Time in Detroit

Can a startup in Detroit that assembles and sells watches, bicycles, leather goods, and journals compete against low-cost manufacturers in Asia?
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There was a time when manufacturing dominated the U.S. economy, that is until low-skilled jobs moved overseas. Now Shinola in Detroit aims to reverse the course via specialized manufacturing, says Jacques Panis, director of strategic partnerships, and Bridget Russo, marketing director. Photographs by David Lewinski

 Before it ceased production some 40 years ago, Shinola shoe polish enjoyed a cult-like following and held a place in American folklore. It seems an Army private during World War II, fed up with an overbearing general, took it upon himself to exact a measure of revenge. One day, rather than polish the general’s boots with Shinola, the private used horse manure. As word of the defiance spread — apparently the general never noticed the switch — it inspired the expression: “You don’t know shit from Shinola.” When the troops returned home to the states, the colloquialism stuck.

So what does a shoe polish company founded as Shinola-Bixby Corp. in New York in 1907 have to do with the rebirth of an American industry, the revitalization of Detroit, and the creation of highly skilled jobs in a city struggling with a 30 percent unemployment rate? A great deal, it appears.

The journey begins in a suburb of Dallas, where Fossil watches — a startup venture that was slow to get out of the gate in 1984, picked up steam, went public in 1993, and in 2012 reported $2.9 billion in revenue. Looking for a new challenge, one of the principals left the board in 2010 and established Bedrock Manufacturing Co., an investment firm in Dallas which, among other things, explored the startup of another watch company along with the production of retro-style bicycles, leather goods,  shoe polish, and linen journals.

The intent was to source as much of the materials, labor, and production as possible in the United States. Inspired by Detroit’s manufacturing heritage, a Bedrock official contacted Bill Dillon, a principal account manager at Detroit Economic Growth Corp., a quasi-public development agency. A few weeks later, after touring the original R&D headquarters of General Motors Co., in the former Argonaut Building north of Wayne State University, Shinola was reborn. The building, which today serves as a second campus for the College for Creative Studies, was renamed the A. Alfred Taubman Center for Design Education.

“We hired people from Detroit, trained them to build incredibly complex watches, and now we have an assembly line where we’re producing 1,000 watches a week,” says Jacques Panis, Shinola’s director of strategic partnerships, during a recent tour of the company’s operations on the cavernous fifth floor of the Taubman Center. “The goal is to manufacture 500,000 watches annually, and we have the capacity to produce 1.2 million watches (per year).”

So why buy the rights to a defunct shoe polish company, refashion it for a new era, and invest hundreds of thousands of dollars in a startup? After all, the last time an American company produced watches on a grand scale was Hamilton Watch Co. in Lancaster, Pa., which closed its factory in 1969 and moved operations to Switzerland. While a handful of watchmakers operate today in the United States — notably RGM Watch Co., also in Lancaster — annual production of each concern barely tops 1,000 units.

During a half-day visit to Shinola, where design projects undertaken by CCS students hang from the walls, it’s clear this is no ordinary company. The firm, with a name that calls to mind homespun charm, aims to be a global supplier of finely-tuned timepieces that doesn’t so much compete with the centuries-long heritage of Swiss watchmakers as it does embrace and repurpose that craftsmanship for a new age.

Lightning in a Glass

Sporting a black, monogrammed lab coat and slip-on protectors over his hair and shoes, Shinola’s director of watch operations, Olivier de Boel, points out that the company’s assembly space is as clean as any biomedical laboratory. The room, with its voluminous windows and 10-foot-high exposed ceilings, is outfitted with positive pressure isolation equipment that all but eliminates dust and particles from impacting the production areas.

Leading the way to the assembly line, along a row of lime-green tables sourced from Switzerland, de Boel notes that the tweezers and miniature screwdrivers that are almost extensions of the worker’s fingers must be sharpened daily. “If these tools aren’t maintained properly, you cannot grip the componentry,” he says. “These movements, or the hour engines, are our little heroes. They measure time second by second, and they must be accurate.”

Cross-training is a key component of Shinola’s operations. After interviewing and testing candidates — the job requires steady hands and a patient disposition — more than 20 workers were hired, most of whom live in Detroit (in the next two years, predicated on demand, the company plans to employ 200 workers).

“It’s easy to troubleshoot any problems when all of our associates know how everything works,” de Boel adds. “We also post our production goals and other criteria on the walls for everyone to see. We’re very transparent.”

To maintain quality and consistency, Stefan Mihoc, a master watchmaker who was trained in Romania and Switzerland, meticulously inspects between 40 and 80 movements from every batch of 1,000 units. Mihoc, who emigrated from Romania in 1996, works with his family and operates a fine watch store in Auburn Hills. While he never thought he would work for a company that manufactures watches in the United States, he nonetheless posted his resume. “Shinola found me,” he says. “My uncle was a watchmaker, and ever since I was 13 years old, I wanted to follow in his footsteps.”

As the movements emerge from the assembly line — every dial displays the word “Detroit” — they are packed in colored plastic boxes before heading to the final inspection area. Eventually, consumers will be able to select among 60 different models. But for the rollout, the company decided to produce a limited offering of 2,500 units. When the first batch of watches, called the Runwell, were offered for presale in mid-March, they sold out within a week (the backside of every watch is individually numbered and says, “Built in Detroit”).

The Swiss propensity for perfection transcends to the lightning bolt that appears on every one of Shinola’s timepieces. “You see that lightning bolt, it’s not exactly the same size here and here,” says Panis, pointing to a batch of prototypes. “Those bolts of lightning must be uniform in everything we do. Quality is the very essence of the company.”

The real magic arrives from Switzerland, where Bedrock Manufacturing, tapping three decades of collective industry relationships, established a partnership with Ronda AG to source movement components including miniature circuit boards, magnets, levers, rotors, and some 40 other parts to Detroit.

In essence, Shinola is an “etablisseur,” a French term that refers to a manufacturer that assembles watches from parts sourced from others. (During March, Panis was in Hong Kong and China, where the company sources watch dials, hands, crystals, cases, and buckles.)

In a bid to honor its roots, the so-called quartz Argonite movement is meant to reference the Argonaut Building, where famed GM designer Harley Earl and others crafted iconic automobiles before establishing the sprawling Technical Center in Warren in 1952, often referred to as an industrial Versailles.

Meanwhile, the leather watch-straps are sourced from Horween Leather in Chicago, one of the oldest tanneries in the U.S., and stitched at Hadley-Roma in Largo, Fla., located just west of Tampa. In turn, Eric Scott, a private label leather goods and business accessories company founded by Ron Coleman in 1985 in Ste. Genevieve, near St. Louis, produces Shinola’s line of leather computer and tablet cases, backpack straps and flaps, handbags, wallets, and business card holders.

A Bicycle Built for You

Around the corner from the watch factory is the temporary production facility for two lines of bicycles — the Runwell and the Bixby. In June, bicycle assembly will move to a 5,000-square-foot space inside the historic Willys Overland Building in Midtown. The structure, built in 1917, served as a sales office and a regional parts and repair center for the automaker, while the company’s most famous output, the Jeep, was built in Toledo.

In addition to bicycle assembly, the Willys space will serve as a retail outlet for Shinola’s line of watches, leather goods, and journals, and will feature a coffee and sandwich shop. “We’ve saved everything in the space, including the original skylights,” Panis, says, during a recent visit to the renovation project on Canfield Street, between Cass and Second avenues. In addition, Bedrock Manufacturing has acquired an eight-story brick structure in New York’s Tribeca neighborhood, where in June it will open a Shinola flagship store on the ground floor, while the upper levels will include offices for Bedrock and Shinola. Apart from the company locations, the product lines will be available at select retailers, as well as on Shinola’s website, shinola.com.

To bring the bicycles to life — again, with the mission of sourcing as many domestic parts as possible — Shinola hired famed designer Sky Yaeger. A marketing manager at Suntour USA in the 1980s, Yaeger went on to design bicycles for Bianchi USA, Swobo, and Spot. Inspired by the French style of Porteur bicycles, as well as American models that slightly mimic motorcycles with a faux, elongated gas tank, the urban cruisers retail for $1,950 for a 3-speed version and $2,950 for an 11-speed model.

True to Shinola’s domestic sourcing mantra, the frames are crafted by Waterford Precision Cycles in Waterford, Wis. Interestingly enough, one of the owners of Waterford is Richard Schwinn, a great-grandson of Ignaz Schwinn, who founded Schwinn Bicycle Co. in 1895 in Chicago. Schwinn and business partner Marc Muller acquired the former Schwinn Paramount factory in Waterford, where they manufacture custom bikes, frames, forks, and couplers for a variety of final assemblers.

Introduced at Interbike 2012, an industry trade show, the Shinola bikes drew plenty of traffic, sales, and interest within the show’s Urban Yard section, Panis says. When show-goers inquired how Shinola could compete with Asian manufacturers that have come to dominate the industry, Panis was quick to reveal the company’s domestic supply base, which includes frames, forks, and chainstay plates (Wisconsin), spokes and nipples (Colorado), head badges (Rhode Island), decals (North Carolina), and wheelbuilding (California). All other parts are sourced from Europe and Asia.

The same modus operandi applies to leather goods and linen journals. “In addition to hiring local workers and sourcing domestic parts (90 percent of the tools in the bicycle assembly area come from the U.S.), we’re supporting local causes like U.S. veteran programs, the Chevrolet Detroit Belle Isle Grand Prix, and Detroit Restaurant Week,” says New York transplant Bridget Russo, Shinola’s marketing director. “Our hope is that we inspire cottage industries to spring up around us and make this a manufacturing epicenter.”

With all that is on its plate — Shinola is launching multiple products in four separate markets right out of the gate — what are the company’s prospects for success? After all, a basic tenet of business is to master one product before diversifying into other markets. But Shinola, armed with a mission of reinvigorating America’s manufacturing prowess against a backdrop of global competition, aims to disrupt the marketplace.

“If someone came to me and proposed a business plan like this, I would have to wonder. But given the history and heritage of the company, it can work,” says Mike Bernacchi, a marketing professor at the University of Detroit Mercy. “The U.S. allowed a great deal of its manufacturing to go overseas when, years ago, everything was based on price — meaning lower labor and material costs. But today, ‘Made in the U.S.A.’ and ‘Made in Detroit’ have cache. It adds value and that, in turn, enhances the brand, which is what this is all about.”

Carrying things a step further, or backward, depending on the perspective, Shinola has set its sights on returning to its origins by reintroducing a line of shoe polish in June via a supplier in Chicago.

“As we studied Detroit’s history, we found people like the Dodge brothers built bicycles, and many of the early automobiles utilized bicycle wheels,” Panis says. “Now, flash forward 100 years and you still have this rich manufacturing heritage that we feel can be repurposed and made rewarding for our customers, our employees, the city, and the global marketplace.”

Will Shinola be successful? Time will tell. db

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