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High-End Watchmaker Puts a New Face on Detroit

Wednesday, 10 Apr 2013 | 2:41 PM ET
Setting Up Shop In Detroit
Wednesday, 10 Apr 2013 | 1:50 PM ET
Shinola makes high-end watches and bicycles and is building a factory in Detroit, reports CNBC's Mary Thompson. Workers will assemble the company's 65 different styles of watches there.

Five floors above West Milwaukee Street in Detroit, in the old home of General Motors design studio, a small company called Shinola is at work on a big dream. It is bringing high-end watchmaking back to the U.S.

"It's a like a crazy idea to make watches in the United States again, but its possible," said Oliver de Boel, manager of Shinola's 30,000 square foot factory.

Watchmaking pretty much disappeared from the U.S after World War II. For the last half century, Switzerland and Asia have dominated the industry.

Shinola Watches in Detroit.
Karen Stern | CNBC
Shinola Watches in Detroit.

Shinola, a new company with an old name that set up shop in Detroit, is looking to tap into the city's rich history of design and manufacturing. It's also looking to tap into a new energy that CEO Heath Carr expects will fuel Shinola's future.

"If you get into your car and you drive around Detroit, you can understand the past," said Carr. "The people we met weren't so focused on the past, they were focused on the future and where this was going. That energy is what we wanted to tie into."

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When scouting for a factory location two years ago, Shinola met members of the Detroit Economic Growth Council, or DECG. With the city in financial straits, the council does not lead with economic incentives to bring new firms to the Motor City, instead it focuses on helping them find real estate and the business partners they will need to set up shop in Detroit.

"Shinola is the perfect intersection of what Detroit does best, designing beautiful products and making them" said Olga Stella, vice president for business development at the DECG. "We are so glad Shinola recognized that about Detroit and decided to make its home here."

What Shinola is making in Detroit right now are the movements, or tiny motors that will be placed in its watches. The movement kits are provided by Shinola's Swiss partner, Ronda AG. Ronda also provided training for the 12 workers now putting together the movements, which are made up of 48 pieces held together by tiny screws.

This spring, the factory floor will expand to include a watch assembly line. While Shinola cannot source all the watches parts from manufacturers in the United States, the leather for the straps comes from Horween Leather Co. in Chicago, and it has the straps stitched by Hadley-Roma of Roma Industries in Largo, Fla.

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But Detroit is at the heart of Shinola's smoothly presented story. Each face of a Shinola watch will bear the name of the city and the back of each is stamped with the words "Made in Detroit."

Accessories from watchmaker Shinola base in Detroit, Michigan.
Karen Stern | CNBC
Accessories from watchmaker Shinola base in Detroit, Michigan.

Shinola is opening two stores, one in Detroit and the other in New York, that will also sell the watches. If the firm decides demand is enough to partner with a retailer, the retailer will have to come to Detroit to see the operation before Shinola signs on with them. It is all part of getting the retailer to tell their customer the Shinola story.

Retailing for between $475 to $995, Shinola's line of 65 different styles will first be sold online, beginning in June.

"We are trying to bridge the gap between what we call the fashion brands that would go for $150 to $200 and the entry levels of the Swiss made watches which would probably retail for $1,000 plus," said Olivier de Boel, Shinola Watch factory manager.

But Mehmet Tangoran, a senior vice president at the high end retail website HauteLook, said entry into the aspirational luxury space can be difficult.

"Everybody wants aspirational luxury, if you will, and that is primarily driven by price," he said. "But the entry to that market is very difficult because it requires a lot of capital to be able to market the brand and get the brand awareness out."

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To that end, Shinola is backed by the deep-pocketed Dallas-based Bedrock Manufacturing Co. Founded by Tom Kartsotis, who launched the apparel and accessory retailer Fossil, Bedrock backs and buys companies making high-end goods in the U.S, sourced primarily by firms based in the U.S.

U.S. watchmaker, Shinola in Detroit Michigan.
Karen Stern | CNBC
U.S. watchmaker, Shinola in Detroit Michigan.

Under Bedrock's watch, Shinola set up a slick website and bought full-page ads in national papers, including the New York Times and Wall Street Journal. Its loft-like factory floor and office space is hung with the high-end bikes Shinola assembles in Detroit (they sell for over $2000), and is dotted with display cases for the watches and future Shinola products.

As for the name Shinola, which one may associate more closely with shoe polish, or worse, Carr said Bedrock decided on the name during a brainstorming session when one executive uttered the phrase most people associate with Shinola. Carr said the name suggests Shinola doesn't take itself too seriously.

But it is serious about making a quality product. Along with watches and bikes, the firm just launched a line of leather goods including wallets and backpacks you can buy online.

As for the watches, early indications suggest there is a market for them. A limited edition watch called the Runwell was sold online and all 2,500 of the $550 timepieces sold out in less than a week. Looks like Shinola knows watches.

—By CNBC's Mary Thompson; Follow her on Twitter: @MThompsonCNBC