Sunday, 10 May 2015

While Nike pushes trade pact, local footwear manufacturer has qualms

Rob Scofield doesn't know what to make of Nike's bombshell pledge to bring thousands of manufacturing jobs into the United States. He's too busy making shoes... in Lake Oswego.

Scofield's company, Chinook-Asia Ltd., has been importing footwear produced in Asia for nearly 30 years. In 2012, he took a flier on domestic manufacturing, paying about a million dollars for a 30-ton Italian injection-molding machine that largely automated the process of making boots.

Three years later, Steelhead Manufacturing is well on its way to $10 million a year in sales. It has 40 employees who earn $12 to $17 per hour. Production is running full-tilt, 24 hours a day, six days a week.

"My goal is to make Lake Oswego the Dongguan of the U.S.," he joked, referring to the sprawling city that hosts many of China's largest sneaker factories.

The unlikely success of a new footwear factory in one of Oregon's most affluent cities illustrates how technology is changing the fundamentals of manufacturing. It also reflects the complexities of trade pacts in the global economy.

Scofield fears the Transpacific Partnership, the international trade deal Nike has said is integral to its efforts to bring some of its manufacturing to the United States.

Though Scofield admits he's no expert on the TPP's fine points, he said the pact poses a dangerous threat to his operation. He worries that if operators in low-cost footwear hotbeds like Vietnam can sell their shoes without duties to the United States, it will be much more difficult for U.S. manufacturers like him to compete.

New Balance, the single big-name competitor in the athletic footwear business to retain some domestic manufacturing, also has come out against the TPP.

With the enthusiastic backing of a power duo like President Obama and Nike chief executive Mark Parker, the TPP objections from the likes of Scofield may go unheard. Obama came to Oregon last week largely to promote the TPP, claiming it makes sense for the United States to sign a trade deal in which it has the clout and influence to lay down the terms.

"We have to make sure America writes the rules of the global economy, and we should do it today while our economy is in the position of global strength," Obama told the largely supportive crowd at Nike's Beaverton-area headquarters. "If we don't write the rules for trade around the world, guess what: China will."

Nike responded with the tantalizing possibility of 10,000 new manufacturing and engineering jobs in the United States over the next 10 years if TPP passes.

"I'm proud to say that if Trans Pacific Partnership is ratified, Nike will accelerate our efforts to begin advanced manufacturing here in the United States," Parker said Friday. "The future of Nike and this country depend not only on what we make, but how we make it."

Those are startling words coming from the head of a company whose global manufacturing strategy revolutionized the industry and helped fuel the unrivaled Nike juggernaut.

The company's vast network of suppliers from China to Costa Rica to Bangladesh has not always run smoothly. It became a major black eye in the 1990s, in fact, when labor unrest and incidents of harsh discipline and child labor sparked a backlash that threatened much of what the Nike brand's standing with the public.

Nike stood by its strategy, arguing that manufacturing offshore allowed it to employ high-wage marketing and design jobs here in Oregon. The company that now employs 26,000 also forced new rules on its thousands of subcontractors that improved working conditions in its factories.

Now, improved technology and rising labor costs in China and other third-world manufacturing hotbeds threaten the offshore paradigm. Nike is working feverishly on its manufacturing revolution, known internally as "manrev," that could quicken the pace of change. The Nike tracks across the globe may be headed back toward the United States.

Some companies already manufacturing footwear domestically support TPP, including Lacrosse Footwear, whose Danner subsidiary employs more than 130 at its Portland factory.

"Passing TPP removes outdated tariffs and helps fuel demand for USA-made boots among partner countries," said Quinn O'Rourke, LaCrosse director of compliance and logistics. "In addition, we save on the footwear lines we produce in Vietnam, which allows us to reinvest the duty-free savings back into our American factory and American workers."

Scofield admits he is a tiny player trying to make his way amidst these global changes. Steelhead doesn't make the sexy, high-end athletic shoes. It concentrates on rubber boots.

But it makes a high-quality boot for some big names in the industry, including crosstown neighbor Columbia Sportswear. The addition of Columbia as a customer was a huge endorsement for Steelhead, Scofield said, and now accounts for about 20 percent of Steelhead sales.

Scofield doubled his capacity last year when he bought a second Italian shoe machine. Where in Asia, a skilled employee would typically wrap and cut and trim rubber around a "last" the shape of a human foot, Steelhead's Wintech 10-station rotary injection molding machine largely automates the process.

He moved manufacturing into a larger 40,000-square-foot building adjacent to his existing Lake Oswego headquarters. Steelhead will make 500,000 pairs of boots this year.

Paying his manufacturing workers $12 to $17 an hour, Scofield's labor costs are light years beyond his Asian competitors. But he still finds hiring a challenge.

"It's hard to find a hundred people," he said. "I'm not sure how Nike is going to find 10,000."

Scofield's concerns about TPP aside, he said Friday that welcomes Nike's announcement.

"The more manufacturing we have here in the U.S., the better it is for the rest of us," he said. "Infrastructure that now barely exists will develop. The more the merrier
http://www.oregonlive.com/business/index.ssf/2015/05/post_225.html

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