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Built in Detroit, the new Shinola knows what time it is

Shinola watch
Source: Shinola
Shinola watch

What does the name of a snuffed-out brand of shoe polish and a Detroit manufacturing revival have in common? It sounds like the start of a bad joke—especially in light of this week's major municipal bankruptcy filing. While there is a punchline, the answer tells a compelling story of entrepreneurship, patriotism and profits.

The road to this Motor City start-up began with a simple idea: We wanted to "manufacture in the United States," recalled Heath Carr, chief executive of Shinola, the maker of Detroit-built watches and bicycles. (Yep, the company derived its name from the World War II phrase, "You don't know s--- from Shinola.")

The new Shinola, which bought the rights to the name but doesn't have anything to do with the old shoe polish company, has been in business for about 2½ years. It currently has more than 100 employees—75 of whom are in Detroit, where the company's precision watches and bicycles are assembled.

Bringing manufacturing back to Detroit

"When we started looking at Detroit in 2011," Carr explained in a "Squawk Box" interview, "the threat of a bankruptcy was out there at that time. For us, it was always something that could happen, but it hasn't changed our focus at all."

(Read More: How your city might pay for Detroit's money mess)

"We wanted to be part of a community," Carr explained. "[We] fell in love with Detroit. Detroit fell in love with our idea" of building watches in the United States. Shinola had considered different cities, but ended up building its watch factory inside the College for Creative Studies, a design school in midtown Detroit. The company has fostered a close relationship with the school, where it has sponsored classes and even hired students.

Shinola watch back
Source: Shinola
Shinola watch back

Shinola also teamed up with Swiss-based Ronda for its fine watch movements. "They [also] helped us set up the factory and establish the training."

The new jobs are welcome in a city where the unemployment rate has nearly tripled since 2000 with current joblessness more than double the national average.

"It hasn't been really that difficult to find the people we're looking for," Carr said. "There are a lot of people there looking for a job."

(Read More: Detroit bottom could spell boom for Motor City entrepreneurs)

The idea to make bicycles came along almost by accident as Shinola workers originally thought to buy bikes to hang as props in their stores to sell the lifestyle idea behind their watches. Carr said they first decided to make the bikes on their own and then to sell them. They're made of steel from the United States and forged in the old Schwinn factory in Wisconsin, now operated by Waterford Precision Cycles.

Shinola bicycle
Source: Shinola
Shinola bicycle

The Shinola bikes are assembled in a workshop in the company's newly opened flagship Detroit retail store, which sells the bikes and the watches. Shinola has also just opened a retail location in the New York City neighborhood of Tribeca.

What's in a name?

With the company's name emblazoned on its storefronts and in a recent advertisement in the print edition of The New York Times, there are sure to be questions about it considering the infamous aforementioned saying.

Carr confirmed it's "from the original saying that we can't say on TV." During a brainstorming session about what to name the company, he confided, "someone threw that out at a meeting, and said, 'You don't know s--- from Shinola.' It was at that point, we realized, we had our name."

In choosing to promote Shinola's bikes and watches as "Built in Detroit," Carr said the company is striving to be transparent.

The "Made in USA" standard is maintained by the Federal Trade Commission, which is charged with preventing deception and unfairness in the marketplace. The FTC has required that a product advertised as "Made in USA" be all or virtually all made in the United States.

(Read more: Welcome home, 'Made in U.S.A.' on the rise)

The FTC's Bureau of Consumer Protection said a product that includes foreign components may be called "Assembled in USA" without qualification when its principal assembly takes place in the United States and the assembly is substantial.

Carr readily acknowledges that components of his products are made outside of Detroit and overseas, saying the company discloses the details on its website.

Besides running the day-to-day operations at Shinola, Carr heads Bedrock Manufacturing, the Dallas-based private equity firm that owns the watch and bike maker. Bedrock is also an investor in outdoor clothing company Filson and Steven Alan, a retailer that sells its namesake designer's collections and other clothing and home brands.

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC. CNBC's Lori Ann LaRocco contributed to this report. Follow her on Twitter @loriannlarocco.

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