Sole survivor

RED WING, MINN. -- One day last week, Mary Brandt, a 32-year employee at the flagship Red Wing Shoe plant, was expertly cutting leather made from Midwest cattle hides, the first of 200-plus precision steps that go into making a hand-sewn pair of iconic Red Wing boots.

"We're picking up overtime," said Brandt, her eyes never leaving her pattern cutter. "That's been going on since May. Our inventory got too low."

This is a good problem compared with the one a year ago.

Amid a drastic drop in orders, Red Wing Shoe management decided in October 2009 to gradually reduce from 775 to 550 American jobs across its 150 corporate-owned stores and plants in Red Wing, Kentucky and Missouri. In a bid to slow layoffs, Red Wing had cut production to four days a week, ensuring workers 80 percent of a check while the state of Minnesota paid unemployment compensation at a one-fifth rate, under a unique state program.

Red Wing Shoe was sustained through much of 2008, as the rest of America fell into recession, by high energy prices and booming oil and gas fields whose roughneck workers often wear Red Wing boots. Energy prices and drilling didn't decline until late 2008 and into 2009. And retailers quit ordering seasonal inventory amid millions of layoffs, catatonic consumers and a spreading recession.

A year later, Red Wing Shoe has restored the 70-worker night shift in Red Wing, home to about half of what is once again a growing, 825-employee workforce, 50 more U.S. jobs than last fall.

World 'swinging back'

Fittingly, Red Wing Shoe this year finished work on a $5 million overhaul of a once-dilapidated building for its new global headquarters on Main Street and a flagship store and outlet center in the town where it was born 105 years ago. Red Wing Shoe is growing in an industry where more than 95 percent of footwear production has moved to low-cost Asia or Latin America.

"The world is swinging back toward us," said Red Wing Shoe President Dave Murphy. "These workers have busted their pick for us."

In short, the economy didn't collapse. And workers, sportsmen and hikers eventually started buying footwear again. Red Wing's 450 corporate and independently owned stores, as well as retailers from J. Crew to tony Bergdorf Goodman, started restocking depleted inventories this year.

Red Wing Shoe revenue will rebound by more than 10 percent this year to $500 million, but likely will fall short of 2008's record sales.

"Exports to Japan and Europe have grown to more than 15 percent of our business and our 'lifestyle products,' the engineer boots, the 'Iron Ranger' and boots that sell for $200 to $350 a pair are on fire," Murphy said. "It's all made in the U.S."

The company is pacing a Minnesota manufacturing economy, which has added 8,700 jobs this year, a 3 percent gain. Manufacturing accounts for more than 300,000 Minnesota jobs, about 14 percent of private-sector employment, which is still thousands of jobs short of the 2007 level.

Red Wing Shoe never stopped investing in plant or people and its "purpose-driven" products and sales. When an oil field worker, an iron worker, logger or hiker walks into a Red Wing store, the salespeople know immediately what boot he or she needs.

As the economy has rebounded, the company is taking a large share of the high-end work boot market, as well as product for the growing ranks of urban professionals who think the boots are cool. Moreover, Red Wing is tentatively shifting some production of lower-cost boots and shoes back from China to the United States and its plant in the Dominican Republic.

"It gives us control," Murphy said. "In China, our shoes are made in somebody else's factory. You get in line."

A few years ago, J. Crew CEO Mickey Drexler, a renowned fashion guru, visited Red Wing and placed an order for 600 pairs of high-end boots.

'Home-sourcing'

They were sold in three days, and J. Crew ordered 6,000 more as part of a relationship that continues to grow.

"We made them and got them there in five days," Murphy recalled. "You can't do that from China. When we do it right, we should be able to take an order in Red Wing one day and ship the next."

Under Murphy, 58, a former General Mills executive who was hired in 2001 after three years as a Red Wing board member, the company is better at making footwear, marketing it and distributing it.

"Red Wing is a great example of what's becoming known as 'home-sourcing,'" said Bill Blazar, senior vice president of the Minnesota Chamber of Commerce, who specializes in manufacturing. "They can do a better job of supplying retail outlets on an adjusted-time basis so that retailers don't have to carry a lot of inventory."

Troy Duncan, the Minneapolis-based partner who heads Grant Thornton's manufacturing practice, said a recent Federal Reserve study showed that fewer U.S. companies were outsourcing manufacturing to lower-cost countries in 2010 than in 2008. Caterpillar, GE and Ford have announced they are moving some production back to the United States.

"Companies often don't look at the total cost of outsourcing to China," Duncan said. "You have to send quality-control people, manufacturing people, senior executives over there, and you'll need an expensive guy running the factory. Chinese manufacturers can turn out a good product, but you will have issues that need to be fixed. And they are expensive. It's not just the cost of the widget."

Red Wing Shoes' success is rooted in a flexible culture, nimble management, long-term owners and skilled, loyal workers that average 19 years on the job.

Red Wing's unionized workers are paid $14 to $22 per hour, plus incentives, benefits and pension plans.

"The workers tell us how to do things better," Murphy said. "They are all not in love with me. But they care and they are candid."

On occasion, Murphy, in a show of humility, has attempted to do just about every job in the plant in front of people who know better.

"It takes about two minutes to get around the plant: 'Murphy just botched it. He just wrecked another pair,'" he said.

Applause for adding jobs

Murphy was hired by Chairman and CEO Bill Sweasy Jr., 57, whose grandfather, J.R. Sweasy, was an accountant who became general manager of Red Wing Shoe and bought controlling interest in the company in 1918. The company is owned by about 200 Sweasy descendants, Red Wing residents, employees and retirees.

"The owners have been clear," Murphy said. "They want the company to prosper and they want a dividend. I remember one annual meeting about four years ago when I announced great earnings and they just sat there. Then I announced we'd hired 50 people and they applauded."

Red Wing Shoe is the biggest business in an industrial town of 16,000 where freight trains still run through the night along a riverfront that also is a pleasant public park. Red Wing Shoe, which also owns the tourist-attracting St. James Hotel and several commercial buildings, is the community's single-largest property taxpayer and, with the Sweasy family, patron of local charities and arts.

At the end of the production line, Michael Newman, 61, a 44-year employee, "finishes" another pair of boots by trimming a bit of cement glue from the bottoms, rubbing out a dye mark and applying a leather conditioner.

Every Red Wing shoe is made from leather prepared at the company's S.B. Foot tannery in town, one of the last big U.S. leather processors. It provides Red Wing and several other factories here and in China with colored skins such as "Charcoal Abilene," "Skagway" and "Black Cherry."

"On a good day, I'll finish 830 pair," said Newman, preparing a $225 pair of Red Wing Model 877, a generations-old, lace-up hunting boot with a white sole that Japanese men also buy for casual wear. "Iron workers also like it," Newman said.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com