How Shinola Turned Detroit Into a Luxury Brand

Read the Full Transcript

• HARI SREENIVASAN:

  But, first: how a small company in Detroit is trying to bring more manufacturing of a different kind back to the Motor City.

  In fact, the company is branding its products as built in Detroit. But what does that really mean?

  Special correspondent Roben Farzad has the story, part of our series on business and economics, Making Sense, which airs Thursdays.

• ROBEN FARZAD:

  Shinola's flagship store in Midtown Detroit showcases hand-made leather goods, bicycles constructed on site, and, of course, watches, the product that put this luxury brand on the map.

  When you look at your marketing research for, say, a 40-something with some money to spend walks into a store, and aspires to buy a Shinola watch, what is that person buying?

• JACQUES PANIS, President, Shinola:

  First and foremost, a high-quality time piece that has a story behind it

• ROBEN FARZAD:

  President Jacques Panis says that story is about Detroit, a city that got hit especially hard by a financial crisis that saw Washington bailing out General Motors.

  Adding insult, the NFL's Lions went winless, the city's mayor was indicted, and Detroit later filed for the biggest bankruptcy in municipal history. Even so, five years ago, Shinola set up shop here in a former GM lab.

• JACQUES PANIS:

  It's a city that is going to be one of the great stories of our country. And, yes, it fell on hard times. And we at Shinola have come to this city and have been a small part of this revitalization.

• ROBEN FARZAD:

  The company has created almost 400 jobs here, 240 in manufacturing. Mesha McCoy was laid off by a car parts maker in 2009.

  This feels much less kind of what I imagine manufacturing to be. It's a clean room. We're wearing, you know, smocks and we're wearing things over our shoes.

• MESHA MCCOY, Movement Assembly Team Lead:

  I like it because, when we come in, we're clean, and when we leave, we're clean. At the auto — automotive industry, it was the total opposite. Go in clean, you leave out dirty. So, I love it.

• ROBEN FARZAD:

  McCoy was one of the first workers on the movement assembly line.

• MESHA MCCOY:

  I didn't know anything about a watch, but to know how to set it.

• ROBEN FARZAD:

  Titus Hayes used to work on dashboards for Chrysler. He too was among Shinola's first hires.

• TITUS HAYES, Junior Watch Repair Technician:

  They helped us assemble the movements and they trained us piece by piece, step by step how to assemble movements, until we can do it on our own.

• ROBEN FARZAD:

  The workers on the floor earn $13.50-$15.50 an hour. This year, they will churn out 225,000 watches. They're also ramping up production of leather passport covers, key fobs and journal covers.

• LISA COOK, Michigan State University:

  This is the future of manufacturing.

• ROBEN FARZAD:

  Michigan State University economist Lisa Cook says the days when Detroit manufacturers employed 200,000 are gone. But there is a future for smaller, niche operations like Shinola.

• LISA COOK:

  We can expect that many different types of novelty products might be produced, ones that require high skills like Shinola watches, and these goods, and goods like them, represent that kind of comeback.

• WOMAN:

  Detroit is and always has been an amazing place to be.

• ROBEN FARZAD:

  Shinola has closely aligned itself with the resilience of Detroit and the revival of American manufacturing. As a result, it's won some famous fans, like presidents past and present and movie stars.

• BEN AFFLECK, Actor:

  I got this Shinola watch in Detroit. Any time you can contribute in any way to that city, it's — it feels good.

• ROBEN FARZAD:

  Billionaire sports and tech mogul Ted Leonsis invested $25 million in Shinola's parent company, Bedrock. Why? He saw more and more young people buying products with meaning.

• TED LEONSIS, Founder, Revolution Growth:

  Millennials really wanted the ability to not only badge, wear something of high quality, fairly priced, beautifully made, like my Shinola watch right here, but equally, as importantly, to be able to support your community and your neighbors.

• ROBEN FARZAD:

  Shinola founder Tom Kartsotis, who made his fortune building Fossil watches, named his company after an old shoe-polish brand that came up in conversation one day.

• TED LEONSIS:

  When Tom talked to his lawyer and told him, I'm going to do a moonshot, I'm going to build the next great company to put people to work, he said, you don't know no (EXPLETIVE DELETED) from Shinola about doing that. And he said, what is Shinola? And went online and…

• ROBEN FARZAD:

  Is that apocryphal? That's real?

• TED LEONSIS:

  Yes, and ended up buying the brand kind of a little tweak and fun, you know, you're probably right. I don't know what we're doing around this, but let's go for it.

• ROBEN FARZAD:

  Though it has yet to turn a profit, Shinola made $100 million in revenue last year, up from $60 million the year before. But Shinola has its critics, who point out that it's owned by a company in Texas, not Detroit.

  Aaron Foley is the author of "How to Live in Detroit Without Being a Jackass."

  AARON FOLEY, Author, "How to Live in Detroit Without Being a Jackass": It seemed like overnight they were talked about in the same, you know, breath with Ford, GM, and not just them, Motown, all of these things that are so iconic and historic to Detroit.

  Who's to say that, you know, once the luster of the coolness of Detroit wears off, Shinola won't, you know, pull up their stakes and go to Toledo or Cleveland or whatever the next hot Rust Belt, Midwest city on the rise is?

• ROBEN FARZAD:

  Detroit writer Jon Moy believes Shinola is exploiting Detroit's travails to make money.

  Jon, come on. Detroit, jobs, happy workers, revival, renaissance, leather watches, how could you have any beef with that?

• JON MOY, Writer:

  I don't think I have a beef with jobs. I don't think I have a beef with new things, but, I mean, I think it's a valid criticism to say that they have sort of co-opted this city and the struggle of the city and sort of commodified it in a way that most companies I think would be reticent.

• ROBEN FARZAD:

  Case in point, this ad for a new watch which ran soon after Detroit filed for bankruptcy, and this tweet.

• JON MOY:

  You know, "Bankruptcy schmankruptcy."

  Yes, I don't think a lot of people here would sort of respond the same to the city canceling pensions and retirement plans and benefits. To sort of use it to sell luxury goods, and it's, I think, at least problematic, you know, and, at worst, it's cynical and manipulative.

• ROBEN FARZAD:

  Washington has also weighed in. The Federal Trade Commission recently told Shinola to stop using the slogan "Where American Is Made," because so many parts come from overseas.

  Panis says built in Detroit will now be qualified.

• JACQUES PANIS:

  Built in Detroit, with Swiss and imported parts.

• ROBEN FARZAD:

  The company argues the FTC regulations are too strict since many components are not even available here.

• TED LEONSIS:

  Swiss companies are able to say made in Switzerland, even though they're bringing parts in from China and around. There's a globalization for manufacturing companies.

• ROBEN FARZAD:

  Lisa Cook gets the criticism, but she thinks ultimately Shinola is a boon for Detroit.

• LISA COOK:

  I am an economist. I am a macroeconomist. I will take growth any way you can get it. Even if it's not sort of made wholly in Detroit, it's made enough in Detroit. Open more manufacturing stores like this, more manufacturing outlets like this. There are niche products that people want to buy. So, why not supply those consumers who want these goods? And why not have these goods come from Detroit?

• ROBEN FARZAD:

  The Shinola brand seems to enjoy goodwill among the locals we bumped into.

  Would you get a Shinola watch? Are you interested in that brand?

• MAN:

  I got two Shinola watches.

• ROBEN FARZAD:

  You do?

• MAN:

  Two of them.

• WOMAN:

  If they have good quality, that says that Detroit has quality workers. Then people will buy them and bring Detroit some more shine.

• MAN:

  I wanted to get one of the bikes, but they're kind of expensive. It's Detroit, though, you know?

• ROBEN FARZAD:

  What that ultimately means, only time will tell.

  For the "PBS NewsHour" I'm Roben Farzad reporting from Detroit.