The morning of the job fair was frigid even for Dexter, a town of fewer than 4,000 people in central Maine: –17F. Dick Hall, a co-founder of MaineSole and one of the event’s organizers, arrived a few minutes early to find a crowd waiting on the snow-covered sidewalk in front of the municipal building. “I said, ‘Holy smokes! It’s cold out there. Let them in,’ ” he recalls.
It was January 2014, two decades since Dexter Shoe Co., once the town’s main employer, had been acquired by Warren Buffett for $433 million. At the time, the business was churning out 7.5 million pairs of modestly priced wingtips, boat shoes, and other footwear annually for retailers such as Nordstrom Inc. and J.C. Penney Co. But soon after Buffett took it over, the company was swamped by a tide of cheap imports, forcing it to shutter its U.S. plants. What was left of the business was integrated into another Buffett-owned company. “What I had assessed as durable competitive advantage vanished within a few years,” he wrote in a 2008 letter to Berkshire Hathaway Inc.’s shareholders. The man often cast as America’s savviest investor called it “the worst deal” of his career, because the acquisition was made with Berkshire’s stock. “I gave away 1.6 percent of a wonderful business—one now valued at $220 billion—to buy a worthless business,” he said.
That dubious distinction hasn’t discouraged Hall and a few other Dexter veterans from attempting to bring shoe manufacturing back to Maine, at least in a small way. Founded last year, MaineSole is a case study on the difficulties of “reshoring” American jobs once an entire industry—manufacturing plants as well as suppliers—has migrated to another continent. During the 1960s, footwear factories in Maine employed 20,000 people, according to data compiled by the state’s Department of Labor. That number has dwindled to fewer than 2,000, mirroring a nationwide trend. Even L.L.Bean Inc. makes many of its shoes abroad these days, though its trademark Maine Hunting Shoe is still produced at one of the two facilities it operates in the state.
Hall and six other MaineSole founders set out to capitalize on the one asset that remained after the factories moved away, which is know-how. By the end of that cold January day in 2014 they’d collected 245 names of potential employees. “It became very clear that we not only had the people, we had an obligation to put them back to work,” says the 79-year-old, whose formal title at the company is adviser.
Progress has been modest. Only 10 people are on the payroll at MaineSole, four of them part-time. Most are in their 60s, though the company hopes to train younger workers. Its workshop occupies 4,000 square feet in a red-brick building in the center of town that once housed a wool mill. The space is crammed with decades-old equipment, most salvaged from other plants. Whereas Dexter piled up shoe boxes by the millions, MaineSole typically produces 100 pairs of its private-label shoes a week.
This go-slow approach is partly by design. To build a business that won’t get steamrolled by globalization, MaineSole primarily makes leather footwear for brands that attract customers willing to pay top dollar for craftsmanship. Think $325 hand-sewn penny loafers. “People aren’t getting into their Dodge Caravan after buying a pair of these,” says Kevin Cain, 63, MaineSole’s chief executive officer. The strategy makes sense because there are fatter margins in high-end retail, says Marshal Cohen, an analyst at NPD Group Inc., a market research firm that tracks consumer trends. “It’s not about selling a lot,” he says. “It’s about selling great products.”
Still, it’s no small irony in that MaineSole is making shoes few people in town could afford. When Dexter Shoe announced it was shutting down its production lines in 2001, the local economy went into a tailspin from which it has yet to emerge. The company employed more than 800 people in town and at factories in the area. Stately homes fell into disrepair. Potholes in the sidewalks went unfilled on the commercial strip. Drug use climbed: A recent $3,000 grant helped the police department hire a heroin-sniffing dog. “We have a lot of blight,” says Shelley Watson, who recently retired as town manager. “Just take a ride down Main Street, and you can see that.”
Dexter Shoe was born from the ashes of New England’s textiles industry. Harold Alfond, its founder, bought an abandoned wool mill for $10,000 in 1958 to house the business. As the company grew through the 1960s, it supported the sort of middle-class amenities that defined the postwar years. There was a bowling alley, a movie theater showing first-run films, and a dance for teens every Saturday night at the old town hall. “It was a great place to grow up,” says Al Kimball, 65, who followed his parents into a job at Dexter Shoe and is now the factory manager at MaineSole. “Anything I wanted was right here.”
As his business grew, Alfond branched out from making shoes for other brands to selling footwear under the company’s name. By the 1980s, Dexter Shoe had a chain of retail stores and was making everything from golf cleats to bowling shoes. It even supplied Olympic athletes. The largest shoes the company ever produced were a pair of 22 EEEs made for basketball star Shaquille O’Neal, who helped Team USA win gold in the 1996 games.
As the winds of globalization began to blow, Dexter Shoe stayed afloat by moving some of its production to the Caribbean and sourcing the uppers of shoes from China. The company also invested in technology to automate some facets of production. “We attended every machine show around the world” looking for solutions, recalls Hall. Ultimately, it wasn’t enough. Shutting down, he says, “was inevitable.”
Cain, MaineSole’s CEO, also had a front-row view of the decline of American shoe manufacturing, having spent his career in sales for brands including Florsheim, G.H. Bass, and Harbor Footwear Group. To win big accounts such as Wal-Mart and Kohl’s, shoe companies had to squeeze pennies from their supply chains. That often meant shifting production to countries where labor costs were lower. In 1960 imports accounted for just 4 percent of U.S. purchases of nonrubber shoes; by 1986 that share had shot up to 80 percent. Today it’s more than 90 percent. “I’m a part of the reason why this all failed a long time ago,” says Cain. When he read about what Hall and some of the other Dexter old-timers were up to, though, he asked if he could pitch in.
A group of volunteers made him some samples on borrowed machines they’d set up in the pro shop at the local golf course, which was closed for the winter, and Cain used his Rolodex to line up orders. He declined to name some of the company’s private-label customers, saying they prefer it that way.
Getting investors to put up capital for an old-line enterprise proved challenging, so Cain funded the startup costs himself. He secured a $150,000 loan from the Eastern Maine Development Corp., using his home as collateral. With help from the governor, he also lined up a $50,000 community development block grant that paid for an upgrade to the electrical system in the old mill.
Even with those funds, it’s been tough to manage cash flow, he says, since there’s usually a two-month lag between buying supplies and getting paid for the finished product. There are also unexpected expenses. The floor of the workshop had to be reinforced with steel plates to bear the weight of the machines. The used equipment is prone to breakdowns. Any defects in a shoe can waste upwards of $50 in leather.
To put MaineSole on a more solid foundation, Cain needs to find an investor patient enough to buy into a business that’s as much about creating jobs in a depressed town as it is about making money. It’s a long-term proposition, but there’s not much time to waste. Cain figures that in about five years the old Dexter Shoe workforce—people like Kimball—won’t be around to train a younger generation. “If I lose them,” he says, “it’s like something going extinct.”
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