennessee
By JAMES R. HAGERTY July 13, 2014 7:38 p.m. ET
Loretta Lee, in her new shoe factory in Tennessee, said it is ‘ridiculous’ to ship U.S. cow hides to China to be tanned and then sent back across the Pacific as shoes. Shawn Poynter for The Wall Street Journal
JEFFERSON CITY, Tenn.—Reviving the U.S. shoe industry is proving trickier than Loretta Lee imagined.
On a recent visit to her new work-boot factory here, Ms. Lee walked along a row of sewing machines where newly hired workers in orange baseball caps struggled to cut and stitch leather. Dressed elegantly in shiny pumps and a sheath dress, Ms. Lee ran a finger along the edge of a boot strap. She deemed it too ragged.
“I think this one should be redone,” she told a manager, adding in a softer tone, “I’m a very difficult person.”
For the last three decades, Ms. Lee, founder and chairwoman of Hong Kong-based Merchant House International Ltd., was part of the problem for the U.S. footwear industry—a wave of low-cost manufacturers in Asia and other parts of the world, engulfing 98% of the American market. Boots made at her main factories in Tianjin, China, are sold at Sears, Wal-Mart and other U.S. stores.
Now, Ms. Lee is trying to be part of the solution, shifting some production to the U.S., where the shattered $1.7 billion industry is trying to rebuild after losing most of its suppliers and trained workers.
Boots wait to have their soles attached via an injection-molding machine at a Tennessee factory.Shawn Poynter for The Wall Street Journal
Her efforts come amid a slight revival of the U.S. footwear industry. U.S.-made footwear accounts for about 2% of the market, with the rest coming from imports, mainly Chinese, said Nate Herman, a vice president at the Arlington-based American Apparel and Footwear Association.
Two years ago, the domestic share was about 1%, he said.
U.S. employment in footwear manufacturing peaked at around 260,000 in the early 1940s, began falling sharply in the 1970s and has leveled off at about 14,000 in the past two years, according to government data.
Some people in the industry are skeptical about any major U.S. revival in making low- or midprice leather footwear, a process requiring lots of hand labor. “Unfortunately, I don’t see that as part of the future,” said Joe Russell, co-chief executive of Elan Polo International, which imports shoes from China into the U.S.
Workers at the Jefferson City, Tenn., shoe factory.Shawn Poynter for The Wall Street Journal
For Ms. Lee, reducing reliance on China makes sense, partly because wage and other costs there are rising fast. Ms. Lee also finds it “ridiculous” to ship U.S. cow hides to China to be tanned and then sent back across the Pacific in the form of shoes or boots. The U.S. last year exported about $1 billion of cow and horse hides to China. China transformed the hides into leather products and exported to the U.S. more than $12 billion of leather goods, including footwear, handbags and luggage.
The difficulties of reviving U.S. manufacturing include training workers and finding enough suppliers to create a more competitive market for leather, eyelets and other essentials. Shoeboxes can cost five times more in the U.S. than in China, where they are produced on far greater scale. As a result, Ms. Lee’s Made-in-U.S.A. work boots will arrive at stores in imported Chinese boxes.
At first glance, Ms. Lee seems an unlikely champion of U.S. manufacturing. She grew up in Hong Kong, where her mother operated department stores selling Chinese goods, and studied economics in college there. Her first job was doing market research on Southeast Asia for a now-defunct U.S. advertising agency. She started her own footwear company in the late 1970s, when China began opening up to foreign trade.
Today, Ms. Lee has two boot factories in Tianjin and a plant in Shunde, China, that makes kitchen towels and other home textiles. She intends to keep them. Although some Chinese shoe producers have moved to lower-cost Vietnam or Bangladesh, Ms. Lee chose to open a plant in the U.S. “Closer to the market, you know what consumers want,” she said.
Her initial U.S. investment, to acquire and equip the plant in Jefferson City, is just $5 million, though she aims to double that over the next two years. For now, the plant employs only about 50 people.
None had made shoes before joining Ms. Lee’s company. Many came from a flak-jacket factory that occupied the same building. Others worked in furniture or auto parts.
Some of the workers make as little as about $9 an hour, compared with the U.S. median pay of $12.03 for shoe and leather workers. Ms. Lee said the annual income of $22,000 to $25,000 a year, including benefits, is more than double the $9,000 paid to her Chinese workers.
To keep costs low, she installed German equipment to make and attach urethane soles. An orange robot “roughs,” or scrapes, leather to prepare it for adhesion to the sole. That part of the plant is much more automated than her Chinese boot factories, which have some automated pieces of equipment but none as sophisticated as the ones in Tennessee. Ms. Lee said
Cutting and sewing leather is done manually. Footwear styles often change, and it would be prohibitively expensive to reprogram and reconfigure robots each time that happens.
For now, the workers are making practice runs for Craftsman-brand work boots due to go on sale at Sears in October. Other U.S. customers are being sought. Sears says the U.S.-made boots will retail for $130, compared with roughly $50 to $75 for many Chinese-made boots sold at discount stores, but well below the price of high-end work boots.
During her recent visit, Ms. Lee said she saw progress but wasn’t yet satisfied. One example: A steel toe had stretched a boot’s leather in a way that marred the surface.
“This is no good,” Ms. Lee said.
Paul Lloyd, a former Wolverine World Wide Inc. footwear executive who was recently named her business-development manager for the U.S., agreed more training is needed. “Really, they’re better than we are in China right now,” he said. “We’ve got a long way to go.”
Write to James R. Hagerty at email@example.com